A budget to keep the Jacinda bubble from bursting might blunt NZ’s productivity and spur Kiwis to better themselves in Oz

Finance  Minister  Grant  Robertson  won’t  want to do anything  to disturb  the  waves  of  euphoria  washing  over  New  Zealanders when  he  presents  the  budget  this  week.  The  country is  still basking    in  the  recognition accorded  the Prime  Minister  with  the  top spot in Fortune magazine’s list of the world’s greatest leaders.

The annual list, which was published on Friday,  praised Ardern’s leadership during the Covid-19 pandemic as well as her “world-leading climate and gender-equity policies”.

Fortune magazine has been ranking and publishing top 50 world leader lists since 2014. Although Ardern has featured on it in the past, this is the first time she has been ranked  number  one.

Even  one-time National   supporters  line  up  in  the  queue   of  Ardern  worshippers.

So  Robertson   will  strive to  avoid  any  discordant  notes in  the  budget.  Yet  the  fact  is  that  the  NZ  economy,  though  it   has  survived the  Covid   pandemic  with  a  surprising  degree  of  success,  is  facing  many  challenges,  some  of  them  with  very  sharp  edges, as  it  moves  into  the  next  cycle.

These include  many  issues that had been becoming  acute  before  the  pandemic  struck  but were made  worse  by  it:  child  poverty, homelessness, inequality,  mental  health,  skills  shortages.  Now  there  are  pandemic effects, already  obvious some  months  ago, that are making  the  road  to  recovery even  more  difficult.

NZ,  always  heavily  dependent   on  imports, is  finding   supply   chains  disrupted. Freight  charges have  risen  spectacularly  and  there    are   global  shortages  of crucial   imports.  Everything from   building  materials  to  pharmaceuticals   is    rising  in  cost.

Covid’s  impact  on  the  labour   market  has  served to make   shortages more  acute. Skilled workers in the   health, education,  technology and animal care  sectors  have become  scarce.  In  the  rural industries   the  shortages of  manual workers   are  regularly  in  the  headlines.

So   how  will   the  Finance  Minister  handle  the  inflationary  pressures building  up  so  steeply?

Or  will  he   just  ignore  them  as   he   pumps  more  money  into  the  economy?

There   are   high  expectations  among Labour  supporters that  benefits  will  be  increased  in  the  budget, but  the  risk  is  that  their value  will   be  eroded   as  quickly  as  the extra money reaches  the  beneficiaries.

Because more people are on some form of welfare at the moment and the government is trying to stimulate the economy, expenditure  has  risen   sharply.

Heading into the pandemic, the government’s core expenses were about $80bn  a year – $86.95bn in 2019.  The economic cost of fighting Covid has put that up to $114.2bn for this year, and an expected $109.10bn next year.

Given   these  pressures, there   seems  little  chance  of  Robertson   channelling   funds    into  raising  NZ’s  overall economic  performance,  and so  blunting  the Impact of inflation.

As  economist  Michael  Reddell  wrote  in a  recent  post   in  his  Croaking  Cassandra blog:

“It is hard to think of a single thing they (Labour) have done to improve the climate for market-driven business investment and productivity growth, and easy to identify a growing list of things that worsen the outlook….”

Reddell  went  on  to    relate    how  NZ, which once  was richer    than   most  Eastern European  countries,  will   soon  find  its  economy  is  less  productive than  all  or  most  of them.

Few   among   the  current  Cabinet   have   worked   in  the   market  economy  and  seem  indifferent  to  the  need  to  raise  productivity  in  the  drive to improve  living  standards,  generally,   but  particularly  those  at the  lower  end.

The  consequence  of  any  further  drift  in  productivity  levels  (and  living standards)  will  see   workers looking  for   greener   pastures  across  the  Tasman.

One thought on “A budget to keep the Jacinda bubble from bursting might blunt NZ’s productivity and spur Kiwis to better themselves in Oz

  1. Did Fortune magazine do any research before anointing St Jacinda the best leader in the world? It appears not. How can she be praised for “world leading climate policies”? Clearly, Fortune are not aware that New Zealand had the second highest emissions increase last year. Perhaps, they are also not aware that we import coal from Indonesia to keep the lights on in Auckland further increasing our emissions. Joke!

    Liked by 1 person

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