New Zealand budget 2009

So, we’ve had the Budget.

The one time that we need a shift in government policy – and nothing happens.

Treasury believes that the size of our economy is fundamentally smaller, that there has been a permanent shock to our income. As a result, spending needs to fall or taxes need to rise – 11 years of operating deficits isn’t good enough. And I’m not sure that S&P will let us get away with it …

I don’t agree with David Farrar when he says:

There’s not much one can argue should be done differently.

As a commitment to cut spending or lift taxes from 2011 would have been the way to go. However, he does give a good summary of what was in the budget.

Update: Miguel noticed that S&P put us back on stable outlook. Story here. Good news and congratulations to the team, but to be honest I have no idea why.  Unless …

  • Miguel Sanchez

    And S&P has already put us back to stable outlook.

    What. A bunch. Of clowns.

  • @Miguel Sanchez

    Really – wow!!

    Well that is good news – but it makes there pre-budget statements a bit silly!

  • Miguel Sanchez

    And it makes their statements when they put us on negative outlook seem a lot silly. If they can flip-flop like this in the space of four months, how can we be sure they won’t be putting us back on negative outlook again in a few months’ time?

  • My suspicion is that the current move made sense – the negative outlook initially did not.

    I think they’ve researched our banking sector and found that it is sound, and as a result wanted to take us off – they were just waiting for the right moment.

    I get that impression as they have been blabbing about our banking sector. And also they should be rating us on “national debt” not government debt – and the banking sectors ability to deal with that debt is a top concern.

    However, if this is the case I’m not very impressed with their pre-budget statements!

  • For someone who thinks government intervention can often have a positive effect on economic outcomes, Matt, you don’t seem to agree with what the government actually does very often 😛

  • Mark Hubbard

    I’ve made my thoughts on the budget quite clear on Hickey’s site (it’s a Statist abomination).

    However, on another thread on that site, in relation to the Austrian’s, Matt, you stated that they did not pay enough heed to market failure. Do you want to expand on that please?

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  • DT

    I agree with you Matt,

    Although I think that the 11 years of deficits statement is a bit much – that is only according to Treasury!

    Personally I think that the responsible thing to do would have been to re-engineer this years (already implemented) tax cuts before they were put in place. At the time of the last election (not long after which the tax cuts were formalised) it was quite clear that things were going to be about where they are now – ie economy contracting a fair bit. It would have been a good time to reconsider the cuts instead of rushing them through parliament, at least if National were to keep its other promises about not cutting some flagship spending programmes like working for families. Some fiscal stimulus WAS appropriate to (combined with monetary policy) ensure that demand didn’t fail away too much, but perhaps slightly less generous tax cuts than were announced, particularly for higher income earners, would have been more prudent (again, if large cuts in social spending were off the menu). There are much more effective ways to stimulate an ailing economy than tax cuts for the rich.

    I think that the Treausury and the Treasurer have been misleading the public about the possibility of a credit rating downgrade, although it was to be expected given the line they were pushing. So as expectable as that was, I am quite disappointed by the media’s lack of analysis on this issue (who seem to have just swallowed the Treasury’s line without analysis) and even more disappointed in the bloggers, who when the print media fall down I would expect to actually provide informed comment. Kudos to TVHE for being the only ones!