Finance Minister Grant Robertson has headed for Washington for the spring meetings of the IMF and World Bank, as well as for talks with other finance ministers and senior US government officials.
Despite the darkening cloud on the global economy Robertson is gung-ho about the state of the NZ economy, although he concedes that, as an outward-facing export nation,
“ … NZ is not immune to this global uncertainty, and we have to bear that in mind as we transition to a more productive, sustainable, and inclusive economy”.
In Parliament before his departure for Washington he cited reports which indicate the NZ economy continues to out-perform its international peers.
He reckons it is great to see the relevant strength of the economy recognised,
“ .. but we are conscious of the impacts of a global slowdown, and we are getting on with implementing our plan for a more modern and resilient economy that is fit for purpose in an uncertain global environment”.
Brushing aside an interjection from National’s Gerry Brownlee (“who will run the government?”), Robertson says his mission will provide an opportunity to discuss current and potential challenges to the international economic outlook and what this may mean for NZ.
“It is a timely trip to gauge thinking as these clouds gather on the international economic horizon, but also to reinforce the strong fundamentals of the NZ economy and our credentials as a place to do productive investment and business”.
With his “well-being” budget now very much in the frame, and due for delivery in late May. Point of Order believes the Finance Minister – for all his ebullience – may be under-estimating just how difficult it will be to deliver on his promise of a “productive, sustainable and inclusive economy”.
Critics have been banging on for some years about NZ’s inability to raise its productivity rates, and many see an inherent conflict between raising productivity and increasing sustainability (if the latter means reducing agricultural emissions, eliminating fossil fuel production and cutting irrigation).
Labour elements in the coalition have made no secret of their drive to increase spending on education, health and the social sector generally.
But as Education Minister Chris Hipkins is finding, meeting the demands of teachers could prove far more expensive than he ever imagined.
Similarly Health Minister David Clark is scrabbling to stretch the health budget to meet not only the government’s goals but satisfy the demands of doctors, nurses, midwives, and whoever, in the health sector as well as easing the pressures on DHBs and Pharmac.
Then there’s the unexpected costs – for example – of the buyback of weapons under the proposed new gun laws. Some estimates put that as high as $500m.
And what about all those inquiries and taskforces, with their $1000 a day chairpeople? Plus the expanding budgets for Royal Commissions? (Let’s not mention the soaring costs for such schemes as light rail in Auckland and the Kiwibuild wreck).
For Robertson, who has made sticking to budget surpluses a priority in his oversight of the economy, it must feel as if they are coming at him from all directions. He could be regretting the $1.3bn splashed out on student free fees, or the $3bn on the provincial growth fund (which Shane Jones appears to be using as a re-election fund for NZ First).
In the wake of the Christchurch massacre, the pressure on the police budget will be severe. Extra allocations will have to be made for the huge security screens having to be mounted for events like Anzac Day.
There are question marks, too, about the funding of other security agencies such as the SIS.
Labour has made a rod for its own back with every minister parroting rhetoric about under-funding by the previous government in virtually every state activity. That means ministries will be demanding more funding this time round (except for Foreign Affairs where Winston Peters got in his bid last year).
The education sector offers an interesting case study. For teachers in the primary sector, the government’s most recent offer amounted to almost $700m over four years, with an average increase of around $10,000 after 24 months for the vast majority of teachers.
The Employment Relations Authority described the offer as “handsome and competitive” and the NZEI claims as “unrealistic”.
Nevertheless teachers are threatening more industrial action. The NZEI insists the government’s offer still leaves teachers trailing by 3.9% with their peers (whoever they are) in pay parity. The NZEI argues their claim would mean an outlay of $900m over four years.
The following exchange in Parliament is instructive:
Nikki Kaye: Is he completely ruling out increasing the government’s funding envelope for primary teachers; and if not, how does he expect to break the stalemate?
HIPKINS: Yes, $700m is worth more than all of the settlements reached under the previous government put together.
Kaye: Why won’t he reduce teacher ratios and provide the further additional learning support that he promised in Opposition; or is he just a lion in Opposition and a mouse in government?
HIPKINS: This government—
SPEAKER: Order! Order! No—the member will resume his seat. That question’s ruled out.
HIPKINS: I raise a point of order, Mr Speaker. I should be allowed to answer the first part of the question, otherwise it becomes a very one-sided exchange.
HIPKINS: This government has already spent half a billion dollars extra on learning support, so I utterly reject the premise of the member’s question. This government is delivering where the National government chose many, many other things to prioritise well ahead of teachers and kids.
Kaye: Is he saying to parents and students who are facing a third round of strikes that the ministry won’t settle because he refuses to shift on further additional funding for learning needs, workload, and recruitment issues?
The minister went on to detail the pay increases currently on offer as part of the negotiations: for around 30,000 primary school teachers, they would receive three lots of 3% pay increases, plus an additional higher salary step for those on the top of the salary scale, (which is the vast majority of primary school teachers), amounting to an additional 3%—so around 12% overall.
The teachers have also been given the choice between bringing forward the timing of some of those pay increases and having additional classroom release time—an extra 10 hours of classroom release time.
For the record, if the NZEI demands were to be met in full, it would cost around $2.5bn annually.
The teachers’ union, now one of the most militant in the country, seems to be convinced a Labour government will succumb to its pressure. It may even see it as payback for the support given to Labour in the last election.
The pressure in the education sector for extra funding is not coming just from the teachers. The reforms proposed by Bali Haque’s taskforce, with the establishment of about 150 hubs, would add substantially to administrative costs. And the polytech sector is pushing back against the costly changes proposed in that sector.
All a bit of a headache for those writing this year’s budget.
So good luck to Robertson as he works on his sums. Let’s hope he can succeed in putting NZ’s economy on the road to a more productive, sustainable and inclusive future.
We are not holding our breath.