Budget 2016: are the winds of change upon us?

Benjamin Franklin famously said, “when you’re finished changing, you’re finished”.

The Government is poised to deliver its eighth Budget, and potentially lay the ground work for a fourth term.

So is now the time for change?

Successive budgets have offered little in the way of surprise or stimulus, largely due to the influence of The Fiscal Responsibility Act 1994. Of course fiscal responsibility – and transparency - is important.

But for Governments, the balance between what you keep the same and what you change is, and must be, an art not a science.

If the time for change is now, where does a third-term Government start?

Socially, New Zealand is still grappling with two constituencies – the wealthy and the poor. John Key has indicated he wants to leave a legacy of addressing poverty, and both Key and Judith Collins have signalled their intent to address how guns are getting into the hands of serial, violent criminals and gangs. And there’s an emerging demographic movement; we have growing Asian and Polynesian communities; and New Zealand’s population is aging as well. Has the Government done what it needs to create a future for all of them?

Economically, the OCR is at an all-time low at 2.25%, and since mid-2004 four central banks in Europe have moved their interest rates into negative territory. In New Zealand, we have seen a continued investment in infrastructure which brings with it jobs. But is that enough to stimulate our economy? We haven’t seen any encouraging trends in many commodity prices, including dairy, for quite some time. Determining if changes need to be made to stimulate the economy is an area worth revisiting.

Politically, both the Labour Party’s free tertiary education policy and universal income provide a paradigm shift. Whether you like these polices or not, it clearly places these issues high on the political agenda (and policy-makers’ watch-lists).

Technological change is being embraced by the Government as a way of being able to do more with less: evidenced by ACC’s recently announced $450m transformation programme and continuing interest in the Inland Revenue’s $1.5 billion transformation that interestingly has an IT component that will only be a third of that cost. Both of these initiatives are taking place against a backdrop of successfully completing the nationwide roll out of ultra-fast broadband. But there’s also a need to ensure that technological change is safe. After all, cyber-attacks are rapidly and collectively becoming a multi-billion dollar problem for businesses worldwide.

Environmentally, New Zealand has historically had a competitive advantage in its ability to grow grass to fuel a thriving dairy industry and create other exports. Is that still enough?

And there’s a further challenge for this Government.

Making sure that Budget initiatives and their impact are communicated really effectively is vital, so that all New Zealanders are aware of and informed about how these decisions trickle down to their everyday lives, and influence the success of business and our economy.

The Budget and its supporting documents provide the Government with an opportunity to adopt integrated reporting (IR) principles like many other organisations are doing locally and abroad. IR’s focus on better quality information about performance with less emphasis on the bottom line is the perfect platform to tell New Zealand how it’s performing and also what it plans to do.

So in Budget 2016, it’s not just a question of deciding what to change, but also how to tell the story of change.

Above all - the Government must keep it simple, concise – and clearly tell us all how we’re doing.

Further enquiries, please contact:

Mark Hucklesby
Partner and National Technical Director
Grant Thornton New Zealand
T +64 (0)9 308 2534
E mark.hucklesby@nz.gt.com