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 - part two

It's Budget week both here and in Australia. Australians will get the bad news from Joe Hockey tomorrow evening, whilst New Zealanders will have a far rosier picture painted by Bill English on Thursday afternoon.

In an editorial headed Australians must envy our Budget the Herald opines:

Budget week in Australia and New Zealand normally finds the two countries in a similar economic condition, with Australia looking the stronger. Not this week. Australia's Budget, to be delivered tomorrow, will be an answer to a projected decade of deficits. It is five years since New Zealand heard that phrase from John Key and Bill English, the first since the recession and global financial crisis.
It will be small, so small that it could easily disappear before it can be banked next year. Despite the economy enjoying 3 per cent growth at present, tax revenue is running below the Budget for the current year.
The deficit for the nine months to March was nearly $200 million worse than forecast, better than the $900 million shortfall to February but still a worry when the economy has so much going for it.
Dairy prices have passed their peak but the Christchurch rebuild is still providing a stimulus. The Reserve Bank has begun lifting its base interest rate back to normal levels but that should not be enough to choke the growth spurt.
Wage rises are outpacing inflation and consumer confidence remains strong. In fact, the conditions are right for the Government to present a more far-sighted path of economic development than it has so far.
It needs to give voters a reason to return it to power in September for a third term. A surplus will be a signal achievement, especially after absorbing $15 billion of the Christchurch repair bill, but it is a signal of spending controls so far. An election year Budget needs to look ahead.

We're sure that Bill English's sixth Budget will "look ahead". Firstly, it will look ahead to a small surplus in 2014-15, to be followed by significant surpluses in the years that follow. That will give whoever is elected in September room to move, but not to ramp up Government spending as Michael Cullen did in the latter part of the Clark years.

It's a far cry from the situation facing Joe Hockey across the Tasman:

Across the Tasman, Prime Minister Tony Abbott and Treasurer Joe Hockey must envy their New Zealand counterparts. They will deliver their first Budget tomorrow without a consensus of economic support for the austerity they argue Australia needs. Severe cuts to health, welfare, education and other sensitive areas of spending are a possibility, as well as a possible "deficit reduction levy" on high incomes.

And whilst the Herald's leader writer expects opposition parties to apply the usual derisory labels to Bill English's forecasts on Thursday, there is some very positive comment on the Government's economic performance:

New Zealand's public debt went well above 20 per cent with the costs of the recession and the earthquakes. The Government's aim to have it back down to that level by 2020 will require annual surpluses every year from here on. Opposition parties will call the surplus "smoke and mirrors" on Thursday.
It is a phrase easy to apply to a figure built on forecasts rather than cash in the bank. But if they do not believe the forecasts they have less room to go to the election with proposals requiring additional spending.
The Budget ought to give an indication of the Government's use of surpluses over the next few years. On Friday Mr English suggested that as well as repaying debt the Government would boost spending in its social priorities and eventually resume contributions to the NZ Superannuation Fund.
Its pre-Budget announcements in recent weeks give the flavour of those priorities: $20 million more for apprenticeships, $20 million to fight rheumatic fever, $3000 grants for unemployed beneficiaries to go to Christchurch. The sums are not large but the projects are practical and precise. That has been the secret to the return to surplus: not painful cuts but a focus on results.
It seems to be working.

It does indeed seem to be working. Which begs the question; with Bill English having shepherded New Zealand's economy through the deepest global recession since the Great Depression, and with New Zealand now leading the world into economic recovery, why would anyone want to take a punt on a big-spending Labour-led government which can't even get its most basic sums right?


Footnote: We will focus extensively on the Budget this week. John Key and Bill English have an excellent record on which to go to the country in September. Little wonder they're smiling!

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.