Sunday, 10 February 2008

The usefulness of Budget statements

Roger Kerr has an interesting article in the Otago Daily Times of Friday, 8 February 2008 highlighting some of the inconsistencies in budget statements made by the current government since 1999. Each budget seems to have different goals and objectives with no obvious aims or themes running through them. (Ok maybe the major theme is keeping the government in power.)

In the 2000 budget, for example, "Closing the Gaps" was all the rage but by the time the 2001 budget rolled around, economic growth was the all important issue. But as China is finding out right now rapid economic growth - and yes China unlike New Zealand really does have rapid economic growth - can at least initially increase income inequality. As economist Kenneth Rogoff has recently written,
... income inequality in China has leapfrogged that of the US and Russia, which is no small feat. Rising inequality is placing enormous strains on the political system, as is evident from a recent sequence of ill-considered policies that have been aimed at mitigating the problem.
So was "Closing the Gaps" really important in 2000 but unimportant in 2001, when suddenly economic growth became so important that it had to be archived despite the fact that it could, at least in the short term, "Widen the Gaps"?

And this is just one example of an apparent inconsistency in budget statements. Given the ease with which Roger Kerr seems to be able to find such inconsistencies I wonder why journalists have not been raising this issue. A rational, organised, well articulated economic vision for the country would seem to be desirable if we are to achieve what ever economic goals it is that the government has. It would also be nice if the government could spell out, and stick to, these goals in a consistent manner. But the lack of interest by journalists may be related to another recent Kerr article in the ODT on the standard of economic journalism in this country.

But perhaps the major reason for ever changing budget statements is that the government is just pandering to what it perceives as the current concerns of voters. After all, the main concern of any government is remaining the government, no matter what the cost to the country at large. Just think of the current situation in Zimbabwe for an extreme example.

4 comments:

Trinh said...

"Given the ease with which Roger Kerr seems to be able to find such inconsistencies I wonder why journalists have not been raising this issue."

What assumption are you making Walkie?? That Roger Kerr can do something with ease doesn't mean that others would find it easy too!

Paul Walker said...

But surely there is at least one journalist out there who can do it, even if not with the same ease as Roger.

Trinh said...

Paul,

On "closing the gaps", perhaps Labour were hoping that somehow New Zealand could achieve inequality reduction and growth at the same time (ie, the poor grow faster than the rich). Not impossible in theory, I doubt if any country has achieved those twin goals though.

What about the "knowledge economy"? Was it conflicting with another goal? In an earlier article (http://www.nzbr.org.nz/documents/articles/071130goodinstitutions.htm), Roger Kerr pointed out that it was funny for someone who has been promoting the knowledge economy to be saying that Australia's prosperity has a lot to do with its gas and coal endowments!

Crampton said...

Mildly amusing that Helengrad can't stick to a five-year plan...