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Breaking down the Budget with Shamubeel Eaqub: May 31, 2019

The government's budget for 2019 was announced yesterday afternoon by Minister of Finance Grant Robertson who delivered the publication. The focus of this year's budget is on vulnerable communities and the well-being of New Zealanders, among other priorities. The trip trajectory is towards societal issues such as mental health addiction and poverty and the budget's financial forecast.

Louis Laws of the Friday Wire spoke to independent economist and commentator Shamubeel Eaqub to get his take on the budget. You can find the full interview here and the written transcript by Gautami Sithambaran is below.

 

Shamubeel Eaqub begins by providing his response to the Wellbeing Budget:

No one budget is going to solve all of our problems but I think this is a real maturing of the way that we do budget in general. So it's taken a more holistic approach in terms of the big issues that we deal with but not all the issues. So for example this budget was very focused on vulnerable people but there wasn't a great deal around climate change. So we're never going to get everything being set to fit into one budget because there is simply not enough money to deal with everything in one go.

Louis Laws: You're very right in saying that this is a budget that looks to you know vulnerable people that obviously areas of you know New Zealand that maybe haven't been previous addressed in the last budget, this announcement saw as nearly take it to billion nearly a two billion dollar step for mental health services and addiction. However, how does this announcement suggests any change to what actually happen in those sectors?

Look I mean we've seen a number of big projects announced in this budget around mental health and welfare reform. The stuff around mental health is really hard because we've essentially been underfunding mental health and using it for decades. This is not a new problem. So whatever increases we see the actual implementation is going to take time both in terms of the number of people on the frontline because they're the ones who deliver the services but also the systems in terms of the education, the resources that are available online and tools that are available. All that stuff takes time. So my sort of feel is that when it comes to these big social staff particularly in mental health you're going to have to be quite patient. But the fact that they're spending more money than we have done in a long time is a positive step. Is it enough. Not really. But we haven't done that enough for many decades. So for me this is very much a story about we're trying to do something on issues that are really quite big really quite complex and really quite difficult to solve. And the fact that we're at least talking about it and putting real dollars behind it is a very good step.

So why has this been you know an area of New Zealand that has been pushed to the wayside? Why has it been such that in previous budget plans we haven't addressed issues such as mental health and addiction and also our societal problems you know such as child poverty low income. Is there a reason why this reflects previous budget plans and why we haven't addressed them?

Well I think pretty much the big shift in politics and again was an early 90s when we had the mother of all budgets from Ruth Richardson and we have never really recovered from that. Just by the many changes of government. So this is not about any one government or any one political party's leadership. This is a more substantial problem. These pressures have been building for a long time.

I always give the example of state housing in New Zealand so the peak in state housing in New Zealand was 1991 and since then three successive governments we have been essentially running that stock down. This is true of many other parts of essentially the welfare state and things like mental health. And part of that is because it's political, you know there are not many votes in spending money on this stuff. There is a lot more money and things like infrastructure tax cuts all those things get many more votes and that's been the priority. So this is long overdue and I think the pressures of really starting to show now whether it's around poverty or homelessness. You can't ignore it anymore. That's ran across the political spectrum. It feels to me like it's become enough of an issue that doesn't matter who's in charge. They're going to do something about it.

There is once again within this budget plan a large focus on aspiration for Maori and Pasifika in New Zealand. This is once again an issue that the government has been focus on. Well you know in trying to alleviate for you know a very long time it's it's something that is deep within New Zealand's structure. But is this budget plan, is it once again an issue of the government focusing on compensation for Maori rather than restoration?

Well there's slightly two different things. I mean I think there's around the Treaty settlement process which is I think where the restoration takes place but they're kind of that is systematic racism that exists whether it's around the prison population or poverty or lower education outcomes that stuff is going to be much harder. And while there was a bit more money in this budget for Māori and Pasifika, the reality is there were pretty small compared to a lot of the other initiatives. So we're not going to be able to overcome many of the challenges that exist on Māori and Pasifika with the amount of services and dollars that were committed. Having said that the increase in funding for Whanau Ora in particular is really encouraging because that is a program that's working really well and I'm really encouraged to see that they have funded it to a greater extent because essentially that kind of program is about outcomes rather than about the way we do things.  I like that because what we want to see is results. I'm sick of us talking about how many dollars we're going to spend. What I want to see is better outcomes for Māori and PasifiKa because it's been too long

That's right. There is also a focus in reduction on re offending in these communities. However the budget is placing importance a lot on the adequate training and police for public disorderlies and against protesting how to deal with these. Is this once again something that we're actually doing right for Maori aspirations?

Well you know the kind of systemic problems on colonisation are not going to be uprooted and taken out of our system through our budget. Right. It's a much more systemic change. So budgets can't do everything and I don't think we should be looking for the budget to do that. I think what we can look for the budget is resources being supplied so that we can target the right kinds of things. So it feels to me like at least we're talking about the right thing that resurcing to me feels right. But you know there is still a lot of fundamental work that needs to happen right to our judicial system a welfare system and essentially is that racism that exists in New Zealand to deal with it.

Moving away from this topic now and I want to look at the other areas of the budget. There was a lot of focus placed on venture venture capital and you know start ups and vocational education. This has been criticised by National they say that the budget is not doing enough for small businesses in New Zealand. However how do you see this actually being announced in the budget? Do you think we're making a step right for venture capitalism in New Zealand?

Yeah. Look I mean there wasn't much for the economy in this particular budget it was very focused on that vulnerable folks in New Zealand. And what we saw for the economy was very much around that increase in funding of 300 million dollars for venture capital and commercialisation. In the context of things that pretty small but encouraging to see because we know that that is definitely a gap. But having said that you know two other governments previous budgets have really done much for SMA's the answer is no. You know everybody talks a big game when it comes to the economy but unless you're giving corporate tax cuts or streamlining regulation which is not about the budget but it's outside of the budget, there is not a lot of that government can do through budgets.

It's interesting. You know another area that we should address in which you mentioned at the very start was also sustainability as a nation in terms of addressing this climate emergency really what it is now. You were saying that this budget has probably not done enough to adhere to to the state of climate emergency. What would you say we should have been included within the budget. What was missing out in terms of our environment?

Well okay so we put it let's put it this way. There's a few things happening on the climate change policy right. One is a zero carbon budget. And so that's kind of underway. So right now there is a lot that we can spend money on. Right. And essentially the increase in the environment portfolio was around two hundred million dollars which is not very much. We had the green venture fund that was announced in the last budget. So that's still to come. So it all feels like there is stuff that we will need to spend in the future. But there was no immediate identified policies that need money right. I think that's kind of the reason why we didn't see much around the climate change stuff. It doesn't mean that the urgency has gone away. Essentially what I would say I would have expected to see is essentially creating more of a contingency fund around climate adaptation and compensation for industries that are going to be industries and regions that are going to be hit hard by the changes and in particular the adoption of a zero carbon target. But these are big changes of policy and from a climate change perspective I think the zero carbon act is really the big thing. The budget is very much around where do we have the right funding to implement it right now. There were no identified policies that require money. So I wasn't that surprised that the money wasn't there. But at the same time I thought it would be a bit more urgency for us to get ahead and start exploring some more stuff around the science part in particular.

It's funny that you mentioned once again this you know not spending more money because once again this budget has been in surplus, it's been in surplus for the past two years. Economically why is this current government continuing to keep a safe distance in our economy?

Well I mean the big thing for them was they made a political promise in the election campaign that they would run surpluses and not too much which is what they're doing in the budget. So ultimately the budget is a very political thing. It is not an economic thing. Even a lot of people wanted to be. The reality is that it's a deeply political decision in terms of how do you manage the headroom that you have in each budget. You have about three billion dollars. Two to three billion dollars that he can spend on stuff. So there is not a lot of flexibility for any government to do things. And really it's about saying how much more can you do. And given the political constraints. I'm not surprised. Would I like the government to be more ambitious? The answer is absolutely yes. Because I see a big list of things that New Zealand could easily do that's good for us right, where the benefits far outweigh the costs. I think it's heading in the right direction. The focus on vulnerable folk, filling in some of the gaps that have accumulated over many decades is good.