Federated Farmers Submission on the Budget Policy Statement
Federated Farmers has been a regular commentator on fiscal policy matters, including submitting to previous BPS’s, most recently in 2013. Fiscal policy is an important issue for farmers. They have told us through our six-monthly Farm Confidence Surveys that governments should place high priorities on reducing the ratio of government spending and government debt as percentages of GDP and on ensuring that all government spending delivers strong value for money.
Federated Farmers also has a strong concern for the impact fiscal policy can have on monetary policy and in turn on the exchange rate. Rapid growth in government spending, particularly if it is non-productive, makes it harder for the Reserve Bank to keep inflation under control and necessitates higher interest rates for longer. This was the case particularly during the 2005-08 period.
Federated Farmers was supportive of the previous Government’s economic and fiscal policy and efforts to turn around a dire position following the Global Financial Crisis and the Canterbury earthquakes. The new Government has inherited strong economic growth, strong employment growth, and a sound fiscal position with spending under control, operating surpluses, and a steadily reducing share of debt to GDP.
Looking forward it will be important that this position is maintained and built upon. The Government should seek to keep core Crown expenditure at or below its current level of 28 percent of GDP and it should ensure that its spending is affordable, provides strong value for money, and is appropriately targeted.
Summary of Recommendations
Federated Farmers recommends that:
(a) As the Government progresses its Budget priorities it takes a prudent approach that delivers value for money and reduces the risk of unintended consequences or wasteful spending.
(b) The Budget Responsibility Rules are adhered to and do not enable overly loose fiscal policy.
(c) The Budget allowances are not revised upwards in Budget 2018 or in subsequent Budgets.
For more, see the full submission