Budget 2020: Paul Goldsmith - If I were National Govt Finance Minister
No government could have stopped Covid-19 creating huge economic problems.
This week's Budget will show New Zealand falling into an economic hole. Business and consumer confidence has collapsed.
Nearly 1000 people join the dole queue every day, even as 1.6 million Kiwis receive the wage subsidy. Small businesses carefully built up over a lifetime fail daily. We are adding tens of billions of dollars to our national debt.
Lives will be shattered; plans capsized; opportunities missed. But we will bounce back.
Kiwis will make new plans; find new opportunities.
The two relevant questions now are: how do we avoid making the economic disaster worse than it needs to be? And how can we get back on track?
I argue we are making it worse than it needs to be and an ill-directed, big spending Budget this week would compound the damage. And I'll outline National's five-point plan to get us back on track.
First, credit where credit is due. The Government's speed at getting the wage subsidy scheme up and running reduced early economic calamity.
Our lockdown, however, has proved excessively hard. Hindsight is a wonderful thing, and so it's perhaps unfair to criticise initial decisions about the severity of level 4.
But with each passing week, it became obvious that Australia's less extreme response – which left construction, retail, physiotherapists, hairdressers and much else carrying on, with excellent testing and tracing to back it up – was producing similar health outcomes.
The Prime Minister said last week she was a perfectionist. But in extending our severe lockdown, waiting for perfection, we compound the huge damage, both in terms of jobs and general wellbeing.
Big spending in the Budget should be focused on saving jobs – such as cash to small businesses most effected – and critical expenses related to health and education.
We'd do well to avoid nice-to-have pet projects, such as the Greens' wider footpaths, or locking in new or more generous entitlements at this time.
We won't avoid a $40 billion or $50b dollar hole; but we must not turn it into an $80b, $90b or $100b disaster. All the debt will need to be repaid.
And, who can best provide the economic management to get us back on track faster?
The past is a guide.
The previous National Government borrowed $50b to get us through the Global Financial Crisis and Canterbury earthquakes. In short order we got on top of it, got back to surplus with a strongly growing, confident country and economy.
This Government's economic management in the two years before Covid struck is more mixed. Yes, unemployment and debt stayed low. But in two years they burned through massive surpluses to project a deficit this year, and growth had stalled to 1.8 per cent in calendar year 2019. Many announcements were made – KiwiBuild, Light Rail etc; little was delivered.
A National Budget this week would include a five-point plan back to progress.
First, lighten the lockdown. Get Kiwis back to work unless there's an overwhelming reason not to, rather than seeking perfection before slowly restoring freedoms.
National would introduce a GST refund scheme for businesses badly affected by the Covid-19 crisis to help with cash flow, leader Simon Bridges said in a major pre-Budget speech today.
Second, save jobs by getting cash to small businesses most in need. Our GST refund proposal to businesses that had lost more than 50 per cent of revenue for two months would help and help strong businesses to drive growth. Our Business Investment Accelerator proposals would incentivise new investment.
Third, we need commonsense and pragmatism around the rules for "2 or 1m world'". It's one thing to allow bars and cafes to reopen but if the rules mean that you'd just lose money, you're no further ahead.
Fourth, unlocking private sector investment is the key to growth and innovation.
We won't rely on Wellington committees to reinvent the economy. We'll trust Kiwis to work out how to get back on their feet. We'll keep taxes low, we won't regulate firms to death or keep changing the rules, and we'll back them to succeed.
Fifth, we'll use the Government's balance sheet to invest in quality infrastructure – like National did with the Ultra-Fast Broadband – in upgrading our skills, turbo-charging the innovation sector and in improving the quality of public services, such as health.
We need a Budget that backs New Zealanders.
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