- The Government has met our expectations in many but not all of the critical areas
- More support for businesses outside the worst affected sectors needed
- More support needed for access to capital and for a transformational change in productivity
We identified 13 policy responses / key messages we wanted to see in this year’s Budget, the next stage in Grant Robertson’s rolling maul approach to spearhead the country’s recovery. Has the Minister of Finance met our expectations?
As our scorecard shows, the Government has met our expectations in many but not all of the critical areas. We would like to have seen more support for businesses, including those outside the worst affected sectors such as tourism and hospitality.
Job retention and creation are critical but so are access to capital and support for a transformational change in productivity, neither of which has been a focus. We welcome particularly the extension of the wage subsidy, the pragmatic focus on jobs, and the Government’s resolve not to cut spending or increase taxes.
Here’s our report card and our commentary on the Government’s delivery of what we see as the key priorities for the nation’s rebuild.
1 - Job retention ✔
Wage subsidy extended. Wisely new $3.2 billion funding targeted at the businesses most in need – those with 50% decline in revenue compared to last year. On top of $10.7 billion paid out already.
2 - Job creation ✔ / ✕
$1.6b trades and apprenticeship training will help but will it be enough given major job losses expected? $1 billion environment jobs package targeted and sensible but other sectors (e.g. manufacturing, distribution and some services) not receiving same level of support.
3 - No tax increases ✔
Tax increases would have sent the wrong message at this stage. Pleased to see a commitment to some ongoing tax relief. Would like to see a review of the tax base in the mid-term.
4 - No cuts in spending ✔
Now is not the right time for austerity. Slashing spending didn’t work in the 1990s and it is unlikely to work now. That said all spending needs to be quality spending and a watching brief for wastage is required.
5 - Quality infrastructure spend ✔
Substantial investment (a further $3 billion boost to infrastructure spending on top of $12 billion and replacing ferries and trains to tune of $1.2b) is welcome. But we need a commitment to apply a new lens to all infrastructure planned projects (are they fit for 2030 and 2050?). A longer term commitment to streamlined consenting would be sensible.
6 - Targeted support for business and households ✔ / ✕
Targeted evidence-based support is appropriate now whereas universal support was on the mark at the beginning of the crisis to cushion the blow. Good to see $400m for a targeted tourism recovery fund but will it be enough? Tourism is likely to need more support in the next wave. Not much for businesses that are ineligible for the wage subsidy but still vulnerable. Wisely no helicopter payments for all individuals and families. Additional social support is targeted e.g. for Maori, Pasifika, early childhood and school lunches.
7 - Joint policy development with business and other sectors ✓ / ✕
It is really critical that Government works with sector and industry groups – and regions in some cases – to deliver the right solutions. Tourism sector the best example but close collaboration with business and communities to come up with solutions needs to be a given across the board.
8 - Enabling access to capital for business ✕
Limited additional support for accessing capital. More $ needed to improve access to capital to build on first two Covid19 packages in collaboration with banks and IRD
9 - Digital expansion and addressing the digital divide ✕
Enhanced digital capability is a key platform for improving productivity. We need to build on the much faster digital adoption of last two months. $10 m small business e-commerce support is way too small. A portion of the infrastructure spend ($12 billion plus $3 billion) needs to be spent on digital infrastructure.
10 - Boosting productivity ✕
Not enough investment to transform us from a relatively low wage / low productivity economy.
11 - Continued commitment to lower emissions and improved environmental outcomes ✔
We should not apply the brakes to emissions reductions, but we need to be clever about how we deliver on environmental commitments.
$1.1 billion environmental jobs package sensible.
12 - Investment in health ✓
The additional health funding announced pre-Budget needs to be spent wisely with the right proportion going to public health and primary healthcare.
13 - Agile policy making ?
As the Minister of Finance makes clear this Budget is not a one-off response to the economic crisis. It is part of a rolling maul. That rolling maul has to be both quick and firm on its feet. Keeping $20 billion in the kitty for future measures is sensible. Additional wellbeing initiatives to come in specific announcement – again quality spend essential.