Prominent environmental groups in Aotearoa New Zealand are less than impressed with what they describe as underwhelming budget investments in climate, but an expert says the government has taken a multifaceted approach.

Among the announcements yesterday was $402.6 million to expand the duration and scope of the Warmer Kiwi Homes programme, $120 million to expand EV charging infrastructure, $100 million fund to help councils invest in future flood resilience, $24.7 million to improve data on impacts of climate change and adaptation and mitigation, and $167.4 million in building resilience to future climate events.

It came on the same day the World Meteorological Organisation said global temperatures were now more likely than not to breach 1.5 degrees Celsius of warming within the next five years.

Forest and Bird said the budget did little to tackle climate change and turn around biodiversity loss.

“Keeping New Zealanders safe is clearly a ‘bread and butter’ issue, yet the government’s lack of investment in nature-based solutions is putting us all at risk,” chief executive Nicola Toki said.

“What we looked for but have not found, is meaningful investment in nature-based solutions to climate impacts. And our biggest source of greenhouse gas emissions, agriculture, has not yet been priced more than 30 years after New Zealand promised the world it would cut emissions.”

The government’s $6 billion infrastructure-focused National Resilience Plan needed to prioritise investment in areas like river catchments, forests, and wetlands — otherwise it might even affect people’s ability to get insurance in the future, Toki said.

Insulation and heating retrofits
Electricity Networks Aotearoa chief executive Richard Le Gros said the association, which represents New Zealand’s 27 electricity distribution businesses (EDBs), supported the focus in the budget on decarbonisation initiatives as well as insulation and heating retrofits.

“We welcome the government’s greater investment in public EV charging infrastructure throughout the country,” Le Gros said, adding it would help reduce household energy bills and encourage a green transition.

Greenpeace climate campaigner Christine Rose was critical of the government for missing the chance to implement radical change in farming, climate solutions, transport, and energy.

“While it’s positive to see that half-price fares remain for some, we needed bolder and more visionary strategies, including significant investment in expanding rail and making public transport fares free for all,” Rose said.

“We welcome the funding boost for home insulation and heat pumps, but are disappointed not to see significant investment in locally-owned renewable energy.

“This would end our dependence on oil, gas and coal, and also reduce the power bills of everyday New Zealanders, addressing both the cost of living and climate crisis.”

Long-term behaviour change
University of Canterbury professor Bronwyn Hayward said the budget appeared “deceptively simple” but, for example, allowing children to use public transport for free was not just about increasing bus use, it would also ease family budgets and instigate long-term behaviour change.

“Critics of the government will rightly point out there is now less money available to spend on climate resilience due to the crash in carbon pricing, and yet a sizable new spend of $1.9 billion has been allocated in this budget for climate resilience alongside the $1 billion pledged for cyclone recovery,” Hayward said.

“This, together with spending on retrofitted housing, new homes, prescription charges and school lunches all contributes to the social infrastructure that communities will badly need when facing ongoing climate risk.

“We need to join the dots when we talk about climate budgets and see how many of the wellbeing initiatives are also very real investments in climate resilient futures too.”

While making transport more equitable was important, University of Auckland School of Architecture and Planning senior lecturer Timothy Welch said the focus should also be on the infrastructure’s resilience as more intense and frequent weather events could be expected.

“New funding for maintaining public transport service and workforce development is important, but we need more funding to expand our public transport networks and help drive down transportation emissions.”

Research, science, and tech
Universities New Zealand welcomed the announcement of $55 million for research fellowships and an applied doctoral training scheme, as well as the allocation of $451 million for multi-institutional research collaboration hubs in the Wellington region focused on health and wellbeing, oceans, climate and hazards, advanced manufacturing, biotech and energy futures.

However, it said it was unfortunate to see funding for the Centres for Asia-Pacific Excellence had been discontinued.

Professor Hayward said integrating science agencies based in Wellington was important, but it omitted “arts and imagination”.

“The climate crisis will bring repeated, cascading and compounding weather events that will test our resolve and tear at the fabric of our society. These are not challenges which can be fixed by science or investment in infrastructure alone,” Professor Hayward said.

“We need the arts, alongside sciences to help imagine a low-carbon economy in fair and just ways,” she said.

“While government could justifiably argue its attention to digital screen industries is a creative investment in ‘a high-wage low emissions and creative economy’ we also need a wider vision for the deeper integration of arts and sciences, one which helps us imagine new ways we might yet flourish in a climate challenged world.”

Addressing inequities
Environmental consultant Andrea Byrom said it was heartening to see some of the tertiary investment addressing long-recognised inequities, with dedicated fellowships and awards for Māori and Pacific people and a boost to provision of Mātauranga Māori in the tertiary sector, and applied postdoctoral fellowships.

Byrom also applauded trialling apprenticeship training in the tech sector and boost to research fellowships and PhDs.

“The historical gap in funding for these types of fellowships, particularly at postdoctoral level, has resulted in much of Aotearoa New Zealand’s best and brightest talent heading offshore — sometimes never to return.

“Hopefully these fellowships will stem that flow.”

Malaghan Institute director Graham Le Gros said the investment in science and innovation recognised the sector’s value to the country’s resilience and prosperity.

“From building resilience in the face of future pandemics to investing in biotech, innovation and talent to help move New Zealand to a high-wage economy, we can rejoice in some much needed infrastructure so that all New Zealand scientists have a place to really focus their energy and attention,” Le Gros said.

“The multi-institutional research hubs will increase collaboration and productivity, allowing us to work together to tackle some of New Zealand’s most pressing challenges and opportunities.”

This article is republished under a community partnership agreement with RNZ.

Article by AsiaPacificReport.nz

A total of NZ$196 million has been set aside for Pacific services in Aotearoa New Zealand in this year’s Budget.

A big chunk of that — $76 million will go on Pacific health services.

Finance Minister Grant Robertson said the cash injection would be used to support Pacific health providers, to improve infrastructure, fund a targeted diabetes prevention and management programme and prepare for system reform.

Operating funds to the tune of $47 million have also been announced for Pacific education and employment initiatives.

The funds would be used to support Pacific science, technology, engineering, arts and maths opportunities, Robertson said.

An initial $49 million has been set aside for building 300 houses for Pacific people in eastern Porirua over the next decade.

The government’s pledge to deliver an historical account of the Dawn Raids — a crackdown on mostly Pacific migrants to New Zealand in the 1970s — receives $13.7m in funding.

The Minister for Pacific Peoples Aupito William Sio said the priorities in this year’s Budget were in line with its Pacific Wellbeing Strategy.

“This strategy is aimed at lifting Pacific wellbeing and aspirations in health, housing, education, business, employment, incomes, leadership, Pacific arts, sports, music and STEAM career pathways,” he said.

Dawn Raids account, home build project included in Pacific package
“This government is committed to delivering on its Dawn Raids apology package in this Budget as well,” Aupito said.

“The package will give greater public understanding of what Dawn Raids means to our nation and to enable the Teu le Va — to help restore harmonious relationships of mana and dignity, and empower our young people especially to be resilient, confident and vibrant.”

Included in the Budget for New Zealand’s Pacific community:

• A package to build up to 300 homes over the next 10 years for Pacific families in Eastern Porirua, with initial funding of $49m in the forecast period.
• $13.7 million to implement the government’s commitment to deliver a Dawn Raids historical account.
• $49.9 million for the Pacific Provider Development Fund, to support Pacific providers to adapt their models of care into the new health system.
• $20 million to implement a diabetes prevention and treatment programme for targeted Pacific communities in South Auckland.
• $8 million boost to continue the delivery of Tupu Aotearoa, which enables the delivery of personalised Pacific employment and training services.
• $15.5 million investment into Pacific economic development, which aims to meet community demand for services to support “shovel-ready” Pacific businesses and social enterprises across New Zealand.
• $1.6 million to maintain the Pacific Work Connect Programme which supports the continuation of a Pacific migrant support service.
• $18.3 million boost to the Toloa Science, Technology, Education, Arts and Mathematics programme. This initiative provides opportunities across Pacific peoples journeys through education and employment.
• $2 million to maintain and grow the Tulī Takes Flight and Pacific Education Foundation Scholarships, to Pacific education scholarships to address education system inequities.
• $13 million to support the growth of the Pacific bilingual and immersion schooling workforce and the retention of the current workforce.
• Up to $5 million of reprioritised funding over four years to fund further Professional Learning and Development (PLD) focussed on Tapasā: cultural competencies for teachers of Pacific learners.

New transmitter for RNZ Pacific
The government has also announced $4.4 million for RNZ Pacific to buy a new transmitter to broadcast news across the Pacific.

Described as “critical infrastructure”, the transmitter is among plans for a new public media entity which is set to start operating next year.

Broadcasting Minister Kris Faafoi said the funding of the media entity would ensure New Zealanders could continue to access quality local content and trusted news.

This article is republished under a community partnership agreement with RNZ.

Article by AsiaPacificReport.nz

In the New Zealand 2021 Budget, a big investment of NZ$108 million has been signalled to support the wellbeing of the Pacific population through the rebuild and recovery from the covid-19 pandemic.

Pacific Peoples Minister ‘Aupito William Sio said this was a significant investment for Pacific communities who have been hard-hit by the pandemic in the past year.

“With the Pacific Aotearoa Lalanga Fou Goals as a guide, the Pacific package puts a strong focus on Pacific wellbeing and continues the government’s commitment to ensuring that Pacific peoples are leading this work to achieve confident, thriving, prosperous and resilient communities,” he said.

“Budget 2021 makes this possible through tailored business, health and education initiatives that bolster the vital holistic work Pacific communities are already doing across the country.”

The $108 million Pacific package is made up of the following:

• $99.6 million new operating funding
• $660,000 new capital funding from the Budget 2021 allowances and the Covid-19 Response and Recovery Fund (CRRF).
• $7.8 million in operating funding is repurposed from existing funding in Vote Education.

The package includes:

• $30.3 million boost to assist the Tupu Aotearoa programme to support approximately 7500 Pacific peoples into employment, training, and education across Aotearoa New Zealand, funded from the CRRF.
• Investing $6.6 million to support establishing the Pacific Wellbeing Strategy – a cross-government initiative that will develop ways to measure Pacific wellbeing across government work programmes and initiatives.
• Supporting Pacific businesses through the impacts of covid-19 with $16.2 million for business support services, funded from the CRRF.
• $20.8 million supporting Pacific bilingual and immersion education in the schooling system, made up of $12.4 million of new operating funding and $644,000 of new capital funding from Budget 2021 allowances, with $7.8 million of repurposed funding from Vote Education.
• $5 million operating funding and $16,000 capital funding to deliver sustained professional learning and development to embed Tapasā as a tool to address social inclusion in the education sector.
• $5.1 million for the development of two new Pacific language subjects, gagana Tokelau and vagahau Niue as NCEA Achievement Standards subjects.

This article is republished under a community partnership agreement with RNZ.

Article by AsiaPacificReport.nz

New Zealand has now had three “Wellbeing Budgets”: the prototype in 2019, the COVID-19 “Rebuilding Together” version in 2020, and today Finance Minister Grant Robertson announced the Labour government is “Securing our Recovery”.

With Labour governing with an absolute majority, projected debt levels lower than initially forecast and nearly NZ$1 billion from last year’s COVID-19 recovery fund unspent, expectations for housing, health, climate change and welfare have been heightened.

Here, our three experts respond to today’s budget and assess its implications in various crucial areas for the year ahead.

A budget for middle New Zealand

Jennifer Curtin, Public Policy Institute, University of Auckland

Finance Minister Grant Robertson opened his budget speech by taking voters old enough to remember back to 1991. This was the year Ruth Richardson’s first budget as finance minister was handed down. She described it as the “Mother of all Budgets” and it is remembered for considerable cuts and fundamental changes to social expenditure in New Zealand.

It was savage for low socioeconomic groups and set the scene for New Zealand cementing itself as a neoliberal leader. Today, many advocacy groups seeking increased social spending argue 1991 was the start of what has become intergenerational poverty and inequality.

Invoking the Mother of all Budgets — before announcing spending increases in benefits, student allowances, Māori health, housing and education, and more money for capital expenditure on hospitals and schools — allowed Grant Robertson to once again align his government with the halcyon days associated with Michael Joseph Savage’s first Labour government.

Read more: If New Zealand can radically reform its health system, why not do the same for welfare?

Certainly it was a budget that will warm the hearts of Labour’s base. Judging by much of the early reaction from the Greens and Māori Party, it might also appeal to those who vote for the cross-benchers. All this while emphasising the importance of ensuring debt did not reach 50% of GDP and being fiscally prudent.

There are also critics on both sides (other than the National and ACT parties). Economist Cameron Bagrie and Susan St John from the Child Poverty Action Group both rued the absence of transformation, albeit from different perspectives.

Benefit increases were welcomed but are not yet sufficient to cope with increased housing costs, to relieve debt, and make up for intergenerational asset loss.

Meanwhile, there is still no clear pathway to opening the borders to help with the supply of goods, skilled workers and international students to support the government’s new and existing infrastructure projects, and to revive our connections with the world.

These criticisms will not worry the government. Robertson had dampened expectations in advance of budget and then surpassed them on delivery. This is a budget for Labour’s base and the centre, meaning the polls will remain favourable, and there will be little of substance for the opposition to rail against. At least for a while.

A welcome welfare boost but still not enough

Michael Fletcher, Institute for Governance and Policy Studies, Te Herenga Waka — Victoria University of Wellington

The Budget 2021 welfare increases are to be welcomed. From July this year all main benefits will rise by $20 per adult. From April next year there will be a further increase of $15 per adult for beneficiaries with children, plus an additional top-up to bring rates to at least those recommended by the Welfare Expert Advisory Group (WEAG) in 2019.

Overall, these changes mean increases of between $32 and $55 per week, depending on family type, and come on top of the $25 increase last year. To illustrate, the single adult rate will rise from $258.50 per week now to $315 per week by April next year. For a sole parent the rate will go from $387 to $435, and for a couple with children from $441 to $566.

These are big increases and go a long way towards reversing the 1991 welfare cuts and subsequent long decline in the level of benefits compared to wages. In that respect, Finance Minister Grant Robertson is justified in describing today’s announcement as historic.

Read more: NZ’s second ‘Well-being Budget’ must deliver for the families that sacrificed most during the pandemic

But, sizeable as they are, are these increases big enough? Do they provide those reliant on benefits — the poorest in society — with an adequate minimum standard of living, sufficient that they can fully participate in their communities?

The answer is almost certainly no, at least for many people on benefits. Notably, the budget goal of meeting the WEAG recommendations for core rates by 2022 takes no account of price increases in the three years since WEAG reported.

Nor has the budget addressed the Working for Families tax credits or the Accommodation Supplement, despite the rapid increases in rents many beneficiaries have been facing in recent years.

More analysis is needed, but it appears unlikely the Budget 2021 increases are enough to meet the incomes WEAG calculated families and individuals need to get by on.

Robertson also announced the government, in concert with Business New Zealand and the Council of Trade Unions, is looking to develop a social unemployment insurance scheme. It would be unfortunate, however, if today’s announcements were seen as the last word on benefits and attention then turned to supporting those more advantaged New Zealanders with a scheme that pays considerably more than a benefit.

A shadow carbon price, but nothing transformative

David Hall and Nina Ives, Social Sciences and Public Policy, AUT University

We were warned this was not going to be a climate budget. But the government seems to have learned lessons from its previous term, and has under-promised to allow for positive surprises.

The biggest surprise was that, from Budget 2022 onwards, the government will hypothecate (or recycle) the revenue generated from the auctioning of Emissions Trading Scheme allowances into emissions reductions programmes. Doing so is international best practice, yet it comes up against Treasury’s longstanding aversion to hypothecation. This is a major policy win, and ensures ongoing revenue for climate change issues.

Rail enjoys a major boost of $1.3 billion in operating and capital expenditure and New Zealand Green Investment Finance is being recapitalised with an extra $300 million, essentially quadrupling in size, with a focus on decarbonising public transport, waste and plastics.

There are sprinkles of climate-related investment elsewhere, including $302 million for incentivising low-emission vehicles, $120 million for home insulation and heating retrofits, $17 million to build regulatory capacity for climate risk reporting by large financial institutions, $6 million to implement a sustainable biofuels mandate, $14 million to better enable just transitions for communities, $14 million to scale up business support by the Energy Efficiency & Conservation Authority, and $41 million to improve diffusion of low-emission technologies in the transport sector.

Read more: Most people consider climate change a serious issue, but rank other problems as more important. That affects climate policy

The agricultural sector received $37 million for the delivery of a national integrated farm planning system and a long overdue $24 million boost to accelerate research to mitigate agricultural greenhouse gases. Allocations for climate-related policy workstreams include $300 million to reform water services (drinking, waste and stormwater) and $131 million to replace 30-year-old resource management legislation. Both are critical to climate adaptation.

The programme to make the public sector carbon neutral by 2025 receives $67.4 million and the Climate Change Commission gets a $10 million top-up to address “critical cost pressures […] related to an underestimation of the complexity and scope” of its activities.

Overall, New Zealand still isn’t making the transformative investments on the scale of this week’s International Energy Agency report. Perhaps, with its emissions reduction plan in hand by the end of this year, the government will fulfil that ambition next year.

Read more: International Energy Agency warns against new fossil fuel projects. Guess what Australia did next?

But it is also important to keep in mind what the budget leaves out. The low-emissions transition requires not only investment in clean infrastructure, but also harm avoidance by avoiding investments that lock in fossil fuel dependence.

Notably, this is the first budget with a shadow price for carbon. The relative lack of funding for roads in the $57.3 billion investment in infrastructure may signal a shift away from the emissions-intensive status quo.

– ref. NZ Budget 2021: billions more for benefits, but one eye on the bottom line – https://theconversation.com/nz-budget-2021-billions-more-for-benefits-but-one-eye-on-the-bottom-line-161083

This week’s Budget is a chance for the Labour Government to take the crisis of poverty and inequality seriously. They can do this by delivering something serious or even transformational for those suffering at the bottom of the heap in New Zealand. In particular, a big increase in core benefit rates would be the most effective way they could tackle the worsening problem.

Of course, Prime Minister Jacinda Ardern has already faced campaigns to increase benefits, and firmly said “no” to these as recently as December – you can see my roundup of this issue then: The Left’s challenge to Labour’s inaction on poverty and inequality.

However, pressure to deliver to those most in need is now just too great for the Government to ignore, and rumours are building that a benefit increase will be announced. Last week, Finance Minister Grant Robertson even signalled the Budget will include measures to deal with inequality and poverty, and Ardern came up with the term “The Compassionate Budget” for what is coming.

Business journalist Liam Dann forecast in the Herald yesterday some big spending to put more money in the pockets of the poorest: “There will undoubtedly be some big, new spending packages in this Budget. They will likely target child poverty and those suffering most from inequity” – see: Budget 2021: Why Grant Robertson won’t match big spending Aussies (paywalled). And Dann outlines how pumping money to the poor will tick both moral and economic boxes.

Arguments for a big “benefit boost”

If the Government ever needed permission to boost benefits, it received this in a landmark survey released in February showing overwhelming public support for increased income support for the poor – see Harry Lock’s Survey finds 69% want income support for those in need increased.

The question was asked whether “the government should increase the amount of income support paid to those on low incomes and not in paid work”. Across all demographics, incomes, and voting alignments, the result was clearly in favour of government action. Even Act Party supporters tended towards an increase in income support.

Responding to the poll, the ActionStation advocacy group said this about benefit increases: “The time for excuses is up. This poll shows the government has a clear social licence and mandate, on top of its moral obligation, to lift inadequate welfare payments to ‘liveable’ levels, and it needs to be done now, in this Budget round.”

Plenty of high-profile voices have also been urging Labour to do the right thing. For example, recently political journalist Andrea Vance highlighted that while Ardern had come to office on a promise to reduce inequality, she hasn’t done so yet – see: The social welfare net is threadbare – can Grant Robertson mend it?. In this, Vance suggests giving beneficiaries a proper payment increase as well as modernising the whole welfare system.

Similarly, writing in February, Branko Marcetic argued that lifting benefits is the “bare minimum” that the Government should be doing to work on fulfilling its promises. But he admits a benefit rise would have a downside for the Government: “Doing this will certainly mean Robertson may have, at first, less impressive debt numbers to show off to business leaders at lunches and breakfasts held in luxury hotels” – see: NZ’s economic “bounce-back” is a myth – but lifting benefits would bring it closer to reality.

Welfare researcher Louise Humpage has more recently argued that benefit increases and other positive welfare reforms are desperately needed, because what few initiatives the Government has already taken have only had a negligible impact – see: If New Zealand can radically reform its health system, why not do the same for welfare?.

Humpage also points out that the Government’s own Welfare Expert Advisory Group made a number of recommendations for reform, which the Government is largely ignoring: “It made 42 key recommendations but only a handful have been addressed. Almost two years on, we are still waiting for real action.”

Latest “grim” poverty statistics out

More evidence of the “grim” situation came out on Thursday, with the release of the Government’s first Annual Report for the Child and Youth Wellbeing Strategy and another report on Child Poverty Indicators. The most significant finding from these reports was that 20 per cent of children live in households where food runs out either sometimes or often. For details, see Rebecca Moore’s Advocacy groups slam ‘racist’, ”discriminatory’ system after Government releases child poverty report.

The article reports the response of Child Poverty Action Group’s Janet McAllister, who says “We should be angry about this” and she admonishes the Labour Government for only taking “small steps to address these big issues”, saying although there are indications of slight improvements in poverty levels, “It’s not okay to be a little bit better than four years ago.” She concludes that “The Government has power to change this terrible situation we’ve been in for far too long.”

Guardian journalist Tess McClure labelled the stats as representing “slow or non-existent progress” on dealing with child poverty – see: Ardern faces calls to boost child poverty spending in budget amid glacial progress. She reports Children’s Commissioner Andrew Becroft’s statement in response, that there was “an inarguable need to increase benefits”, calling “for more spending for children in the upcoming budget”.

The Prime Minister is also quoted defending her record, saying “Many of the issues facing children, young people and their families are complex, stubborn and intergenerational, so we know change will take time, and will require sustained action across government and across our communities”.

Similarly, researcher Max Rashbrooke’s message is to have more patience, because “Child poverty is like a huge oil tanker – it takes a long time to turn around”, “It takes time to convert income into greater wellbeing”, and “Some of the problems are so ingrained, that you spend a lot of money erasing the problems of the past”. But he lamented that the Government are “not willing to commit to the massive increases in benefits that would really see us slashing the rates of child poverty.”

Rashbrooke has also written recently about his attempt to track down planning for how the Government is going to deal with the poverty crisis, coming up empty-handed – see: Plan and budget both AWOL in child poverty fight. He says: “we need Ardern to tell us exactly how she will meet her long-term targets, how much it will cost, and where those funds will be found. The issue also cuts to the heart of her Government’s credibility.”

This article follows on from an earlier one by Rashbrooke in which he argues that the Government’s lack of a plan on poverty is troubling, and that making inroads will require much more boldness than is currently on offer – see: Tackling child poverty a mountain that keeps getting steeper.

Economist Brian Easton also responded critically yesterday to the latest poverty stats, suggesting that any purported improvements are just “statistical noise”, but that this shouldn’t be surprising “because the policy changes have been small, if trumpeted loudly. Therein lies the challenge. The assumption seems to have been that small incremental policy measures can eliminate child poverty. But they will give only small incremental gains” – see: Are we really serious about child poverty?.

Easton is very critical about Ardern’s vague attempt to find a moderate path to fulfil the radical targets set under law to fix child poverty: “Can it be done incrementally? I am sceptical unless the increments are larger and more focused than what has occurred so far. The statute says where we are to end up, but it does not provide a path to get there. So we are gingerly navigating our way; there is no map.”

The lack of a plan for dealing with poverty was also criticised earlier in the year by a Stuff editorial that said “we’re on a track that remains only half-built and the path ahead is anything but clear and, even now, we don’t really know where we stand” – see: Limited progress in child poverty, but it’s not on track yet.

The newspaper cites the arguments to increase benefits by between 12 and 47 per cent as the official advice dictates, and adds that the Government has a mandate to be much more radical: “the result of the previous election was nothing if not a mandate for boldness on fronts such as this.”

Also writing about this time, leftwing columnist Gordon Campbell said: “Voters gave Labour a sweeping mandate to pursue transformational solutions for this country’s most serious problems”, but that they’re taking “tiny, barely discernible steps to reduce poverty” – see: On Labour’s fudging on child poverty. He asked: “Is this really the transformational change we expect to see from the Ardern government, given how much political mileage it has got from claiming to care? Hardly.”

How much should benefits be boosted?

If a benefit boost does eventuate in Grant Robertson’s Budget on Thursday, the crucial issue will be how much they rise by. There seems to be a near-consensus amongst progressives and welfare advocates that such an increase would need to be in the range recommended by the Government’s Welfare Expert Advisory Group of 12-47 per cent. Anything less than a $100/week increase for single jobseekers, as recommended, will leave many on the left disappointed.

Some would even like to see benefit rates doubled. Writing in the Herald last week, the Auckland City Missioner, Helen Robinson, looked at this issue of how much benefits needed to rise by, and suggested: “The $490 weekly Covid Income Relief Payment for full-time workers who lost their job during the pandemic is a good starting point. That level of investment, compared to the little over $250 a week received by a single person over the age of 25 on Jobseeker Support, is a more realistic weekly income. Economically this is possible” – see: Impossible choices deprive our people of hope (paywalled).

Robinson commented further on this yesterday, saying to break the poverty cycle “the benefit needs to increase by around $200 each week” – see RNZ’s Major rise in benefits needed to get children out of poverty – Auckland City Missioner.

The City Missioner also points out that official statistics released last week on child poverty are out of date, and that things have got much worse due to the impact of Covid. As an example, she says “the mission before Covid was doing about 25,000 food parcels a year and this year we’ll get to somewhere between 45 to 50,000 food parcels – so the need has significantly increased.”

What else could the Government do?

If not a significant rise in benefit rates, what else could the Government do to help those at the bottom? According to the Child Poverty Action Group, they could start indexing Working for Families payments in line with the wage index, as is done for Superannuation and benefits – see Melanie Carroll’s Working for Families falls behind wage rises: Child Poverty Action Group.

According to this article, the “Government had not increased payment rates for Working for Families since 2018”, and research shows that the lack of indexation has left “some families up to $1900 worse off over two years”.

Additionally, Working for Families could be reformed, to provide the “In-Work Tax Credit” to the families of beneficiaries, as recommended by the Child Poverty Action Group – see Janet McAllister’s What the annual child poverty stats tell us.

In this piece McAllister also complains about the low rates of benefits, suggesting that Labour’s approach is still too rightwing: “Ruth Richardson’s Mother of All Budgets still has more influence on the miserly social welfare system than Jacinda Ardern does. In fact, net benefits and child assistance (Working for Families) combined are still lower now that they were immediately after Richardson’s social welfare cuts, as a percentage of net average wages.”

The free school lunch programme could be extended, as it is currently only funded for about a quarter of students. This is a call backed by the Children’s Commissioner, who says “free lunches for schoolchildren should be ‘a birthright'” – see Lana Andelane’s Free school lunches: One free meal a day means one less thing on parents’ plates – Kiwi mum. However, the Prime Minister has responded negatively to this, saying that such a universal approach would cost too much.

Finally, for a clever and satirical communication of “how New Zealand’s post-Covid economy has benefited some while hurting others”, see cartoonist Toby Morris’ The Side Eye’s Two New Zealands: The K Shape.

Last week, out of left field, the government placed a three-year embargo on normal public sector wage bargaining, essentially a salary freeze. While there has been a certain amount of backtracking since, it is clear that the government has been very committed to ‘fiscal consolidation’ (aka ‘austerity’).

What were they thinking? What problem were they trying to solve?

Some governments are obsessed with their own debt levels, and prioritise the reduction of their own household debt over the economic management of the country. Such governments set themselves on a path of opting out of governance; it would be like teachers opting to save their employers money by not teaching.

Debt is a relationship.

The New Zealand government sees itself as a debtor who has gained recent favours from begrudging creditors who would really much rather spend their money on themselves, or lend that money to parties other than the government.

In real life, debt occurs as a contract between two parties who are both advantaged by that relationship; the parties to each contract are creditor (who owns the debt, as an asset) and the debtor (who owes the debt, as a liability).

The debt relationship that almost everyone is familiar with is depositing money in a bank. Householders are creditors, and banks are debtors, in this relationship.

Who decides when the relationship ends? It is normally the creditors who end (or diminish) the relationship, by withdrawing their money. Indeed it would seem very weird if the banks that we lend to keep trying to ‘pay us back’. Rather the banks expect to service their debt to us by paying us interest, and by allowing us to withdraw when we want to withdraw. (We all understand that, if most of a bank’s depositors want to recall their funds on the same day, then the bank would be unable to comply; banks, like almost all other debtors, invest – ie lend so someone else can spend – their borrowed funds. Banks are, indeed, intermediaries; we expect them to invest the funds we deposit with them, so that they can pay us interest.)

So, in life out of the public finance rabbithole, it is creditors who initiate the debt repayment process. The obligation of a debtor is to service the debt, including making sufficient provision to satisfy those creditors seeking repayment.

Government Debt

In the case of government debt, the creditor is essentially the wholesale banking system. Do we see any signs of our wholesale bankers asking government to reduce its liability to them? Of course not! Government debt is a mutually advantageous arrangement between creditor and debtor. Government action to reduce its debt to the banks would be like banks acting to get households to reduce their bank term deposits. Dumb and dumb.

Banks (in the broadest sense of this term) like to lend to – invest in – five sectors: businesses, unsecured consumers, asset holders, governments, and foreigners (especially foreign banks). They like to expand rather than to contract their balance sheets; ie to lend more to their customers, not less.

Conservative economists strongly emphasise banks’ lending to businesses; and deemphasise banks’ lending to governments. That is, they see it as right and proper that businesses – collectively – should have large and expanding debts, and that indeed it is business debt (aka business investment) that drives economic growth. So it is they – not the banks – who see bad government debt as ‘crowding out’ good business debt. That’s the source of the general opprobrium towards government debt, and that opprobrium resonates with the many householders who wrongly think of debt as an inconvenience to their creditors.

Who should the debtors be?

The whole capitalist system – with banking at its core – depends on debt. The majority of people who believe in economic growth necessarily also believe that total debt must be expanding.

Conservative economists at least have a consistent position; that business debt (lending to business) is good, that certain types of secured debt are also good (specifically house mortgages and hire purchase), and that a degree of foreign lending is also good. In the twenty-first century this ‘good-debt bad-debt’ thinking, however, represents another rabbit hole. The reality since the turn of the century is that the global corporates have become a creditor sector; in the aggregate, businesses now save more than they invest.

Bankers, unlike conservative economists, are indifferent. They will lend, rationally, on the basis of risk and reward.

For banks, lending to businesses is risky, because it is ‘secured’ only on the future revenues of their business customers; in an increasingly uncertain world, those revenues are also increasingly uncertain. Banks compensate for such ‘lack of security’ risks, by charging their business customers higher interest rates. While substantial business debt is an economic necessity, banks, as creditors, do sometimes recall that debt. (As the saying goes, a banker will lend you an umbrella when its sunny, but may ask you to repay it when it is raining.)

Also risky is unsecured consumer lending. (And semi-secured lending, in which a debtor’s likely future salary is the security.) This also drives the 21st century economy, especially in the form of credit card debt. The high risk is compensated for by charging high interest rates. Debtors like to repay these debts as quickly as possible, because of the high servicing costs associated with high interest borrowing. Creditors in this market need to keep finding new debtors to compensate for the repayments of existing debtors.

Secured lending is widely favoured by modern banks. This is lending secured by assets such as shares, land, houses, managed funds, and consumer durables. The problem here is that it fuels speculative behaviour through inflating the prices of those assets, especially, shares and land. Thus, too much of this type of lending is revealed as systemically unstable when asset prices periodically deflate. Banks which consider themselves too big to fail tend to give insufficient weight to this problem when they decide who to lend to. Thus, generally, this type of lending is seen by banks as less risky than the previous two categories. Interestingly, however, in the late-2000s’ financial crisis, the finance companies (included as ‘banks’ in this discussion) which failed were those doing secured lending; while few if any of the finance companies lending to the poor at high interest rates failed, some positively thrived).

A keenness to lend to foreigners – as some countries in northern Europe and East Asia like to do – is a political mercantilist strategy; historically prevalent as a political strategy, but not necessarily profit-maximising to banks. An important form of foreign lending is lending to banks in other countries. Indeed, when interest rates have been higher in New Zealand than in Australia, to maximise profits the Australian banks would lend to their New Zealand counterparts. In effect, much New Zealand mortgage debt was owned by Australian creditors.

Government debt has always been popular with banks. While it is low return, it is also low risk. Central Government debt is secured by the governments’ unique powers, the power of taxation. Even governments facing political constraints on raising taxes are seen as secure debtors because of their special reserve powers to tax their subjects. Governments are – and should be – borrowers of choice in times of emergency or great uncertainty.

Whenever capitalist economies face high levels of risk, banks prefer to lend more to governments. There is an ensuing natural feedback mechanism, in that non-corrupt government spending facilitated by increased government debt serves to reduce the amount of risk in the wider economy. The reduced risk then facilitates renewed lending to non-government unsecured and semi-secured debtors. The resulting private spending then results in more (tax) revenue to governments, and government debt to bankers automatically falls relative to the size of the economy.

One of the most destabilising types of event in financial history occurs when governments try to upset this benign arrangement by repaying debt to their banker creditors who do not want to be repaid, and who do not have enough good unsecured and semi-secured alternative debtors lined up. In this situation, economies may directly go into a state of depression – as in the 1930s, and as in the European Union in the early 2010s. Or, to forestall economic depression, banks may be induced into more of the speculative secured lending that creates financial bubbles, financial instability, and eventually economic depression.

This is the inept financial destabilisation that the present New Zealand government is indulging in. It’s a classic case of a lose-lose financial policy. When governments obsess about their financial deficits in uncertain times, everyone loses. Salaried workers lose, the poor lose, bankers lose (eventually), and governments lose.

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Keith Rankin, trained as an economic historian, is a retired lecturer in Economics and Statistics. He lives in Auckland, New Zealand.

contact: keith at rankin.nz

A $50 billion rescue fund sits at the centre of 2020’s “once in a generation Budget” as the country braces for the economic carnage promised by the covid-19 coronavirus pandemic.

The plan lays out the first $15.9 billion of investment including an extension of the wage subsidy scheme to the hardest hit businesses, free trades training, and a state house building programme.

Almost $14 billion has already been allocated to previously-announced initiatives, leaving about $20 billion unspent.

READ MORE: Al Jazeera live updates – US accuses China of coronavirus hacking

The hefty price tag promises to blow out debt to 53.6 percent of Gross Domestic Product (GDP) by 2023 and will leave the country in deficit for years to come.

Finance Minister Grant Robertson said the pandemic was a “one-in-100-year event” which demanded record spending.

“It is a once in a generation Budget. It is bold because the task we face is monumental,” he said.

And Treasury’s forecasts show just how tough that task could be, with unemployment predicted to more than double, surging to a peak 9.8 percent by September this year.

“This is the rainy day we have been preparing for – now we must weather the global storm,” Robertson said.

Support for business
The 12-week wage subsidy scheme – set to expire in June – will be extended by another eight weeks for the worst-hit businesses.

From June 10, firms which can prove their revenue has halved over the previous 30 days compared to the year before will be eligible.

The payment remains at $585 per fulltime worker and will be paid to employers in a lump sum.

Up to $3.2bn has been set aside for the extension.

A $150m short-term loan scheme will also be rolled out to incentivise businesses to continue research and development programmes which might otherwise be shut down.

NZ Trade and Enterprise is set for a $216m boost to increase the number of exporters it can support.

The Budget acknowledges covid-19’s particular toll on the tourism sector with no end in sight for the country’s border closure.

An injection of $400 million will fund a domestic tourism campaign and support businesses to plan their next steps.

A separate $1.1 billion package has been set up with the aim of creating almost 11,000 jobs in the environment sector from pest control to wetland restoration.

Follow RNZ’s liveblog on Budget 2020 here.

Housing and infrastructure
The government has committed to rolling out a home building programme to build 8000 new state houses over the next four to five years.

Kāinga Ora will borrow an estimated $5 billion to pay for the bulk of the houses and the Budget sets aside another $570 million in rent support.

The homes will include about 6000 public houses and 2000 transitional homes.

The Budget also commits an additional $3 billion to fund “shovel-ready” infrastructure projects, on top of the $12 billion spend-up announced earlier this year.

Ministers have already received nearly 2000 applications for funding and will soon decide which projects to push ahead with after receiving advice from officials.

Investment in rail has also been bumped up $1.2 billion to reach $4.6 billion.

Training and eduction
Trades training for critical courses – such as building, construction and agriculture – will be made free for all ages over the next two years to help retrain people who have lost their jobs.

About $1.6 billion has been set aside for the entire Trades and Apprenticeships Training Package which will also help workplaces retain their trainees.

Out of the fund, $276 million will go towards setting up Workforce Development Councils and Skills Leadership Groups to monitor the job market around the country and plan for recovery.

Welfare
The Budget is notably absent of “helicopter cash” initiatives or further significant increases in welfare payments.

In March, the government boosted most benefits by $25 a week. Today’s budget also increases the rates of foster care allowance and orphan’s benefit by the same amount.

Almost $80 million has been committed to social services, of which $32 million will go towards foodbanks and other community food services.

A $36 million fund has also been established to support community groups which support Māori, Pacific, refugee and migrant communities.

Tertiary students will also be able to apply for support from a $20 million hardship fund to help them get through the next few months.

The “Warmer Kiwi Homes” scheme has also been expanded to cover 90 percent of the costs of insulation or heating retrofit for low-income households.

The $56 million investment is expected to cover an extra 9000 houses.

The government is also spending $220 million over two years to grow its current school lunch scheme from 8000 students to about 200,000 by the middle of next year.

Article by AsiaPacificReport.nz