The good news for Nelson from Budget 2018 is that the economy remains strong. New Zealand history is littered with incoming governments facing major economic problems like those that confronted new Prime Ministers Lange in 1984, Bolger in 1990 and Key in 2008. Last week’s Budget numbers for growth, tax returns and surpluses shows National bequeathed an even stronger economy than expected.
Much about the Budget was steady as she goes. The new spending in education and health was little different to Nationals. Labour has put the health budget up by $2.6 billion compared to National’s $2.9 billion increase in last year’s budget. School’s funding increased this year by 1.6% which is less than the 1.9% average under National over nine years when times were much tougher.
The most positive aspect of the Budget is the projections of ongoing increases in incomes. The average annual wage grew from $46,000 to $60,000 under National and is forecast to reach $72,000 by 2022. However, this means workers on the average wage will soon be paying the top tax rate that bites at $70,000. Labour reversed National’s Budget 2017 adjustments to the low and middle income brackets. People on the average wage should not be paying the top tax rate and this will need to be addressed.
Many will be disappointed that the Budget did not deliver on Labour’s promises. Nelson’s 15,000 superannuitants have been short changed by $267 with the delayed winter energy payment. The promise to reduce the cost of a GP’s visit on 1 July for adults has not been met. Nelson’s 16,000 students have missed out on Labour’s promised Ipad for every school pupil. The 10,000 per year Kiwibuild homes has shrunk to 1,000 and the “affordable” price has surged to $650,000. Fuel tax is increasing by up to 24 cents per litre despite the promise of no new or increased taxes. Labour has also reneged on its promise to scrap secondary employment tax. Nor is there any sign of Labour’s promise to slash immigration by 30,000 a year.
Labour’s problem is that they did not expect to win and way over promised. They have also put Winston Peter’s demands for more diplomats, foreign aid and tax breaks for race horses ahead of the needs in health, housing and education.
My biggest disappointment of Budget 2018 is the lack of a plan for keeping our economy strong. Spending is the easy part of a Budget. Creating new wealth requires more vision. Business confidence and investment has plummeted in response to uncertainty over immigration, foreign investment, industrial relations and energy policy. The challenge for National will be filling this vacuum and developing the strong economic plan for New Zealand’s future.