Tuesday 20 August 2019

Leak row overshadows Kiwis' Well Being budget

 

Financial planning: Prime Minister Jacinda Ardern and Grant Robertson, Finance Minister, centre left, are flanked by ministers James Shaw and Winston Peters as they head to present their budget. Photo: Bloomberg
Financial planning: Prime Minister Jacinda Ardern and Grant Robertson, Finance Minister, centre left, are flanked by ministers James Shaw and Winston Peters as they head to present their budget. Photo: Bloomberg

Charlotte Greenfield, Praveen Menon and Donal O'Donovan

New Zealand has unveiled a €2.2bn spending package under a much-hyped Well Being budget, prioritising mental health and alleviation of child poverty, but it expects a smaller surplus and slower economic growth over the next year.

Much of the excitement around the budget, touted as the world's first to measure broader living standard goals, was dampened amid a furore over hacking accusations after details were leaked ahead of its release.

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The opposition has called for heads to roll over the blunder - including that of incoming Irish Central Bank Governor Gabriel Makhlouf (pictured) who as Treasury Secretary ushered in New Zealand's new style Well Being budget, but was also at the centre of this week's leaking scandal. Photo: Bloomberg
The opposition has called for heads to roll over the blunder - including that of incoming Irish Central Bank Governor Gabriel Makhlouf (pictured) who as Treasury Secretary ushered in New Zealand's new style Well Being budget, but was also at the centre of this week's leaking scandal. Photo: Bloomberg

The opposition has called for heads to roll over the blunder - including that of incoming Irish Central Bank Governor Gabriel Makhlouf who as Treasury Secretary ushered in New Zealand's new style Well Being budget, but was also at the centre of this week's leaking scandal.

He initially claimed the budget had been hacked after opposition politicians got their hands on it, but it later transpired the document had been accessible through the Department of Finance's own website.

It has left a cloud over his nine years in New Zealand and the new-style budget that should have crowned that term and points to what may be his priorities in Ireland.

"Today's budget shows you can be both economically responsible and kind," Prime Minister Jacinda Ardern said after the budget was released on Thursday. It increases the annual operating allowance for new spending to NZ$3.8bn (€2.2bn) per year over the four-year forecast period, from a forecast NZ$2.4bn in the previous budget.

About NZ$1.9bn was slated for mental health services over that period, a key issue for the government with New Zealand still having one of the highest suicide rates in the world.

NZ$1.1bn was set aside toward reducing child poverty. The Labour-led government also allocated funds for tackling domestic violence, and for infrastructure projects like rail, hospitals and schools.

"We are measuring our country's success differently," said Finance Minister Grant Robertson. "We are not just relying on gross domestic product, but also how we are improving the wellbeing of our people, protecting the environment and strengthening of our communities." The national rail service, KiwiRail, was given a NZ$1bn boost.

The Treasury Department, however, downgraded its GDP forecasts to 2.1pc in the year ending June 30, 2019, compared to 2.9pc predicted in December, hurt by a cooling global economy and slackening domestic consumption.

GDP was forecast at 3.2pc in fiscal 2020, and was seen averaging about 2.6pc over the forecast four-year period.

Net debt was also forecast to rise slightly above 20pc of GDP, before dropping to 19.9pc in 2022. Mr Robertson warned that the economy faces continuing risks from the US-China trade disputes and Brexit.

The budget forecast an operating surplus of NZ$3.5bn for the year ending June, up from NZ$1.7bn forecast in December, but is then expected to narrow to NZ$1.3bn in the 12 months to June 2020. Ratings firm S&P said the new spending on health, housing, education, defence and general welfare will increase core expenses by about 1pc of GDP per year compared to the treasury's forecasts in December.

The budget also included NZ$150m for a gun buy-back scheme that was introduced after a mass shooting at mosques in Christchurch earlier this year.

Despite enjoying a 'rock star' economy for years, some New Zealanders have felt left behind due to the rising inequality.

Ms Ardern, the popular 38-year-old Prime Minister, came to power in 2017 with an agenda of social justice and promising to make the economy "work for all New Zealanders".

Some questioned whether the budget had lived up to stated goals to transform the economy and pointed out that the spending increase was still relatively modest as the government stuck firmly to its targets of paying down debt.

Referring to the leak of budget details, the opposition National Party called it a "botched budget", and questioned allocations for defence that do not come under the Well Being approach.

"Families want more money in their weekly budgets for food, petrol and rent. Instead, their taxes are going toward rail, the defence force and trees," said National Party leader Simon Bridges.

Critics, many in Labour's left-wing base, already felt the government has missed key opportunities to fulfil its transformative goals.

"They have spent on their priorities that they stated they would but I just don't get the sense that its the transformation that we have been promised," said Ganesh Nana, chief economist at Wellington economic think tank BERL.

Ms Ardern made a surprise U-turn in April by ruling out a capital gains tax during her tenure, long a Labour policy to tackle wealth inequality.

Tens of thousands of New Zealand teachers staged the country's largest strike on Wednesday, and doctors, nurses and others also threatened action this year for higher pay and shorter hours.

"Moving the dial, meaningfully, on Kiwi wellbeing may take five to 10 years, and they'll be quizzed every budget," said Kiwibank chief economist Jarrod Kerr. "The aspirations in the budget are grand, and respected. But it's all about long-term execution in a short-sighted political world."

Reuters

Irish Independent

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