New Zealand Budget 2020

COVID-19 has inevitably affected all New Zealanders.

The New Zealand response, although not finished, has worked. Few of us would rate it perfect – a 10 – but “if you expect perfection, you are in the wrong time at the wrong place”. Lessons have been learned and many more will come as we have time to reflect.

As we have proceeded through the lockdown and assessed its impact, social and economic connections have come to the fore.

It is true that there are two degrees of separation in New Zealand. The potential for a viral spread is high. Equally, from a business perspective we have learnt more about what our businesses rely on and how our customers view us.

Government and businesses have historically focused on physical infrastructure – a need to maintain and ensure its effectiveness. Network infrastructure, how different parts of the economy and society are connected, have had a much lower focus. Its importance is clear – how the parts of a system do or don’t work together and, if they don’t, how quickly that can be fixed have become vital questions. This is a powerful observation and reinforces what a working economy is – a symbiotic network.

Responding to those key factors, the Government’s actions have been focused on health and supporting people in work. It has targeted certain sectors but also broadened its help through several schemes. 

With the budget announcement the Government starts answering the question of what next? The answer is focused on the immediate and to some extent the horizon.

The Budget makes further commitments on a $62b COVID response. It includes a short extension to the wage scheme, on environmental work, on trades training, housing and on infrastructure. The announcements add $18 to $19b of further funding.

Our analysis over the next few days will be focused on the quality of the spend and the clarity of the criteria. Although the speed of response means there will be inevitable mis-steps and therefore, ineffective spending, that is minimised by the clarity of the guidance. We have found with the wage scheme that some of that is lacking.

The big question is what does the future hold and for Government, what role should it play?  There is a real balancing act between Government involvement, where it is most effective and needed, and letting business and New Zealanders lead. Each party needs to acknowledge and play to their respective strengths if New Zealand is to prosper. 

Drawing the line is essentially a pragmatic exercise – the answer will be different for different problems. However, business needs to be able to do what it does best – discover how best to deliver what its customers need. 

The indications from the budget are that Government is inclined to play a much more active role. There is not a vision or direction of what the new economy looks like. However, there are initial steps which will hopefully provide practical support. There is a promise that Government will work in partnership with business and others. That is important and welcome.  

Our team hosted a New Zealand Budget 2020 webinar discussing social services, health, infrastructure, Māori, and a business view. If you missed the webinar, you can watch our recording here.