An Exercise In Basic Accountancy
WHY HAS MAKING such a ridiculously big deal out of the whole Budget exercise persisted? The very notion that the government of the day possesses the foresight and skill to successfully diagnose and treat the nation’s economic ills in ways that have not been tried a hundred times before is fanciful. The smart move would be to treat the entire process as an exercise in basic accountancy. Because that’s all it is.
In essence, the budgetary process is about whether or not present state expenditures should persist (with appropriate adjustments for inflation) or be discontinued. Since most state expenditure is committed to activities that cannot be discontinued without throwing society into chaos, practically all of the Minister of Finance’s decisions are made for him. The sick must continue to be treated. The young must continue to be taught. The poor must continue to be housed and fed. The elderly must continue to be supported in their old age. Just attending to these “Musts” consumes practically all of the State’s annual revenue.
Of course a wise Minister of Finance will also keep a weather-eye on the condition of the global economy. Not because he can do anything about it, but because the impact of exogenous economic events – especially negative events – cannot help but affect the condition of the domestic economy. A reduction in the amount of money people spend and/or invest has consequences for the health of the nation’s businesses, the number of its citizens in work, and, most importantly, the quantum of revenue collected by the state.
In a rational society, any shortfall in state revenue would be made up by a corresponding increase in taxation. Unfortunately, democratic states are seldom governed rationally. Governments elected by the people are reluctant to court the wrath of their electors by increasing their taxes, preferring instead to allow the nation’s cultural and physical infrastructure to decay. Or, if the deferral of crucial maintenance fails to produce the savings necessary to keep the “musts” operational, borrowing to make good the shortfall.
Government borrowing poses all manner of potential problems for the nation, but not immediately. In a democracy, this delay between the act and its consequences is precious. Putting the country into debt allows a Minister of Finance to keep the lights on and the ATMs working without raising taxes. That option may become unavoidable at some future time, for some future government, but that is not the present government’s concern – not in the context of a three year electoral cycle. The politician’s motto is simple: “Always put off until tomorrow what is likely to cost you votes today.”
The problem with days of reckoning is that they always come. It was Rob Muldoon who found himself without a chair to sit on when the music stopped playing in 1984. When the game resumed, David Lange, and his Finance Minister, Roger Douglas, found themselves without fiscal options. Something dramatic had to happen to the way New Zealand was run, or the lights would indeed go out and the ATMs stop working. (In 1984 they very nearly did!)
As we all know, something dramatic did happen – “Rogernomics”.
Prior to Rogernomics, Budgets had been newsworthy largely because they were the occasion for rises in government taxes on petrol, tobacco and alcohol. Less frequently they made news on account of minor adjustments to Income Tax. Roger Douglas put paid to all of that.
After 1984, Budgets became part of the grand theatre of economic reform. Not even the “Musts” escaped the attention of the reformers. The National Party Finance Minister, Ruth Richardson, confronted with another day of fiscal reckoning in 1991, produced what she called “The Mother of All Budgets”. (A reference to Iraq dictator Saddam Hussein’s promised “Mother of All Battles” during the First Gulf War, which should have warned New Zealanders what Richardson had in store!) It was TMOAB that slashed the incomes of beneficiaries by 25 percent – impoverishing thousands. For some Kiwis, Budgets were now events to be feared.
In spite of the best efforts of the political marketing experts, there has not been a Budget to match Ruth Richardson’s TMOAB for more than 30 years. Yes, there have been years in which Bill English (another National Finance Minister) felt obliged to cut back sharply on what he memorably described as the “Nice To Haves”. (Government projects that made life easier, happier, more fulfilling.) But the “Musts” have limped on from one Jerry-built Budget to the next. Those dark clouds gathering on the horizon, however, speak gloomily of another day of reckoning that is fast approaching.
It will not be an ordinary day. Crowded into its 24 hours will be climate change, global financial fragility, the weakening and breaking of supply chains, rising geopolitical tensions, rampant inflation, and the ongoing effects of a global pandemic. To keep the lights on and the ATMs working in the face of these challenges, governments all around the world have been forced to borrow and spend like there was no tomorrow. (Which, with the hooves of the Four Horsemen of the Apocalypse thundering across the planet, may not be an unreasonable prediction!)
The current Finance Minister, Grant Robertson, has about as much chance of holding these grim arrivals at the border as King Canute had of keeping the incoming tide at bay. The budget Robertson delivered today, like most budgets, is a holding operation. If he’s lucky, in a final bid to retain control of the Treasury Benches, he will get the chance to borrow and spend all over again in 2023.
If, however, Robertson is unlucky and/or unsuccessful, then he is unlikely to be too distraught. Indeed, he may feel extremely relieved that he does not have to write the 2024 Budget. And if his assumed successor, Nicola Willis, has a lick of sense she will persuade her boss, Christopher Luxon, to hand-off the job of dealing with the Mother of All Days of Reckoning to Act’s David Seymour. After all, he’s the man with the machete.
Rather than search for a Budget title to top Ruth Richardson’s, Seymour should dispense altogether with the hoopla and razzamatazz surrounding the Budget performance. Since the document he hopes to present will be nothing more – nor less – than an exercise in basic accountancy, that’s the description he should use.
That the phrase ‘an exercise in basic accountancy’ will forever after strike fear into the hearts of New Zealanders is, sadly, as unavoidable as death and taxes.
My accountants advise: Don’t become a chartered accountant. Well, this was during tax season, so he wasn’t in the best of moods when it comes to his job.
My advise: Start out with bookkeeping (entry level) to see if you’re willing to do the work.
Let’s put it this way – a ten percent increase in cost of living would be a dramatic hardship for much of New Zealand.
A ten percent increase in cost means that things like programs for the developmentally disabled, go away. Aid, help, housing, defence, police – just more people on the street. As someone with said developmentally disabled in my family, that fills me with a deep, abiding rage.
Increased cost means less money for things like basic or applied research.
Your tamariki and mokos may never see a flooded city or starve, per se, but they’ll be paying for our actions for the rest of their lives.
Sam Our mokos may not see a water flooded city, but they’ll see cities flooded with strangers and that’s happening right now. My bland suburb is Little Asia, particularly when I’m out at night, and I’ve long thought it likely we’ll be Chinese probably by attrition; Brits came for the land and resources which we still have in abundance, as well the water which we generously give away free to our mates.
I don’t regard Ruth Richardson as a normal woman or human being, I don’t know what the short repulsive strutter is, but if the Nats produced something like her again then the charities need to start rebuilding workhouses. English is another sociopathic dwarf trying to convince himself he’s God’s wee buddy, and God’s hairless buddy Luxon is indescribable. This country lost its soul, maybe back in the 60’s / 70’s when the hippies and peace movements elsewhere were busy finding their’s. We’re as arid as hell, but I’m not sure about the rest of the world right now and like the man says, there’s the unpredictables. Kia kaha.
We still have to vote. We still have to lobby our officials. And we need to get organised.
But you would chop aforementioned programs to keep living costs from going up?
Perhaps the rich pricks should be made to pay a bit more tax so we can have some more services?
Maybe they should just pay some fukin tax. That, would be good.
Your points are thought provoking, Sam. In particular, I agree with you about our actions having consequences down the track for the younger generations.
Apart from infrastructure projects becoming crazy expensive, remember the scope of global climate change – infrastructure will need to be rebuilt/retrofitted every 10-20 years.
Apart from that what you should be concerned about is actual great walls. Border Guards that put Nazi SS to shame in brutality supported by populations living under siege mentality. Climate change will first strike at China, India Pakistan and overpopulated Africa.
Western Civilisations will survive in body and mind and once again becomes powerfull, It just loses its soul.
A bit hyperbolic Sam?
I don’t know if it was a good idea putting James Shaw in charge of the climate, he’s completely overdone it, as ideologues are wont to do.
We’ve had decent frosts here in Northland in early May and now the South Island blanketed in snow. Winter hasn’t even started yet; we’ll be freezing our nuts off before he wakes up.
Science knows enough aboit thermodynamics. In the event of an ice just charge C02 sediment, release and youll raise global average temperatures over one generation. In general it’s easier going up than down.
So are you blaming James.now for the weather?
I am replying to David George.
What fart-arsed nonsense! Hot summer temperatures started in late November, and have only just subsided.
I am in my 70s – I know that we had hot temperatures like this when I was young, but it was just for a period of a week or so – not most of the entire summer. Here in Hamilton we have had only 2 very light frosts, and the South Island is nowhere near “blanketed in snow”.
You are a very wishful thinker.
And if you look into the patterns of global warming, you will learn that we will have very cold spells in winter, as the cold of the Antarctic leaves the Antarctic, moving North and affecting us. This has been in process in the Northern Hemisphere for some years: USA and Europe freeze, while the all-important Arctic warms and melts.
The same fatal (for us) process is now starting in the southern hemisphere.
Idiot.
The Frosts ate caused be Weather. Thats about as linked to climate change, as you are to a fish. Its a real tenuous connection
Good points Sam. Your thinking seems to be from a longer term perspective than most.
There’s some people deeply disappointed with the budget:
“The budget does nothing to address LBGTQI transqueer climate poverty in Aotearoa”
– Marama Davidson (Greens co leader)
I don’t even want to try and guess what “transqueer climate poverty” is but I’m sure a few billion would help, aye Marama?
Take the above with a grain of salt – can’t find confirmation.
David George, The simple answer to solving the problem of ‘trans queer climate poverty’ in New Zealand is for everybody to identify as the biological gender with which they were smitten at both. There we are. Not always easy, but sometimes that’s how it has to be.
I’m blowed if I know how climate change affects the different genders differently though. The thunder and lightening at 6.10 this morning hit the whole street indiscriminately, and our sadly shrinking West Coast glaciers do not seem to be taking any heed of gender variations among the persons they’re impacting on. What’s Davidson on about this time ?
I want to identify as a fighter jet!
My 4wd identifies as a Prius
I’m to be shiny black Mercedes heading straight down to Wellington Harbour to tip a couple of passengers in for a swim.
Don’t you know the devil is a liar who wants to see your soul on fire.
They’d rather see is down rather than going higher and higher.
I was thinking checkers moves bit it is God’s faith.
Robertson holds a book proudly. Is it Accounting for Dummies – I don’t see clearly? However that makes me feel close to him as we obviously share the same failing.
David George is that a real quote from Marama. If you have a link,that would be good. I am not doubting you
David is just yet another bigoted bible basher who thinks that being trans is an abomination and should lead to jailong
I don’t know what being trans is like but for sure people like David George, Luxon the Bald and seemore are most definitely not the people to be answering that. Can’t spell success without combined sex.
I think it’s a joke millsy. Funny because it’s believable?
Less of the assumptions and derogatory accusations would be good.
‘In a rational society, any shortfall in state revenue would be made up by a corresponding increase in taxation. Unfortunately, democratic states are seldom governed rationally.”
I know of no one alive who agrees with you – for that is total nonsense. There were those, now long time dead, who mistakenly did believe that. Since the election of Labour here in 1935, and FDR in the USA (1932) that changed. They had higher hopes for government, they got created jobs building stuff – dams, houses.
There is something called an economic cycle. An intelligent or even semi-useful Treasury informs government about such. Governments stimulate the economy with deficit financing at sometimes and runs surplus and pays down debt at others.
RBG over do the laxity and then over do the tightening up. Just to complicate matters for government and Treasury. Etc , it is accounting but the forecasts are based on a continuing journey of the nation state government ship in an economic world (including money markets and longer term debt financing).
Again aren’t prices different from what the markets are able to pay?
Market mechanisms like pricing ain’t worth the paper they’re written on. How’s the market supposed to signal scarcity when the permafrost has already exploded?
We know politicians and captain’s of industry lie everyone gets that.
So eat your cheeseburger, now! You won’t be able to afford it or it will be made of 95% meat substitutes and probably 4% insect meat (purposefully farmed for this).
You’ll see a sharp rise in the price of groceries making the recent lighthearted view on food security by the middle class be a thing of the past. You might see grocery bills eating a larger chunk of a family’s budget.
Taxes for infrastructure will also increase as previously established infrastructure must he retrofitted for the new climate it is finding itself in. I expect the South Pacific will soon need to engage is vast renovation projects and do it again every 10 to 20 years from now on until the climate stabilizes in what this rate is looking like centuries.
Price that in Babylon.
Totally correct Chris. Its all theatre and just underscores why we need a new political system.
As I am sure you know, Brash and Hide reprinted your 2004 speech on their site. It is entirely relevant today and I think you should republish it here. Although its long and may need tweaking, It absolutely hits the nail on the head about how we need to move forward.
Not all beneficaries are nasty robs mob nor are they all bludgers that is a stereotypical view.
What Chris ignores is that many lifelong Labour voters such as myself (only 2 elections elsewhere since Norm Kirk) are not overwhelmingly interested in any economic (we own our own homes & we know how to work) , environmental/climate, (we’ve lived through a lot of bad weather before) poverty (weve all been poor before, in my case more than once), woke, “ToW principles partnership equity” or other academic distractions. The single issue that we will vote on next year is killing co-governance, because we know that its wrong in our democratic bones.
Co governance has been going on longer than He pua pua it just makes it official with all the trimmings.
Since the treaty is a part of international law, not demoatic law as some internet professors of of constitutional law may think, covernance will proceed. All it has to do is alow the gears of democracy turn.
Poor old Robbie, the spaceworld of the 21st century both beyond our atmosphere and between people’s ears, young as well as old, is too much for you.
Don’t forget to bring ya pitchforks and white sheets with the eyes cut out.