Page 1593 - Week 04 - Thursday, 7 April 2011
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budget cycle. Our priorities and commitments are very clear and we have been very consistent in saying what we think public money should be spent on, how it should be raised and the role of fiscal policy in a market-based economy.
I would like to cover briefly the fixation with balanced or surplus budgets that pervades the political discourse at the moment. From the language used by both major parties, one could reasonably think that some great catastrophe will befall us if we do not have a balanced budget. Whilst it is, of course, a laudable goal and undoubtedly we need sufficient fiscal and monetary space to ensure that we can respond to the natural economic cycles and counteract them to ensure stability, mainstream economic thinking does not support the “at all costs” approach to budget surplus that seems to have been adopted in recent years.
Fiscal policy is very complicated and there is certainly much more to it than just achieving a balanced budget. It is overly simplistic and disingenuous to say that budgets have to be in the black to be prudent. That is not in any way to suggest that we do not need to carefully assess every expenditure decision and make sure that it is in our long-term economic interests before we position ourselves for the inevitable difficulties that will come about from short-term thinking.
Energy efficiency is the simplest and most basic example that illustrates the point very well. If I borrow money to improve the energy efficiency of my house and it costs me $1,000, but each year it saves me $200 and the interest payments are only $70, it was a prudent economic decision by any measure. In the long run I am much better off. This is a very simplistic example but it illustrates the point that our thinking should be about the long-term impact of our decisions, not just a mindless adherence to something that in and of itself makes little difference to our lives.
It probably is easier to spend money than to save it, and in that sense a level of discipline is required to avoid having to borrow funds to finance the budget. To the extent that this is true, fiscal discipline is required. No-one likes waste. We all work hard for our living and it is offensive to see money frittered away when it could be used to tackle the many serious problems that confront our community.
Conceptually, there are two types of waste. The first we can all agree on: building something and then pulling it down to do it again or providing materials grossly disproportionate to needs is waste that we would all disapprove of. An example of example here would be Bunda Street. Bunda Street recently has had a lot of work done to it with the new shopping mall going up across the road. There has been a lot of work done and a lot of money spent on that. Fortunately, there has been a change in decisions on Bunda Street. It has now been decided that it would be better to have it as a shared thoroughfare. That means that a lot of the work that was done will be ripped up and have to be redone. That is an example of waste.
Another example is a proposal to plant 500 trees down Northbourne Avenue. The question would be: is this the right time to be doing that as we know that there is a design study, an investigation into Northbourne Avenue, about how Northbourne Avenue may be replanned—may be redesigned in the future—to ensure that we do have faster access for buses and better access and safer access for those who wish to
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