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Rod Oram: Budget 2018 a patch-up job

Rod Oram assesses Grant Robertson's first budget as more of a patch-up job for the past than a real transformation for the future

Foundations for the Future is the title Finance Minister Grant Robertson has given his first Budget.

But Patching up the Past best describes how he and the Labour-led coalition government will be spending almost all their time and money in coming years.

The Budget devotes large sums to improving in conventional ways health, education, infrastructure, housing, technology and other vital areas after years of under-investment. Hopefully that will help make many individuals, communities and companies slightly better equipped for - and more eager to - contribute to big change later.

But there are no new initiatives for achieving the “transformation” Prime Minster Jacinda Ardern is promising for society, the economy and environment. The only guides are the big but skeletal ones already promised such as a Zero Carbon Act, an Independent Climate Commission and lifting the country’s spending on research and development from 1.3 percent of GDP to two percent within 10 years.

Rather than breaking ground for the foundations of a 21st century country, the Government has so far only spray-painted a few dashed bright lines in eye-catching colours.

Worse, the Budget offers a muddle of miniscule sums of new money to further the work, such as $8.9 million over four years for the entire climate change policy framework; $2.2 million to establish the Climate Commission; and $3 million for our diplomats leading work in the Paris climate agreement on areas crucial to us such as international carbon credits and rules on forestry and land use changes.

Yet, the Government knows the vast scale of the challenge to turn our low-value, low productivity, unsustainable economy into a valuable, deeply sustainable one; and to do so in ways that offer a “just transition” for everyone, as the Prime Minister promised in her speech in Berlin last month.

Moreover, the Productivity Commission recently offered some 500 pages of analysis and detail on our potential pathways to a net zero emission economy by 2050, as this column described.

The Budget, however, offers only tiny band-aids for the old economy. The most glaring example is the primary sector: a bit more money for biosecurity in the face of Mycoplasma bovis, our gravest biosecurity breach yet; for the Sustainable Farming Fund; for catching up on the backlog of fisheries applications; and for the Environmental Protection Authority which is tasked, among other things, with regulating our oceanic Exclusive Economic Zone, the fourth-largest in the world.

Most remarkably, the Budget allocates a mere $5 million over four years to improve Overseer, the software modelling system that farmers use to control the nutrient flows on their farms to minimise their pollution of waterways. The money is to “significantly increase the range of New Zealand farms systems covered by Overseer”.

But Overseer is an elderly platform developed piecemeal and slowly by AgResearch with government support over many years. Yet the Government and local councils keep heaping new environmental management tasks on it. This is akin to a small, slow-moving software developer trying to evolve a late-1990s version of Microsoft Windows into a cloud computing platform.

In a similar vein, the Budget allocates $3.1 million over four years for establishing a new unit in government to oversee compliance with the Resource Management Act and to improve consistency of application across local councils.

Judging by our current Government’s performance to date and its first Budget, it has yet to summon up the courage, creativity and political will to rise to the even bigger challenge of change we face today.

But the Government is absent from the real debate about the RMA. This is about what new legal framework should replace the nearly 30-year old legislation to ensure we more effectively and sustainably use our natural resources. There is a parallel debate on the need for massive reforms of our equally inadequate fisheries management system.

Work on both reforms is being led by the Environmental Defence Society, with backing from the likes of the Law Foundation and the Resource Management Law Association. Details of the RMA work are here.

Theoretically, the Government’s Green Investment Fund and the Provincial Growth Fund could evolve into useful sources of investment in a clean, high tech economy.

But the former has a vast amount to learn about its field before it can justify funding as a big investor; and the latter has a massive evolution to make from its pre-occupation with planting trees and supporting old economy initiatives.

Beyond the primary sector, the Budget reiterates the switch back to R&D tax rebates initiated by the previous Labour government but replaced by its National successor with targeted grants.

As we were starting to see last time around, rebates encourage a much broader range of companies to get serious about R&D. Hopefully, the good growth of tech sectors over the past decade will encourage an even bigger response this time.

Nonetheless, the Government will have to think, and fund, far more radically to drive a bigger investment from companies so the country lifts its R&D spend from 1.3 percent to two percent of GDP over the decade. But even that would only get us into the middle of the pack of developed countries.

The rapidly accelerating rate of technological change is already triggering big shifts in skills and work. Given this was a subject Robertson devoted a lot of effort to when Labour was in Opposition, it’s surprising we’ve seen little yet from the new Government in this field.

The Budget, however, did deliver one potentially helpful initiative: a tripartite future of work forum of Business New Zealand, the Council of Trade Unions and the Government. It is organisations like this in Sweden, for example, which helps make it one of the leading countries in terms of a confident workforce eager to upskill itself and embrace change.

Overall, though, the new Government’s first Budget supports conventional approaches to furthering a largely conventional view of the economy. The Government is promising to be radical later with, for example, starting to base from next year its Budget on wider well-being measures rather than narrow ones such as GDP, as described in this Newsroom piece.

“Transformation takes time,” Robertson stressed in his Budget speech in Parliament. “One Budget cannot instantly fix nine years of complacency and neglect.”

That’s true. But it ignores a far bigger problem. We, along with the rest of the world, have to understand that only rapid, significant shifts in the way we run our economies, societies and the environment will deliver the progress we desire.

Our last government to think and act so boldly was the Labour government of 1984-90.

Judging by our current Government’s performance to date and its first Budget, it has yet to summon up the courage, creativity and political will to rise to the even bigger challenge of change we face today.

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