The Pulse

The conventional wisdom has it that Governments hate giving a zero budget. The budget is normally a time for Governments to announce popular big ticket items or the sort of big spending on heath or education that usually wins votes, so if there’s no money in the till, meeting expectations can be difficult.

However this year the Government is rolling out its second zero budget in a row and, according to the MYOB Business Monitor, the approach is going down surprisingly well. 68% of New Zealand businesses support “an increased focus on cutting Government expenditure to ensure the New Zealand Budget returns to surplus faster.”

Given the ongoing crisis in the Eurozone, driven by unsustainably large levels of debt, it’s perhaps not surprising that New Zealanders are feeling good about the Government’s emphasis on thrift.

We’ve seen what happens overseas when countries like Greece embrace “Visanomics” and we don’t want the same thing to happen here.

However there is also a bit of a warning for the Government in the results of the Monitor, and recent events overseas.

While they are overwhelmingly in favor of the Government living within its means, 66% of New Zealand’s businesses also support an increase in funding for research, development and innovation.

For businesses, it’s innovation and new ideas that lead to growth, and they don’t want to see our countries ability to innovate damaged.

At the recent G8 summit, President Obama spoke of a new consensus around Governments focusing not just on austerity, but on investing in creating growth. As the UK has just found out, too many cuts during a recovery can put you right back into a double dip recession. Governments need to find the right balance between lowering debt, and creating growth.

It’s clear from the Monitor that this sort of strategy is what New Zealand businesses have in mind: they want a Government that spends money wisely, but protects and invests in the innovation that spurs growth and creates new jobs and industries.

When you think about it, what New Zealand businesses are asking for is for the Government to follow the same approach that they themselves have had to take over the last few years.

During the recession, businesses have had to make hard decisions about spending money, and have had to keep a tight reign on spending and cashflow. But they’ve also had to be innovative and nimble enough to survive the economic downturn and figure out ways to attract new customers, open new markets and find a way back to growth.

They expect the Government to do the same.

What are your views?  Do you support the Government’s “zero budget” approach?

Julian Smith | General Manager – MYOB