The election year budget is always a politically important moment.
The Government has its final chance to set out big picture policy directions, which it will be held against come election day. The Opposition has its chance to define itself in its critique, and gets the information it needs to pull its policy framework together to present to the people.
Playing out this year are many other factors that increase the importance of what is decided. The means of paying for the Canterbury earthquakes will need to be spelled out, and the ongoing effects of the world-wide economic crisis continue to demand a response.
The Budget needs to tackle this situation comprehensively, with two objectives in mind:
- kicking economic growth off again, and
- building a more equal society.
These two objectives support each other, and they are in line with what Kiwis expect their governments to achieve on their behalf.
To get growth moving, the Budget needs to set out some clear directions on:
- increasing the domestic savings rate and the capacity of government to deal with pensions in the medium term
- what sectors are going to be the focus of an export-led growth plan, and what will be done to help those sectors grow
- how we will change the monetary policy framework so that the erratic NZ dollar stops being a savagely negative force on productive investment
- increasing access to skills training and education, to allow for reconstruction and to get more people ready for work
- deepening the pool of capital available to NZ business by reversing recent cuts to support for workplace savings
- how the tax system will change to encourage productive, and discourage unproductive, investment.
In building a more equal society (which is better for everyone in it, happier and healthier and likely to be faster growing as well), the Budget needs at least to:
- show a commitment to catching up with Australian labour market law, so working Kiwis have a better chance of negotiating decent wages
- undoing recent changes to the tax system that have put masses of cash in high income earners' pockets, causing a lift in inequality and driving the budget deep into deficit
- tackle the crisis of affordable housing, so more people can get a foot onto the ladder of asset ownership
To pay for Canterbury, which was an expensive wealth-destroying event that has effects on the whole economy, a targeted time-limited tax increase has to be on the agenda: we can't stifle the economy or lift unemployment by cutting public services and infrastructure investment to meet the costs, and we can't afford to keep going down the route of 'borrow and hope' which now seems to be National's default option.
Of course, there is more chance of the sky turning green than the Budget taking this approach, or securing these things.
It won't tackle the real challenges the country faces.
It'll be about entrenching privilege for those at the top of the tree, paying for pet projects, and blaming the opposition for the debt blowout and growth crisis caused by the government's own decisions (or lack of them).
It'll talk tough on making difficult decisions, but it will actually show the Government taking the easy way out and delivering only to its base, at the expense of most New Zealanders.
Which is why the only reasonable verdict about Budget 2011 is that it will be a failure.