Phil
Smith, Editor: The House
The 2025 Budget
Policy Statement (BPS) is an early warm-up to the
government’s 2025-26 Budget. The statement outlines the
goals and objectives that guided Budget decision-making and
the financial parameters that frame it.
It is first
considered by a select committee and then debated in the
House. The debate took place on Wednesday and though it was
highly political, it was also instructive. So what lessons
can we take from the debate?
In the excitement, a
chair forgets his team
When a committee formally
reports back to the House, the first speech is given by the
committee chair, who speaks on behalf of the committee as a
whole. In this case, it was National’s Cameron Brewer, as
the new chair of the Finance and Expenditure
Committee.
Newly thrust into the spotlight, Brewer
forgot which team he plays for. As chair, he is not a member
of government but of parliament, and on this occasion
speaking not for National but for the committee-opposition
and all. His speech had little to do with his committee, but
was instead a sales pitch for his party and the
government.
Nearing conclusion, Brewer got so excited
during a call-and-response session with his own caucus,
(proclaiming “growth, growth, growth” and “trade, trade,
trade”), that the Speaker interrupted his flow.
“This
is a Parliament, not a revivalist tent,” said Gerry
Brownlee.
Government priorities
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Brewer did
outline four government priorities this Budget
round:
- lifting economic growth, through measures
to address New Zealand’s long-term productivity
challenges - implementing a social investment approach
to drive results from the government’s investment in social
services - keeping tight control of the government’s
spending - developing a sustainable pipeline of
long-term infrastructure investments.
‘Growth,
growth, growth’, but not of government
Megan Woods
discussed the operating allowance as outlined in the BPS.
The operating allowance is the ‘extra’ money the government
has allowed itself for allocation to new initiatives or
increased outlays.
She described the likelihood of
needy ministries getting any of it as “an insurmountable
bar”.
The BPS notes an operating allowance of $2.4
billion. But, says Woods, “after you take out the
pre-commitments that have already been made-that is things
that the government didn’t fund in the last Budget and
realised that they needed to do some political fix-ups on in
between Budgets-we’re left with an operating allowance of
$700 million”.
In an annual budget of more than $180
billion, $700 million is less than half a percent. That
is…low.
“I cannot emphasise to New Zealanders how
low that is,” said Woods. “That is for everything other than
health. That is to fund the cost pressures that we see in
education. That is to fund what we might want to see in new
initiatives in health. That is to fund any increase we might
like to have in the paltry allocation we’ve had to housing
in the previous Budget.”
New Zealand First MP Jamie
Arbuckle put a different spin on it: “$700 million of that
is left, remains to be allocated through the Budget, but
that is being responsible. We aren’t blowing out the Budget;
we are being responsible with the money that we have got
allocated.”
Further cost-cutting in
government?
The BPS notes “with a small number of
exceptions, government departments should expect to receive
no additional funding in the Budget”.
ACT MP Todd
Stephenson noted that the minister of finance, giving oral
evidence to the committee, said: “Ministers have been asked
to reprioritise funding within their portfolio if they want
to pursue new spending initiatives.”
Without
inflation-relief in the Budget, intense cost-pressures may
lead to further job losses and programme cuts. That might
even play-out pre-budget with departments pre-loading as
many lay-offs as possible; tucking the costs of redundancy
into the outgoing financial year.
Headwinds in the
numbers
Headwinds are a common euphemism for tough
economic times, or ‘golly, this economic management thing is
harder than it looks’.
National MP Nancy Lu opted for
a different metaphor: “Challenges remain, and we are very,
very early in this economic growth space. Economic growth
has been a little bit slower than expected, which means that
things are sticky.”
Governments are legislatively
bound to regularly update Parliament on finance. The
Half-year Economic and Fiscal Update (HYEFU) is released at
the same time as the BPS.
Brewer noted: “December’s
economic and fiscal data highlighted both the scale of the
challenge and the extent of the opportunity that New Zealand
faces.” A sober clause buried within the evangelical
fervour.
He also noted that “inflation is back within
the target band at 2.2 percent, compared to 7 percent” and
that “with the official cash rate now down to 3.75 percent,
saving real money each week in mortgage payments for
families across New Zealand is a reality”.
Because
statistics always cut both ways, Green co-leader Chloe
Swarbrick also brought numbers.
“This time last year,
the HYEFU was projecting a 1.5 percent growth for this year,
but the actual rate now is negative 0.2 percent. Meanwhile,
next year’s growth of the Budget in May was projected to be
1.7 percent, but it’s now projected to be 0.5 percent. This
Budget does not increase productivity-in fact, it actively,
demonstrably, evidentially does the opposite.”
For
ACT, Stephenson argued it wasn’t as dark as all that: “Stats
New Zealand did modestly upgrade GDP, real growth, and
nominal growth. Now, it was only modestly, but it should be
noted that it actually has been upgraded.”
Lu also
brought numbers about the past.
“Laid out very clearly
in the BPS, New Zealand’s fiscal position has deteriorated
over the last six years… Crown expenses have risen faster
than core Crown revenue. The operating balance before gains
and losses, which is commonly referred to as OBEGAL, has
been in deficit since 2019 and the 2020 year. And yes. All
of the above is during the last Labour
government.”
And because this was duelling statistics
(not banjos), Labour’s Ginny Andersen also brought up the
past.
“The Budget Policy Statement lays out the truth.
It confirms what New Zealanders already feel in their
day-to-day lives: things were better under Labour. It states
right here: growth through 2023 and 2024 was stronger than
originally thought. But since then, since National took
office, the economy has taken a sharp
downturn.”
Climate
Deborah Russell noted one
thing that was not given a focus in the BPS: “This Budget
Policy Statement is remarkably silent about the hugest issue
we have facing us, and that is the issue of climate change,
but it’s lurking in there.”
She pointed to new
government procurement rules announced this
week.
“They are no longer going to require government
services to have buildings built to a five-star rating
standard, they should no longer be required to have battery
electric or hybrid electric vehicles, and they should no
longer have to use low-waste or recyclable
products.”
As it happens, climate change adaptation is
the subject of a special debate the House undertakes to end
its week, late on Thursday.
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