Key deals restrained Budget hand

21:06, May 16 2011
Chris Trotter
COLUMNIST: Chris Trotter.

New Zealand should count itself fortunate in having a governing political party located in the centre of the political spectrum. In trying economic times the peddlers of extreme solutions are never without an audience. It takes genuine courage to embrace moderation when the political rewards for extremism can be so high.

For nearly three years now, John Key and Bill English have resisted the advice of extremists and kept the New Zealand economy right-side up. Reading the signals ahead of this week's Budget, it's clear they've no intention of turning it upside- down any time soon.

As far as possible - without attracting the unwanted attentions of the international credit rating agencies - Bill English will strive to maintain the purchasing power of the voting public. He cannot avoid making some gestures in the direction of reining in Government expenditure, but such cuts as there are in the Budget will not be felt universally (as happened with the GST increase) or even immediately.

Key's announcement of a "zero Budget" in conditions of relatively strong inflation actually signals a 2 to 3 per cent reduction in the real level of Government expenditure.

Government departments and agencies may receive the same appropriation as last year, but in dollars that are worth less. Maintaining the same level of services to the public in these circumstances will be a struggle.

Civil servants will find it equally difficult to preserve (let alone increase) their incomes. Indeed, the value of their wages and salaries will almost certainly decline in real terms.


So, its name notwithstanding, there will be quite substantial public spending cuts in Thursday's "zero Budget".

It's just that by being restricted to the public sector, and because they'll be happening in slow- motion, most of the electorate won't notice them.

Private sector savers, families with children, and tertiary students will, however, find it difficult not to notice the Government's plans to cut back the State's contribution to Kiwisaver, tighten up the eligibility for Working For Families, and take a more aggressive approach to the recovery of outstanding student loans.

But, even here, Key and English have made moderation their watchword. Very wisely they have ignored the advice of the business community's more feral elements - which was to squander a huge chunk of the Prime Minister's personal political popularity by rushing through these austerity measures under urgency.

Instead, Key and his Finance Minister have chosen the impeccably democratic option of postdating the reform of Kiwisaver, Working for Families and the recovery of student loans until after the general election.

In effect, the Prime Minister is daring the electorate to abandon his Government for an Opposition in varying degrees of disarray.

"Back me or sack me!" is his cry - leaving the average voter in the agonising position of the poker player holding a weak hand who must decide whether or not to pony up his last dollar to discover whether his opponent is bluffing.

John Key is asking voters to look at the Opposition parties, assign them playing cards according to their worth, and then decide whether or not their hand is stronger than the Government's.

If they decide the Opposition's cards are too low, then they should give the Government what's on the table. But, if they honestly believe the combination of Phil Goff (King?), Metiria Turei (Queen?), Winston Peters (Joker?) and Hone Harawira (Knave?) constitutes a winning hand, then, by all means, they should push all their chips forward.

Lose a little or win a lot: that's the wager. And it's only their own, their children's and their country's future that's at stake.

It's high-risk politics for Key and his government, but the genius of the Prime Minister's proposition lies in how little he has actually put on the table.

If he had followed the advice of the Business Roundtable, or Dr Don Brash, or the Right-wing commentariat, Key would have pushed everything into the centre of the table. All of the State assets; interest-free student loans; Working for Families in its entirety; Paula Rebstock's welfare reforms; the whole kit and caboodle of neoliberal obsessions would have gone into the pot.

Had he done that, then the voters might have been willing to risk everything - even on the poor hand the Opposition parties have dealt them. The wager would have been a terrifying zero-sum choice: win it all or lose it all. Folding wouldn't have been an option.

But John Key, the successful currency trader, the self-made millionaire, the high-stakes riverboat gambler, has made throwing in our hand a reasonable option.

The Key-English version of moderate-conservative poker may set the table limit low, but by reassuring the punters that they're not engaged in an all-or-nothing gamble, it keeps them at the table.

And as long as they keep playing, the Prime Minister knows he can keep on winning.

The Press