Claire Trevett is the NZ Herald’s political editor. She started at the NZ Herald in 2003 and joined the Parliamentary Press Gallery team in 2007. She is a life member of the Parliamentary Press Gallery.
OPINION
National needs the Budget to deliver it a good day at the office.
The sales job ahead of that first Budget from the coalition Government has resulted in a cliff-hanger ending as to how we’ll feel about it at the end.
Former Finance Minister Steven Joyce reckoned we might be disappointed, but that was probably a good thing.
In a joint interview with the NZ Herald, Prime Minister Christopher Luxon and Finance Minister Nicola Willis reckoned we might be surprised and promised “bold moves”.
They promised the surprises were good – it was less clear whether the bold moves would be, or what constituted bold.
For this Budget, everyone is a winner in theory – or at least 83 per cent of those who get an income are. One certainty is taxes – or rather, tax cuts.
The other certainty is the spending cuts to pay for this “modest but meaningful” tax-cuts bonanza Willis has promised.
It’s the time of year when finance ministers feel they have been flung into a Dickensian novel, with a long queue of people lining up and wanting more.
Every advocacy group in town issues wish-lists and demands for what the Budget should deliver. Few of them deliver an accompanying list on how it could be paid for.
From the slew of pre-Budget announcements so far, it is clear every group of “winners” will be accompanied by a conga line of losers: every new funding boost has included an explanation of what was cut to pay for it. The latest example was cuts to first-home buyer grants to pay for community housing.
There’s an art to selling a Budget in advance.
Finance Ministers have to play to different audiences.
Politically, a key audience is the voters. However, they also need the numbers to be whispering sweet nothings to the credit rating agencies, to business, and to economic analysts.
In pre-Budget speeches, Willis has tried to strike a balance between emphasising things are very, very bad indeed but not so bad that she won’t be able to fix them eventually.
She has gone to some lengths to prepare voters for pain and a future of spending cuts, while also promising pennies to compensate for it and a way out of the economic doom and gloom.
Willis and Luxon will no doubt be hoping that the pennies side – those tax cuts – will be the hero on the day.
They certainly need something to be, but if Willis has done her pre-Budget sales job right it won’t be the tax cuts.
It will be the medicine that the tax cuts are supposed to sweeten: the measures being taken to try to resolve the economic buffeting facing New Zealanders.
National has missed its post-election honeymoon and Willis will not necessarily be expecting the Budget to deliver her one, although she wouldn’t turn it down.
Tax cuts are a short-lived sugar hit.
Willis will be hoping the Budget delivers something a lot longer-lasting: trust in her economic management.
National was voted in partly on the basis of its promise of strong economic management.
It has not thrived in the polls since. That raises the question of whether a chunk of those middle New Zealand voters remain unconvinced National is focused on that core task.
Instead, the demands of coalition partners and its own programme of repeals and change across the board have meant distractions have peppered its first six months in office.
The Budget is the chance to prove it is focused on that core business.
It is clear Willis knows that. She delivered her own version of former Finance Minister Michael Cullen’s “bread today, jam tomorrow” saying the Budget would produce some relief today, and hope for tomorrow.
The pre-Budget period has been dominated by doom and gloom: cuts to the public sector, grim economic forecasts, recession, high interest rates and inflation.
That is also playing out in the real world. In the polls, pessimism is up, optimism is down.
So Willis’ pre-Budget sales job is not just convincing people that they are “winners” in the Budget, but also that it is for their own good to be a loser. The ones she wants to think are winners are low- and middle-income working people.
Willis and Luxon have driven home the “raw deal” New Zealanders copped in Labour’s last year or two.
In selling the tax cuts, Willis has used the figure of the median income worker to explain the need for them is more than simply a bit of extra coin each week: “the average tax you pay has increased from around 15 per cent in 2011 to around 21 per cent today.”
She has repeatedly said those tax cuts are aimed at lower- to middle-income earners – she never mentions the high-income earners, even though they will benefit equally if not more from the tax cuts on offer.
Then comes the line-up of villains: the groups National wants people to think got all the bounty while they were paying: “Everyday New Zealand workers have been left to wait in line while beneficiaries, government agencies and consultants got a boost.”
Strategic polling questions are showing Willis has public sentiment exactly where she wants it: a Taxpayers’ Union Curia poll out recently showed two-thirds of respondents thought public debt was too high.
Another question showed 58 per cent of people wanted Budget spending to be recouped from spending cuts rather than debt or new taxes.
If voters see a problem, they can stomach the solution for it.
As for the tax cuts, once they have been pocketed, the Government will have to get through two more Budgets.
In an interview with the NZ Herald this week, Willis was asked whether this Budget was as good as it would get on tax cuts or if there could be more in the next two years.
The answer was a bit vague: the coalition agreements allowed National to implement its campaign tax cuts promise in this Budget. Anything beyond that would require Cabinet agreement.
That means it would require Act and NZ First to agree. Act is keen to work on tax moves that nudge towards its own policy. NZ First is sceptical about whether even this year’s lot are affordable.
Willis’ answer to more tax cuts was not a “no”, however. Given voters pocket tax cuts pretty quickly, its a fair bet there might be lot more discussion about that question come the 2026 Budget – just before the next election.
Dancing Diary: Harcourts Dancing for Hospice week three