In putting together this year's budget the Government, just like business, has had to carefully consider the trade off between controlling expenditure and putting in place initiatives that will generate more revenue to improve the country's overall fin
In putting together this year’s budget the Government, just like business, has had to carefully consider the trade off between controlling expenditure and putting in place initiatives that will generate more revenue to improve the country’s overall financial position. All this of course having to be done against an unforgiving political backdrop that must satisfy both short and longer term goals.
Drafting a successful budget can quite readily be likened to children exploring and enjoying the mechanics of a seesaw. Getting the right balance of components on both sides of the economic fulcrum always presents a challenge.
The best time is had when those playing on this piece of playground equipment have between them achieved a good sense of balance. Yet there will be bumps along the way as people come and go. Science can play a useful role in explaining why things happened the way they did, but the art is in continuously adjusting the variables so that everyone has a great time.
Today’s budget onlookers include not only the public of New Zealand, who are in a powerful position because they have the power to vote out the Government in six months time, but also the credit ratings agencies who presumably, under a cloak of secrecy, had the opportunity to vet the broader policy decisions before they were finally approved. In light of the Global Financial Crisis and what’s happening to sovereign debt in some European countries its clear we ignore credit agencies at our peril.
Just as parents keep a watchful eye on their children and their friends when they are on playground equipment to make sure they are safe, investors and business owners around the country will be doing the same: assessing the risks that surround this year’s budget to make sure that if the scales, or in this case seesaw, tips quickly, they will not be seriously hurt.
Winding back the clock 12 months, who could ever have imagined the impact that earthquakes or the recent booms in commodity prices would have to so quickly change the economic landscape? Events like these are just like having more people unexpectedly join and leave you when you are on the seesaw. It can be good; it can be bad.
A slightly changed, but still well balanced strategy, seems to have been found in dealing with KiwiSaver, Working for Families and student loans. There is a momentum and purpose behind all three policy initiatives that will make rapid change virtually impossible without creating political carnage.
That sense of balance remains with the tax rates announced last year all remaining in tact. Again this is generally good news, though successful businesses would always like their taxes to be lower!
It was interesting to note in Bill English’s budget speech the observation that “the main sector not saving is Government”. Getting the balance right across the economy is clearly going to take time. It’s just like a new set of children coming to and from the seesaw with two options: the savings end and the spending one. The Government very clearly is still wanting people to head to the savings end rather than spending one so it can quickly balance its books.
Few would disagree with the Prime Minster’s closing remarks at his Beehive press conference on Monday when he said that the economy was ‘finely balanced”. He backed this up today with a press release headed “ Responsible, balanced Budget for the times”
That said, it would be dangerous to focus solely on the economic seesaw which is described in such great detail in the 2011 Budget.
There are plenty of swings and roundabouts in the economic playground as well. That’s when the x-factor comes into play. They are they global trends and developments beyond our direct control that range from wars and conflict, through to natural disasters and the consequences of poor governance. The Government, just like Kiwi businesses, is not immune from any of these influences which is why it’s so important to keep everything in balance, and when it is, why everyone is able to go home from the playground happy and content.
