Budget 2025: Policrastination defined
Budget 2025: “Policrastination” defined
“Policrastination” is a new word we are trying to get in the dictionary. Definition: a politician’s tendency to delay, dodge or defer critical policy decisions, especially those affecting the long-term wellbeing of future generations, in favour of short-term political gains.
Government budgets are all about choices and WEAll Aotearoa fears decisions taken today are not setting us up for success tomorrow. A healthy economy invests in the future, today.
We would have liked to have seen more invested in children, education, science, infrastructure, and responding to the big challenge of climate change, as well as a balanced tax and budget system that supports everyone to live in dignity. We need to invest in these areas if we want long-term resilience, equity and shared prosperity.
What values are reflected in this Budget?
Through this Budget, the government has signalled its support for big business, extractive industries and older homeowners who will benefit financially from tax breaks, increased funding, and rates rebates.
But these benefits are built upon reducing government Kiwisaver contributions and extinguishing 33 pay equity claims from low-paid women. As a result, those beginning their journey to save for retirement will ultimately be worse off.
In fact, changes to the pay equity scheme alone make up a staggering half of all government savings, that’s $3 billion a year or $11 billion over the next four years low-paid women won't receive. Young people starting work will be tens of thousands of dollars worse off when they reach retirement age as a result of reducing and means-testing the Government’s Kiwisaver contribution. You could say this Budget is not only ‘robbing Paula to pay Peter’ but robbing pēpi too.
Will such a narrow focus on short-term GDP growth even succeed?
At the high level, the economy will see lower growth than forecast, higher unemployment and no surplus until 2029. However, under the measure used for every modern Budget until last year, the country would still be $3 billion in the red in 2029. Perhaps borrowing for tax cuts and tax breaks for landlords last year wasn’t such a smart idea for a country facing a structural deficit.
Investment Boost
The cornerstone of the Government's mission to increase GDP is the Investment Boost. This policy allows businesses to immediately deduct 20 per cent of the cost of a new asset (such as new machinery, tools, equipment, vehicles or technology) from their tax bill. The Government anticipates this will reduce tax revenue by $1.7 billion per year.
This is an expensive programme. To put it into perspective, the total spending by the Government on heritage, culture and recreation in 2025 was about $1.5 billion. This programme will reduce tax revenue by more than that total expenditure every year.
While boosting New Zealand’s woeful productivity is a commendable goal, there are big doubts this policy will achieve it. Despite the $34 billion Treasury forecasts it will cost, it will only boost GDP 1 per cent over a 20-year period.
It seems almost certain that the lion’s share of investment in new assets would have happened anyway. For firms that would have purchased new machinery even without the policy, the 20 per cent deduction is a pure gift.
While cash in the pockets of business owners is a one-off boost, the only truly sustainable way to strengthen an economy in the long-term is sustained investment in knowledge creation: education, science and research and development.
A few final quick thoughts.
Possums were a surprising winner with the disestablishment of John Key’s Predator Free 2050 program and we are staggered to see $200 million for the Government to directly invest in new oil and gas fields! We don’t believe the Government should be part-owners of fossil fuel companies in a climate crisis.
This isn’t fiscal responsibility, it’s a values decision that reflects deeper systemic priorities. We need to ask what kind of economy we are building, and who it is serving?
