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.