In a pre-Budget speech last Thursday to the Wellington Chamber of Commerce Finance Minister Grant Robertson said the economic and fiscal forecasts will be grim, Federated Farmers senior policy manager Nick Clark said.
So it is fortunate New Zealand’s fiscal position was strong going into the covid-19 lockdown but Robertson said there will be operating deficits for an extended period and net core Crown debt will increase dramatically.
In the light of the economic and fiscal position Robertson said new spending packages previously planned for the Budget have been re-assessed and unless they meet a core cost pressure they have been put on ice.
Packages for seriously affected sectors have been developed and over time support will become more targeted because some industries and firms can survive and recover on the back of broader stimulus measures.
Federated Farmers vice-chairman Andrew Hoggard said the Budget should have an eye not just to short-term employment and kick-starting economic activity but also to setting up farmers for the future.
While good progress has been made Hoggard said more investment is needed to bridge the rural cellphone and internet connectivity divide.
“That’s not just about fairness, it’s also giving our primary producers, our economic powerhouse, the modern tools they need to further lift productivity and be competitive as international traders.”
Hoggard said more investment is needed to improve and better maintain rural and regional roads, both state highways and local roads and bridges.
“These economic and social lifelines are crucial for our physical connectivity but have been suffering years of neglect.”
The drought has shown pressing need for more and better on-fam and community water storage, which, well managed, have economic, social and environmental benefits.
“Rather than imposing new, heavy-handed environmental regulation the Budget should signal more funding for weed and pest control, environment enhancement projects and catchment groups and funding to help councils with their huge looming costs to address drinking water, waste water and stormwater problems.”
“Budget 2020 will be vital to the rural sector, especially after covid-19.”
Hoggard expects it to be the biggest in a generation.
“Recent Budgets have been bland, boring affairs but covid-19 has changed all that.
“The virus and the Government’s response have had significant short-term economic impacts, including a deep slump in GDP and a surge in unemployment.
“The fiscals have been slammed and it’s anyone’s guess how big the deficit will blow out to.”
Though GDP will bounce back as restrictions are eased, the global economic downturn will exacerbate the impact on NZ and will be a headwind to recovery.
“It will take considerable time to make up the lost growth and even longer for unemployment to return to levels before the virus struck.”
The economy will continue to undergo a great deal of realignment even as it recovers and getting back up to the big picture it will be vitally important for the Government to focus on providing a more positive business environment to give existing and new businesses much-needed confidence to invest and employ.
“The Government can do this by keeping its spending controlled and focused on good, value-for-money future investment, by keeping the tax burden down, by fostering competition and open markets, by ensuring low and stable inflation and by seeking to improve the quality of regulation to reduce compliance costs.
“I believe this can be achieved through restraint in operating spending and pursuit of value for money, aiming for return to operating surpluses within five years.”
The Budget should enable investment and be inspiring for confidence rather than establishing heaps of committees and signalling a state-directed interventionist approach to economic management, an approach that has been tried and failed, Hoggard said.
Though there is much uncertainty, what is certain is that the future normal will be different.
Whether it is better or worse will be influenced by decisions made in the Budget.
“I don’t envy being in Robertson’s shoes on Thursday.
“His and his Government’s responsibility is massive,” Hoggard said.