After the beehive-spin induced euphoia wears off and the hangover sets in, middle New Zealand will reach for the Berocca and try to work out what the Budget really means for them.

Not to add to the inevitable headache, but here are a few of the facts of life for the morning after.

1. For at least 3/4, and maybe 90% of the country, by the time they eat a whopping 5.9% inflation next year (Treasury Budget forecasts, not NZLP numbers!) they will be worse off until at lesst 2012/13.   For a family with 2 kids on $72k for example, $55 a week worse off.
2. That inflation will feed into mortgage costs and rent rises.  It will result, quite rightly, in pent up wage demands from workers who have gone without wage rises for the last two years. 
3. While its ok that the middle income brackets got some income tax relief, and would have likely got more relief from us, the tax cuts are way too skewed to the top.  You just can’t get around the fact that someone earning a $million a year gets $1000 a week back.  That is going to make the haves/have nots gap wider.  And that gap will inevitably worsen over time, undermining the Kiwi dream and taking us further from the “fair go for all” kind of place we want to be.
4. That is made worse by the underlying agenda of shrinking the state and the services it can provide.  We have already seen home help for the elderly branded “low quality” spend and cut.  Health’s new money in the Budget is, we reckon, about $270 m short of standing still given next year’s inflation forecast.  That means more cuts to the services and more pain for the vulnerable.
5. My personal gripe is early childhood education.  What has the Govt got against quality preschool education?  Why is it swiping $100m pa from that?  Labour will lead in this area and every family with young kids will hear us. 
6. Rebalancing the econmy is way undercooked.  Take away the smoke and mirrors of the tax switch, and we are still left with residual taxt incentives for property and LAQC avoidance mechanisms.   Proof:  LAQCs sheltered $2.3 billion of taxes in 2008.  The tinkering in the Budget trimmed only $70m p.a. of that.  
7. There is STILL no credible plan for growth in this Budget.  The National Govt seems intent in relying on “passive” instruments. I have no problem with dropping the company rate – provided the fiscal balance can support decent public services (personal view – see “About” on the blog site) – but that cannot be enough to get the export sector going on its own.  What about the R and D tax credits?

The strucutral problem remains: we don’t export enough, we don’t save enough, and we don’t innovate enough.  As an economy we are short on capital, technology, skills and IP.  Budget 2010 does not fix that.  Time is short and the job is urgent.  When NZ wants positive action, Labour will be ready to lead.

As the bubbly wears off in the Beehive and the Berocca gets passed around the country; the poor, the forgotten middle class and the structural problems of the economy have not been moved forward by this Budget.

It remains a suger-coated tax swindle.

It remains a step back, not a step up, and certainly not a step change.