More of what’s working not boring

Several commentators are criticising today’s Budget for being boring.

Boring in the sense of no surprises is good for Budgets.

We should be grateful the days when everyone stocked up on fuel and fags then sat round the radio listening to the Finance Minister add taxes here and give out subsidies and other taxpayer largesse there are long gone.

But a Budget that delivers more of what’s working for New Zealand shouldn’t be written off as boring and the programme being built on in successive Budgets is working.

NBR editor Nevil Gibson writes of a Budget success story we don’t hear about:

One of the biggest contributors to the reduction in the budget deficit is the money not being spent on welfare.

It’s a success story you won’t hear much about as opposition parties insist a rise in the welfare budget is a better measure.

But, like the ACC reforms and its lower fees, the savings in welfare benefits are like a tax cut for all other taxpayers. . .

The reduction of people on benefits pays dividends in financial and human terms.

The reduction in benefit numbers since the reforms began in 2012 and the projections are described as “startling” by an Australian commentator, Rick Morton. 

His column quotes figures that show the number of years people will spend on benefits has fallen 12%, worth 650,000 years of benefit receipt in the next five decades.

“Two-thirds of this is due to a reduction in the number of people who will gain benefits and one-third is a reduction in the time they will spend on those benefits,” Mr Morton writes.

“From $NZ86 billion, the future liability of the welfare recipients shrank to $76.5 billion in 2013 and to $69 billion last year, largely on the back of economic factors such as inflation.

“But $2.2 billion of the reduction was attributed, in a report released earlier this year, to the ‘effectiveness’ of the policy, which is measured by fewer people getting access to benefits and more people leaving them.” . .

Lindsay Mitchell notes the success in reducing the number of teen pregnancies:

. . . To be demonstrating prevention-success alongside support for the diminishing number who do become teenage parents is a political dream. 

Stopping people going on to welfare and getting beneficiaries from welfare to work are two of the best ways to alleviate poverty.

Whatever further measures to address the problem of poverty are announced in today’s Budget, the significant reduction in the long-term financial and social costs of welfare are anything but boring.

An email from the National Party yesterday made these points:

  1. 194,000 new jobs created since the start of 2011 under National – that equates to around 120 new jobs every day.
  2. We’ve turned the Government’s books around – the deficit peaked at $18.4 billion in 2011 and now we’re expected to be back in surplus next year, a year later than the target we set in 2011. We’ll still be one of the first developed countries to be back in surplus after the global financial crisis.
  3. This will be the type of Budget a responsible Government can deliver when it’s following a plan that’s working.
  4. Budget 2015 will contain $1 billion in new spending. It continues to support New Zealanders and help families while responsibly managing the growing economy and the Government’s finances.
  5. The Government will continue building on what we’ve put in place to address the drivers of hardship. This approach is working – there are now 42,000 fewer children in benefit-dependent families than three years ago. So our spending will make a difference to those who receive it, while at the same time we respect the taxpayers who pay for it.

There is no money for a lolly scramble budget and even if there was that would be wrong.

A business as usual budget might be boring to some but it’s working for New Zealand.


4 Responses to More of what’s working not boring

  1. Dave Kennedy says:

    While I do think that there could have been a lot more spent on supporting struggling families and children (while some support was increased, other support for families decreased), the elephant in the room is Superannuation. It is now costing $3.5 billion more a year than five years ago (25% increase) and a total of $12.3 billion for 2016. Is this sustainable?


  2. JC says:

    “It is now costing $3.5 billion more a year than five years ago (25% increase) and a total of $12.3 billion for 2016. Is this sustainable?”

    Easily. Govt estimates of the costs of Super each year have fallen for the last 14 years to the point where (2013 figures) its a little over 4% of GDP rising to about 5%+ in 10 years and over six in the decades to come

    Click to access PensionBriefing-2013-6-New-Zealand-Superannuation%27s-real-costs-%C2%AD-looking-to-2060.pdf

    This is reinforced here..

    But the killer is this..

    In 1995 only 20,000 of over 65s carried on working, today its 140,000. At the current exponential rate of growth half the wrinklies will still be working, paying tax, staying healthy for much longer and of course supplying the full value of their skills and experience back into the economy.

    As I’ve mentioned somewhere you can start the economic facts about the working 65+ with the cost of the Super package, less the continued tax they pay, the value of the services they supply to their employers, the better health they are likely to enjoy, the increased volunteerism and so on.

    Chances are the plus side of the ledger now and looking ahead are a lot better than generally thought.



  3. Dave Kennedy says:

    I don’t begrudge supporting our retired people but when you compare the 5% of them living in relative poverty compared to 25% of our children, there seems to be an imbalance.

    We are cutting millions from things like Kiwisaver that provide some savings and support for our youth but around $800 million extra a year on superannuation.

    A high percentage of our elderly own their own home and a shrinking % of under 40s can even imagine owning one.

    I just don’t get the logic of supporting one demographic generously but not the other.


  4. JC says:

    “I just don’t get the logic of supporting one demographic generously but not the other.”

    Thats because old age is permanent whereas being unemployed or a sole parent is supposed to be a temporary situation. The rationale has always been you pay just enough to see the temps through till they get a job.. and in fact thats the way it works, ie, for most being on a benefit is temporary.

    Persistent hardship (not that ridiculous poverty measure) is what the Govt is targetting. We know (because we’ve surveyed them) that about 30% of deciles 1 and 2 say their income is insufficient and we now have cross agency cooperation so we know that such people appear regularly before these agencies with their problems.

    We also know that if they work just 20 hours a week such problems are much reduced, hence the measures we saw in the budget.

    This data driven approach is being picked up in the US.



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