Polls show Labour on a high and the economy is in good nick as Robertson polishes Budget 2021

Labour  MPs  are a  happy bunch  of  campers. Party polling  is  solid, their  leader  has gained  recognition round the  world  that few other NZ prime  ministers have  enjoyed, and  their  opponents  are  in disarray.

The  government  has  steered  the  country   through  the Covid-19  pandemic  with  little  of  the  strife  that  has  ravaged  other  populations.

What’s  more   the  economy is  in good  shape, despite   the   damage  suffered  by  key sectors like  tourism, aviation  and   international  education.

The  Labour  camp   is  confident  Grant  Robertson  will  maintain  the  political  momentum  when he  delivers  the   budget next  month.  After  all,  he  did  not  hesitate to  spend  up  large to  sustain incomes  when the  economy looked  as  it  would nosedive   during lockdowns. Overall, the  economy  kept a  surprising  equilibrium   despite  the  pandemic’s  buffeting,  and slippage in GDP  in the final  quarter last year.

Not  that  satisfying  the  range  of  demands  for  higher  spending  will  be  easy.  Problems  like child  poverty, housing  shortages,  and inequality have  intensified  since  Labour   took office.

Failing   infrastructure  has  underlined  the  need  for all  those  “shovel-ready”  projects  promised in the run-up  to  last year’s election, but  yet  to  be launched. Fortunately  for  ministers,   they  have escaped  the  obloquy heaped  on  predecessors  when  they trot  out  the familiar banality beloved  of   Beehive staffers  (“work is  going on in that  space”,  Cabinet  is  seeking advice  on that”, “I have  called  for  a  report”).

Robertson  is   under   heavy  pressure  from  some  elements  inside  Caucus    to lift  benefits  so  that   those  unsightly queues  at foodbanks  in the  main  cities  are  shortened.  He  also  has  to  deal  with  that other political  blot  on the financial  landscape,  the  huge  bills  racked up  for  motels temporarily housing,  hopefully  for  short  periods,  the homeless — although there  have  been reports  of  some  families  spending months  in that  kind of  accommodation.

Given the  pressures  to  increase  spending  on   housing,  health, education,  infrastructure  and  climate   change measures, there  may  be  small  scope   to    cut   taxes.  Still,  expectations   are  high  among  Labour  MPs that  some  tax  relief  will  be  signalled  in  the  Budget   for  low-income   families.  Some   tax  authorities  argue  the  assistance  provided  through  the  Working Families  structure  needs  reform,  particularly   as  benefits  are  scaled  up.

The  question   is   how far will the  Finance  Minister  stick  to  the  Fiscal  Responsibility  mantra.   He  has   been  careful in  previous  budgets  to  observe  those  rules, in  respectful  acknowledgement  of  the  importance  of  maintaining  NZ’s  international  credit  ratings.  But  perhaps it is  time  to  stretch  them a   bit?

Of  course, on  the  credit  side,  NZ’s  export  economy  has  done  astonishingly  well  through  the  Covid  pandemic.  There  has  been  the  loss  of income  from overseas  tourists,  but that  has been offset  by  the  cutback  in  overseas  travel  by New  Zealanders.

The   country’s  primary  exports   have   not   been  dented  by  the  Covid  pandemic.  In  fact  dairy farmers  in  particular  have seen  demand  for  wholemilk powder  soaring  — and  some  analysts  are  speculating  Fonterra’s  payout   could even  reach  a  new  high  this  season.

What is more,  it  could be sustained, because  futures contract  pricing  indicates the  strong  prices  will be  sustained  through  the  next  season.

Other  primary exports  are  also   producing  excellent returns, though freight  costs on  shipping  and other  services  have risen.   Along  with the  earnings  from  food  exports, forestry  has   done  well, as log prices  have  strengthened.

High-tech  exports  have  also  given  a  boost  to  NZ’s  foreign  exchange  receipts.  For  example,  some  analysts  had  predicted  Fisher & Paykel Healthcare’s revenues   would begin  to  be trimmed as the  global  population  is  vaccinated  against  Covid,   sending  the  share  price  down below  $29.  To the contrary, it  seems  demand  for  its  ventilators  has  grown   even more  as the US, Brazil, Italy, France  and  Germany have suffered  second  and third  Covid  waves  with  the  spread  of  variants— while  India is  now  breaking  records  with  the   number  of  new cases.

F&P Healthcare’s  revenues, like those  of many other  companies  in the  sector, have been strengthening, and  investors are  piling in, sending  the  stock up from below $29  last  month  to  above  $35  this  week.

It  is  that  kind of  buoyancy  the  Finance Minister  will  be  eager to  maintain in  his   Budget—and his  party  colleagues  won’t  mind either  if  it  keeps  the  party’s poll ratings  up  there.