We’re spending more but have nothing to show for. This is Steven Joyce’s view and as a former Finance Minister he knows what he’s talking about:
Many of us have friends or family members that just “aren’t good with money”.
They earn a good income but somehow it all slips through their fingers and they never have anything to show for it except a maxxed out credit card.
This government is starting to look like one of those friends.
It’s not like they don’t have a good income, courtesy of the tax we all pay. The Government’s half-yearly update this week shows that by 2022 they’ll have collected at least $10 billion more tax than was predicted by Treasury before the last election.
Unfortunately, they are spending it even faster. The amount they are going to spend across the four years to 2022, according to official government numbers, is now $19b more than was in their own fiscal plan prior to the election. Alert readers will recall much wailing and gnashing of teeth when someone had the temerity to suggest they would spend $11b more than their own plan. We are now well past that point.
This government fell into the $11b hole and they’re making it bigger.
Debt is now predicted to top out at $78b, as against the $68b they predicted at election time two years ago, and an expected surplus of $6b for the current year is now projected to be a deficit.
All this wouldn’t be so bad if the government had something to show for it. But just like our friend with the big spending habit, it seems to have all slipped through their fingers.
More and better infrastructure, health, education, housing, fewer people on welfare, fewer in poverty . . . would be something to show for their big spending but that’s not what they’ve delivered.
All the key performance indicators that measure the effectiveness of government spending are currently going backwards. State Housing wait lists, poverty numbers and numbers on welfare are all growing. The big hospital metrics like emergency wait times and elective surgery numbers are deteriorating. The performance of our kids in school relative to the rest of the world is continuing to decline, and tertiary enrolments are down despite a year’s free tuition. There has also been no discernible economic uplift in regional New Zealand to match the government’s fine rhetoric, beyond what was already occurring.
Just about every primary sector except strong wool is enjoying good to better returns. That ought to be flowing through the regions but in spite of that and the Regional Growth Fund, the regions aren’t booming.
So it’s perhaps not surprising this week that the government tried the “look over here” tactic to distract everyone from the deteriorating state of the government books.
We are to have an infrastructure splurge – which in itself will apparently help the Treasury’s increasingly modest growth predictions be achieved.
No-one, except the anti-road dark greens, is questioning the need for more roads but there’s a big but.
Let’s be under no illusion as to how quickly the infrastructure pipeline has been run down. There are currently eleven major roading projects, all started before 2017, that are building 120km of new and upgraded four lane highways around this country. Nine of them are due to finish before the end of next year.
From that point in time there is literally nothing, no large new road projects, rail projects, or anything else to replace them. All of the big projects in the queue have been stopped, slowed down, or postponed because “we shouldn’t be building new roads” and we’re not ready to build anything else.The civil contracting industry has been tearing its hair out worrying about what to do with its workforce.
Twice in recent weeks people in roading have told me they’re running out of work and some in the industry have already cut staff.
The problem will be how to ramp that infrastructure pipeline up quickly again. The Government finally acknowledged this week that NZTA has been pretty good at building stuff, but that was before the same government took multiple billions out of the forward roading budget, unfairly shamed the agency over the Auckland tram fiasco, made key personnel changes, and operated a revolving door into and out of its boardroom. Treasury seems to acknowledge this issue, by projecting the government will get little more than a third of their new $12b spend out the door by the middle of 2022.
Another challenge will be to build the right infrastructure, stuff that improves economic efficiency rather than damaging it. A useful hint is to invest in more of the infrastructure that people already use, like commuter rail and busy road corridors, and not the stuff that requires heroic assumptions about bending the world to suit your world view. Flights of fancy about far-away ports and returning to a time when 70 per cent of freight travelling by rail are examples of what not to invest billions in.
Rail is good for getting some things from A to B but it covers only a very small part of the country and a lot of goods are more efficiently transported by road.
More broadly the government must start demanding some accountability for all the billions of extra spending it is doing. The absence of any tangible results from all this spending is another brake on our prosperity, and the amount of wastage going on is insulting to hard-working kiwis paying their taxes.
Most of those people would surely prefer to pay less tax to take the pressure off their own family budgets, rather than having to watch their spendthrift friend without a care in the world max out New Zealand’s credit card and have nothing to show for it.
Letting people keep more of their own money would be better than handing it to this government to waste.
New Zealanders worked very hard to restore the country’s fiscal position following the global financial crisis. We shouldn’t be frittering all those gains away.
The previous National government put a high priority on the quality of the spend rather than the quantity because more spending is not necessarily better spending.
This one has gone for quantity rather than quality.
As a result of that it hasn’t been able to deliver on its promises, we’re all worse off because of that and it’s the poor this government purports to want to help who are paying the biggest price for that.