Week in politics: A bad news Budget like no other

6:00 pm on 8 May 2020

By Peter Wilson*

Analysis - Level 2 relief is just around the corner but there's a tsunami of bad news on the way and it will start when next week's Budget lays bare the rocky road to economic recovery.

No caption

Grant Robertson said the wellbeing principles for the 2020 Budget which were outlined pre-pandemic have been put on ice. Photo: Pool / NZME

Just a few months ago Finance Minister Grant Robertson was looking forward to presenting another healthy "wellbeing" Budget, and now he's preparing New Zealanders for the bad news that economic recovery is going to be a long, hard road.

In a speech to Wellington Chamber of Commerce on Thursday, Robertson said he was not going to sugar-coat fiscal reality.

"We will be running operating deficits for an extended period and allowing net core Crown debt to increase to levels well beyond our previous targets."

He said Treasury forecasts that will be published with Thursday's Budget would set out the challenges ahead.

"We are no longer talking about growth in the near term, but about the scale and length of the economy's contraction," he said.

"Business investment and confidence will take a hit. Unemployment will rise."

In December, the Budget Policy Statement set out the five principles which, at that time, were going to underpin Budget 2020.

They were: Reducing child poverty, delivering improved health outcomes, supporting the transition to a climate-resilient, sustainable and low emissions economy, lifting productivity through innovation, and lifting Māori and Pacific incomes, skills and opportunities.

Those principles had been put on ice, the minister said.

That showed the immense change brought about by the pandemic. The Budget is going to be about economic survival.

The Reserve Bank published a paper on Wednesday on the economic impact of Covid-19. It estimated GDP was about 37 percent lower than usual during the level 4 lockdown, equal to $10 billion in lost production. During level 3 it was down by about 19 percent, it will be down by 8.8 percent under level 2 and by 3.8 percent under level 1.

"Any ongoing impacts to GDP, or to wellbeing, are beyond the scope of this analysis," the bank said.

Right now people are looking forward to level 2, businesses are preparing to re-open and the government is as confident as it can be that Covid-19 will be eliminated.

  • If you have symptoms of the coronavirus, call the NZ Covid-19 Healthline on 0800 358 5453 (+64 9 358 5453 for international SIMs) or call your GP

But there's a tsunami of bad news on the way, and it will start with those Treasury projections Robertson referred to.

The National Party is poised to take maximum advantage of this new economic reality. Opposition leader Simon Bridges has been saying a low number of Covid-19 cases doesn't mean success when there are no jobs.

The tactic is clear - shift the agenda away from success against the pandemic and focus it on the economy.

"Next week's Budget will show New Zealand is in the deepest recession in a generation and our country needs a government with a strong record of economic management," he said in a statement on Thursday.

Opinion polls consistently show voters favour National when it comes to managing the economy and the party will make the most of that in the months ahead.

*See all RNZ coverage of Covid-19

Another problem that's brewing in the Beehive is around the legality of lockdown measures and police powers.

National has been uneasy about that for weeks and now the Epidemic Response Committee, chaired by Bridges, has summonsed all the legal advice given to the government and the Commissioner of Police.

"The legality of the lockdown is highly questionable," Bridges said. "That's what academics, lawyers and the Law Society have said."

Legal advice to the government is privileged and hardly ever released, but the committee has strong powers and believes it can force it into the public domain.

Prime Minister Jacinda Ardern was closely questioned about this during her daily press conferences this week and insisted there wasn't a problem. Police Commissioner Andrew Coster had the same view.

Dr Ashley Bloomfield, the Director-General of Health, is in the middle of it because he issued the notices under the Health Act authorising the lockdown restrictions.

He could find himself in court because a former Parliamentary Counsel official, Ashley Borrowdale, has filed for a judicial review of Dr Bloomfield's actions.

The Parliamentary Counsel Office drafts laws, and Borrowdale told Stuff the notices overstepped the powers Dr Bloomfield has under the Health Act.

Stuff explained the situation in an editorial, saying the question was whether the lockdown measures had a proper legal foundation.

"It's been raised largely by academics but it's more than an academic question even as it appears we are nearing the end of the most restrictive stay at home phase," it said.

"If the lockdown orders were not justified it would, for example, open the way for damages claims by the hundreds who have been prosecuted for flouting them."

*Peter Wilson is a life member of Parliament's press gallery, 22 years as NZPA's political editor and seven as parliamentary bureau chief for NZ Newswire

Get the RNZ app

for ad-free news and current affairs