Island Life by David Slack


The Budget of All Mothers

Three and half billion dollars is the limit of my comfort zone, declares Michael Cullen. A hundred million here, 200 million there. Before you know it, you’re talking about unreal money. Sometimes it helps to take the Geoff Robinson approach to complex matters. So, Dr Cullen, if I’m drawing up the nation’s budget in my garage, how much money do I need?

This little nugget from the briefing material is helpful. John Smith’s payslip tells us where his taxes go. John earns $45,000, so he probably wouldn't get a date with Cathy Odgers.

16/5/2008 TO 22/5/2008

Annual Salary $45,000
Weekly Salary $865.00
ACC levy $12.00
Tax goes to: $186.00
- Health $36.90
- Benefits and Working for Families $33.70
- Education $29.70
- NZ Superannuation $22.70
- Capital (excl. Transport) $12.10
- Law and Order $9.10
- Industrial Services $5.50
- Transport and Communication $8.30

This is Tax Cut day. The islanders are standing on the deserted airstrip, waiting for the cargo. If Dr Cullen’s barbed observation in an earlier press prizefight was accurate, Guyon Espiner’s first order of business will be to find out how much he’s getting. I have been too busy taking tea with a friend to arrive in time for a good seat, so from the back row, I can’t see which page the One News political editor turns to first. Down here in the cheap seats, however, the naked self interest is frankly acknowledged as people punch in the numbers and call over the treasury officials to help them calculate their particular entitlements.

The rainy day Dr Cullen was waiting for, and/or an election, has come. John Smith, income $45,000 per annum, will be holding on to an extra $16 of his pay each week, and by 2011, he’ll get to keep $32.

Over the course of the lockup, I ask various people in the room how much they expect to be paying for petrol in 2011. Few are willing to hazard a guess, although Bernard Hickey wonders if three dollars a litre might be about right.

The purchasing comparisons will be quick to come today, as the microphones head out to the malls and Victoria Street. The people who have been lately lamenting that they can no longer afford a block of cheese are now lamenting that their tax cut will only buy them a block of cheese. Oh the sting of it. That's a block of cheese each and every week, you ingrates. But we need to fill the tank, they say, that takes a hundred.

There’s something about the spurned lover or the disgruntled customer in the vox pop tone. Nice try, buddy but you should have been here three years ago and frankly: is that the biggest bunch of flowers you could manage? I’ll bet John gets me some lovely ones.

Every bit helps, every bit is welcome, but if you think there’s a number at which a tax cut will delight the voters, it may well amount to more than they handed over in the first place. Who’d want to be a finance minister? You’re in the same thankless position as any mum who has ever had to try and stretch the family budget further than it will reach. Everyone gets a filling - but dull - meal, the kids all have sensible shoes and trousers they’ll grow into, and a little bit more pocket money, and yet the grumbling does not abate. So it is for Dr Cullen. He has delivered the Budget of all mothers.

He was always going to be luckless. He is, though, demonstrably taking solace in the fact that the Tories will have to go deep into debt or cut spending if they want to do better. Several times he uses expressions which suggests the perspective of a Captain who has already abandoned ship: he talks about Anybody who may be in government and future governments may want to think about that.

This is my first experience of being detained by her majesty’s government, if you don’t count when I worked for them, or a meeting I once had with the IRD. From 11.00 am until 2.45, I must remain within the confines of this small banquet hall, jammed in alongside all manner of journalists, analysts, treasury officials and ministers. Our simple nourishment takes the form of the filled rolls, quiches and sausage rolls my friend had just been warning of. She is a veteran of many of these events. Why on earth would you want to go voluntarily?, she asked. Well, I guess, because a budget lockup is the sort of thing a follower of politics has on their list of 100 things to do before they die or turn 50.

Before you hand that tax money back, you have to get it in. I’m especially interested to know how much money Treasury believes the next few turbulent years might yield. I track the revenue table along from 61 billion to 71 billion and recall that when Bill Birch gave one of his budgets, the big news was that for the first time the nation’s GDP was more than $100 billion. The Government's revenue is now nearly three quarters of the way to that figure now. Growth; we love it.

Let’s now turn to their risk analysis; how realistic is the forecast? First the context is recited; various perturbing items of economic disorder: an 80% surge in world food prices, surging oil prices, sub prime meltdown. Careful discussion of these many risks follows, with the conclusion that growth will slow. But at least we’ll still have some. As enormous economic convulsions go, that sounds pretty tolerable. I rather hope they’re right, and not underestimating the coming volatility.

But what if their numbers are off? What if the price of oil goes higher. If the markets contract, well what then? What if retail really shrinks here? How’s that GST revenue going to look then? I am guided by the nation’s canniest retailer. As runes go, consider this. Michael Hill Jeweller has people lined up outside his store on budget day for the chance to buy a 1000 dollar ring for a dollar. He’s got Breakfast TV to cover it and on Lambton Quay, there are people in feather boas and colourful skirts and an MC with a microphone chivvying the shoppers. This says to me that retailers are feeling the need to pedal mighty fast. I see a big freeze at the sales counter and a sagging GST take ahead. This, Dr Cullen says, is what we have buffers for, and boy have people bristled at them for the past few years. Now we’re working along towards the buffer in the red - up to the 3.5 billion Dr Cullen says he’s happy to live with. Bill English may choose to go further.

The National Party argument prefers to ennoble the tax cut as a means of generating growth. We put it back in your own pockets and you’ll do something productive with it. Maybe; although when Bill Birch did it, much of the effect was simply to lift consumption. You may have seen the couple on the TV news who have no kids and earn a decent income. We pay all this tax and we get zero return, they complained. Individualism can become quite unlovely when it mates with modern consumerism. People seem to have a similar difficulty grasping the concept of insurance.

We will almost surely get to find out whether tax cuts can generate growth over the term of the next Government. Wellington, everyone tells me, is abuzz. The smell of change, giddy excitement, and doom, is all in the air. It’s Berlin in April.

This is half the fun of Wellington; all the talk. I mooch around the room, renewing old acquaintances, making new ones. I swap notes with John Tamihere on the state of our coronary arteries, tease Barry Soper about his continuing enthusiasm for May/December romances. I introduce myself to Gordon Campbell, whose writing I have been enjoying since he reviewed Blood on The Tracks, which we calculate would be 33 years ago. Talk turns to music and I end up burning a CD of Animal Collective for Michael Wilson.

Time rolls on. Harried hacks tap out their interpretations. On the big screen, Michael Cullen begins a reprise of the speech he gave us at midday, and makes his way through the substantial piece of work it represents. We hear about many aspects of this plucky little nation’s economy, but in hindsight, I have to say: considering how much of a fuss they were making just a month or two ago about the Free Trade agreement, and considering how much of a bearing it stands to have on the price of cheese, and oil, and the size of our future income, and, by implication, tax cuts, might it not have been to our advantage to have heard rather less about tax relief and rather more about China?

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