Thursday, May 19, 2011



Digesting the Budget

What to make of the Budget? Firstly, it will make you worse off. If you're receiving Working For Families, in KiwiSaver, or planning an education, you've just been shafted. On the first, while the WFF cuts were not as bad as feared, the government will be slowly reducing your payments (either directly or by inflation) through a combination of lower thresholds, higher abatement, and a payment freeze. Their carefully chosen examples, which show lower-income people receiving higher payments, do that because they're counting the inflation-adjustment, not because they've actually made the scheme more generous. In real terms, their entitlements have been cut. On the second, the government has just legislated you a 1% pay cut from 2013, plus another 1% if (like many) your employer rips KiwiSaver payments directly out of your wages. Plus, they're cutting their contribution, while sticking a stealth tax on your employers (meaning, in fact, that you will be no better off due to their increase). And if you're planning an education, you're not going to be allowed to do it part-time unless you meet your course-related costs. Which makes it far more difficult for those already in the workforce to better themselves.

In addition, we have health cuts, thanks to a sub-inflation increase, education cuts, thanks to the Ministry of Education having to meet superannuation costs out of its own budget, and selling the family silver. And all of this so the government can reach surplus one year earlier (if everything goes right). I remember when government's delivered surpluses without these sorts of cuts. But that was back when we were governed by competent people, rather than self-interested looters.

But don't worry! Good times are just around the corner! Treasury says so, so it must be true! Oddly, though, they're projecting record 4% wage growth [PDF; Table A3.1], while at the same time sticking the screws on public servants through the requirement to internally fund superannuation. So who is going to get these supposed wage increases? Un-unionised wage-slaves on 90 day contracts? Somehow I don't think so.

All told, this is going to make people worse off. The government is cutting spending while the economy is stagnant. This is likely to make things worse, rather than better - just as Ruth Richardson did in 1991.

As Stuff notes, John Key has put his job on the line over this. If you don't like his cuts and his privatisation, you can vote him out and have them reversed. I suggest you do so.