0 Budget week - part four

The reporter on TVNZ summed it up perfectly - "Joe Hockey swung his axe, and he didn't miss". The Australian Federal Budget is full of cuts.

And as the Herald reports, the sales job starts today for Tony Abbott and Joe Hockey:

The Australian Government will today start selling one of the nation's most unpalatable Budgets in decades.
Leavened by a handful of sweeteners, Treasurer Joe Hockey's axe has hewn through almost every area of Government spending.
"Doing nothing is not an option," Hockey said. "The days of borrow and spend must come to an end."
The Budget aims to cut the deficit from almost A$40 billion ($43.3 billion) to A$29.8 billion next year, falling to A$2.8 billion in 2017-18.
By 2024 Hockey predicts surpluses of more than 1 per cent of GDP.

Australia has its own Decade of Deficits to deal with; a legacy of the Rudd-Gillard-Rudd years where spending continued as revenue dropped in Labour's last months. Joe Hockey and Tony Abbott have inherited an economy in freefall, with a $20 billion negative turnaround revealed as Wayne Swan and Kevin Rudd packed their bags and headed off to greener pastures.

We'll be looking at reaction from across the ditch as the day progresses, but thus far it is relatively mild and pragmatic. Commentators seem to accept that drastic measures are required to address the decline into deficit. As Hockey himself said "Doing nothing is not an option".

And we wish Messrs Abbott and Hockey good luck in getting MP's to support the proposed one year pay freeze for MP's; things must be especially dire when they ask the turkeys to vote for an early Christmas!

0 Budget week - part three

The Herald describes tonight as "crunch time" for Australian Prime Minister Tony Abbott. Federal Treasurer Joe Hockey will deliver the first Budget of the Abbott era, and there's a lot riding on it:

Tonight is make-or-break night for Prime Minister Tony Abbott as his Government reveals its first Budget to a nation that is expecting the worst.
How Abbott has framed his economic strategy and how he markets it to voters will define his first term and, possibly, determine whether he wins another. He will present Labor with a huge political target of broken promises that will fuel the Opposition's rhetoric for the next two years. Breach of faith is not easily forgiven by the electorate, especially when it hits their hip pockets.

Tony Abbott and Joe Hockey will be understanding just how John Key and Bill English felt when the books were opened to them after the 2008 General Election. The New Zealand economy was then in freefall, having gone into recession in the March quarter of 2008, and continued in recession in the two subsequent quarters. And this was before the Global Financial Crisis bit deeply.

Australia survived the GFC relatively well via some novel stimuli applied by the Rudd-Gillard-Rudd Government. But much of it was artificial, and the writing was on the wall this time a year ago. We blogged about it at the time; having forecast a surplus of of $1.5 billion, Wayne Swan instead delivered a deficit of A$19.4 billion; a A$21b turnaround in the space of a year. 

By the time Australia went to the polls in September and kicked Labour out of office, things had got even worse, and incoming Treasurer Joe Hockey abandoned the plan to be back in surplus by 2016-17. We will find out the long-term outlook for Australia when Joe Hockey delivers the bad news tonight.

Abbott and Hockey have little option but to go for the jugular tonight, and hope that one awful Budget will buy them time with the voters; the Herald continues:

Abbott is clearly betting on voters' short memories, hoping that by slugging them so early in the political cycle the pain will ease and, with an improving economy, reduce the threat of retribution at the next election.
Treasurer Joe Hockey has included a bit of sugar: twice-yearly increases in the fuel tax will fund A$40 billion in roads programmes, matched by the states and private business; the debt reduction levy will hit only high-income earners; politicians and senior public servants will go without pay rises for a year.

Other sweeteners may also emerge tonight. But the politics centre on whether any economic gains emerge in time to offset the bite of cuts to some of the most sensitive areas of government spending.

It's little wonder that emigration from New Zealand to Australia has slowed down, and that more and more Kiwis are returning from what was once referred to as the Lucky Country. That was evidenced in last week's Household Labour Force Survey result, where although the number of people in work hit a record level, the actual rate of unemployment was unchanged. 

Bill English's sixth Budget on Thursday is going to be far more encouraging than Joe Hockey's first. Mr English will doubtless remember how difficult his own first Budget was in 2009, and we're sure that he will have sent an encouraging word to his Australian counterpart.

We will have the details and reaction to the Australian Budget tomorrow.

0 Budget week begins

Bill English will deliver his sixth Budget on Thursday afternoon. Having inherited an economy predicted to be in deficit for at least ten years after the 2008 General Election, he is tipped to deliver a small surplus in 2014-15, with larger surpluses to follow in following years. New Zealand's economic outlook has not been brighter for many years.

It's a different story on the other side of the Tasman. Australian Federal Treasurer Joe Hockey is facing a nightmare with the Aussie economy tanking while others like ours recover. That's a legacy of the free-spending Rudd/Gillard/Rudd government that Australians kicked to touch a year ago. The Budget Mr Hockey has to deliver on Tuesday night is going to cut deep.

National held its Mainland Regional Conference at the weekend in Queenstown. And here's what Steven Joyce reminded the assembled delegates:

Steven Joyce is dead right. When New Zealand voters make their choice in September they will face the choice of an economy in recovery under Bill English, at least four years ahead of schedule, or an economic recovery that will run into a brick wall if the Government changes to a big-spending, big-taxing LabourGreenNZFirstMegaMana monster.

We know what our choice is going to be.