I noted before the Budget announcements that we needed a statement attuned to the needs of the New Zealand economy, and not those of the credit rating agencies. And, as I always told ECON101 students in their first class, economics is about people not about money. So, what did we get from the Budget about people, about money, about the NZ economy, and about the credit rating agencies?

What we got was debt. 34 times. We did get exports six times, but skills didn’t even make it onto the Budget scoreboard.

Debt = 34

Debt. It is a four-letter word and its fingerprints were all over the Government’s first Budget. Actually,

I lie. No, not its fingerprints. Rather, its impression was more the equivalent of fairly large size 12 gumboots clod-hopping through the countryside.

After several weeks of scaring New Zealanders witless with the prospect of a credit ratings downgrade, it was clear that the Government wanted this Budget to be judged by its success in reining in the debt blowout. We were led to believe that a ratings downgrade from AA+ to AA would indeed be a catastrophic outcome. (I’m pretty sure there are many, many economies around the globe that would give their right arm at the moment for a rating of AA, but that’s another story …).

And, true to form, ‘debt’ found its way into the Budget speech no less than 34 times. This is, though, entirely consistent with one of the three stated objectives of the Budget. That is, “to take steps to keep government debt under control”. So, with catastrophe averted and AA+ remaining, I am obliged to give the Government due credit. Not quite full marks here though, as ongoing deficits for 10 years out suggests scary shadows from the ratings agencies are here to stay.

So, 9 out of 10 here.

Slash and burn=0, jobs=14

Another objective was “helping New Zealanders through the recession and supporting jobs”. This required restraint in the desire to slash and burn the public sector. A more level-headed assessment acknowledging that over-zealous cuts to spending would exacerbate the recession would be needed to succeed here. It is fair to say that this temptation was largely resisted, as the focus was on re-prioritising existing spending plans. So, the help to take us through the recession was in avoiding the slash and burn.

But, support for job creation was minimal other than the obligatory words (as always).

A mild pass mark of 5-and-a-half out of 10 here.

Exports=6 and skills=0

But, what about the needs of the New Zealand economy? Well, “lifting productivity and raising New Zealand’s international competitiveness” was the other of the three objectives. Great, finally something I could relate to. In this context, and rightly so, investment and productivity were noted as critical. Investment appeared in the speech on 16 occasions, with productivity another eight times. But, to be honest, this wasn’t much different to what we’ve had for the past 20 (at least) budgets.

Conspicuous by its absence was the detail as to how investment and productivity were to be lifted. The long-awaited infrastructure investment programme amounted to not much more than the already announced roads, broadband, and school building programme.

At least there is now a National Infrastructure Unit, with a National Infrastructure Plan to be unveiled towards the end of the year. I supposed I’ve waited long enough for this, so another six months won’t hurt.

Without doubt, though, the greatest disappointment was the serious omission of dollars (or even just words) on that other leg of the productivity platform – skills and training. No impetus here, despite a budget objective on productivity, is little short of negligent.

Moreover, the word ‘skills’ appeared a big fat zero times during the speech. Admittedly, training got a mention twice, but only in the context of medical and general practitioner training.

And, if we’re talking about productivity and international competitiveness, we shouldn’t forget my own hobby horse – exports. Well, exports were deemed so important that the word was mentioned the princely sum of six times. Extremely disappointing.

All in all, achievement on this objective ranks an anaemic 2 out of 10 (and I think I’m being generous).

C pass, but improvement desperately needed

An average score of 5-and-a-half out of 10 overall is indeed a pass mark. But, I look forward to significant improvement next year.

 - reprinted from BERL Forecasts June 2009