The yawn Budget

What? Ouch. Yawn.

A few small surprises, a little bit of pain and mostly what we were all told to expect.

The Government has achieved its promised surplus in 2014/15 but it is far smaller than was needed for credibility.

It is essentially a mannequin surplus, dressed up to look good.

At less than $200m it is so slim it will only take a banker breaking wind in Barcelona to blow it out the window.

If there is even a whiff of the Treasury's "downside scenario" it will be gone, raising the real possibility that the Government will need to reach for more cuts and more revenue next year if it wants to stay on track. If things do turn sour Bill English and John Key would be wise to run and not cut; saying with a sigh, we at least tried.

The measures taken to achieve the return to surplus are a mix of the petty (the kids paper round tax rebate) the necessary (the rort on tax breaks for expenses on boats and baches) and the wise (the rise in tobacco excise).

The latter will raise more than $500m but it must have been tempting to go for the doctor and adopt the third option under consideration; a 30 per cent hike now that would have delivered a healthy $1b plus in extra tax that would have fattened up the books.

Other measures are more a way to harvest future costs rather than bring in cuts today; the removal of inflation adjustments for early childhood education for instance, which follows on from the pre-budget changes to student allowances.

Perhaps the oddest element of the Budget is the first round allocation of over $500m from the proceeds of the planned asset sales through the so called Future Investment Fund.

Almost half - $250m - goes to KiwiRail. Not so much an investment in the future, as a way to pay for an underfunded loss-making liability from the past ... paid for by the sale of a profitable stake in an energy company.

Despite some extra cash for science and innovation, it is not a Budget to inspire with its innovative thinking, nor one to do much to address the country's biggest exposure; the country's - as opposed to the Government's - overall debt.

Fairfax Media