A weak budget for a weak economy | Josie Pagani



A weak budget for a weak economy

They are borrowing for groceries. We will have $14 billion in tax cuts over four years, when the Government expects its core debt to go up by $32b over the same timeline.

I counted 10 uses of the word “weak” in the summary of the economic forecast alone.

The key reason Treasury is downgrading growth forecasts is that our future productivity is getting worse. It warns, “Labour productivity levels are around 3% lower than in the Half Year Update,” which was only in December.

This was a weak Budget for an even weaker economy.

The Government‘s economic strategy is tailored for a fundamentally sound economy, where a firm hand on the till would sort out issues, all of which occurred for the first time in the past six years. To believe all that you have to ignore our structural problems.

It has been 50 years since we earned more overseas than we spent. Our productivity is dismal, so we work longer hours for less than nearly any developed country. We grow by adding people instead of by innovating. As a result, far too many kids live in poverty, and working families are squeezed. This Budget will see everything on that list get worse.

Here’s our basic problem: Big ticket costs in health, superannuation, crime and infrastructure go up by more every year than the economy grows. That’s been happening for decades. The population is ageing, equipment costs are rising, and we need to pay cops, nurses and engineers more to keep them here.

As expensive things keep getting pricier, more taxes or ever deeper cuts in other areas are needed to pay for them.

We are in a doom loop from which the only way out is an economy that undergoes a step change in productivity supported by a state sector that can deliver more and better.

Read Josie's review of the coalition government's first budget in The Post.

Listen to Josie with Heather du Plessis Allan and Phil O'Reilly on Newstalk ZB's Huddle.

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