By Michael Worth*
If the Budget genie sprung from its lamp and asked me what I’d like delivered in Budget 2022, I would ask for: The Public Finance Act to be reformed, more Jobs for Nature, and a ceiling on our carbon emissions.
Public Finance Act reform
There’s a common perception among many Kiwis that a Government should balance its book like a household: earn more, spend less and run a surplus at all times. This approach is supported by the Public Finance Act, which sets out a framework for how the Government can borrow money or spend public funds.
The Government spent strongly over the past few years to support its laudable COVID health response. Its economic response was bold, swift and decisive. We emerged with a strong economy, and a level of public debt considerably lower than our peers. Now Grant Robertson is aiming to rein it in, warning in his pre-Budget announcement, “As we move to a new normal post the peak of COVID, it is the right time to resume a set of fiscal rules to carefully manage costs while planning for the future.”
But treating the country like a household isn’t appropriate or necessary. It’s too restrictive to allow New Zealand to tackle the huge environmental challenges we face. The Public Finance Act enshrines an outdated, orthodox approach to spending that is holding us back from investing in the future. It must be reformed, because public debt shouldn’t be as frightening as what we’re facing environmentally if we fail to act.
Given the level of threat, what is required is not simply more room to manoeuvre within the PFA, but to remove it. Once this artificial constraint is gone, then we can clearly and confidently use the power of the Government’s balance sheet to address the very real crises to ensure we have a future. A high level of fiscal debt might be undesirable, but the real debt is what we owe to the next generation. What good is running a cash surplus if our children can’t rely on quality air, clean water and a healthy place to live?
More Jobs for nature
If we did have more to invest, the Jobs for Nature programme would be a great place to start.
Robertson stated in his pre-Budget announcement, Budget 2022 initiatives will “be a pivotal change as we move towards a high-wage, low-emissions economy that provides economic security in good times and bad”. But what does this look like as it moves beyond a statement? How might we make it policy and action? Our high wage, low emissions economy will need greater environmental expertise. It also needs more low carbon jobs such as caring for humans and improving our external and internal environments.
As part of the bold and decisive COVID recovery strategy, the Jobs for Nature programme has coordinated and managed funding across government agencies to benefit the environment at a local level. The $1.2 billion budget is designed to fund 11,000 nature-based jobs across Aotearoa; it has already created 5,700 jobs for 360 projects. The fund has paid for 3.2 million plants to be planted, pest control on over 500,000 hectares and maintenance on nearly 600km of tracks.
The programme has taken people displaced out of sectors like tourism and repurposed those skills into jobs to achieve real results at local levels. Imagine the effect we could have on Aotearoa New Zealand’s degraded environment with a significant boost to this programme.
Our interior environments could also benefit if we expanded the programme to fund work on making homes more efficient. According to the International Energy Agency, boosting buildings’ energy-efficiency work creates more jobs per million spend than any other sustainable initiative, and is the highest job creator of the sustainability initiatives they assessed.
An extension of the Jobs for Nature programme in Budget 2022 might become more like a true job guarantee, providing a low-carbon care economy. A more comprehensive job guarantee would ensure the creation of dignified jobs, ensuring full employment and acting as an automatic stabiliser to keep inflation in check more effectively than current mechanisms.
Budget for carbon, not just cash
Rather than just money, a proxy for resource use, how about we base the budget on not only financial metrics, but the actual resources we have? The idea of an energy economy has been gaining ground, partly because energy has far more intrinsic value than money. If you were stuck on a desert island, you’d certainly rather have a generator than a pile of cash.
Carbon is one currency in the energy economy, and we have set targets for reducing our carbon use and emissions. What if we established how much carbon New Zealand had left to burn? If we agreed Aotearoa New Zealand’s carbon budget and capped it, it would throw into very stark relief the best use for this scarce resource. As a nation, it would help us to reach our target of 100% renewable energy by 2030, and facilitate the transition to a carbon-neutral future.
There are ways we could measure and allocate carbon, such as Tradeable Energy Quotas, which could be allocated to individuals. Those who use less carbon than they’re allotted could sell the excess to other users, and manage the system through an online platform. The total number of units available to New Zealand goes down year by year and could be set by an independent body, like the Climate Change Commission, which would set the units to maintain adherence to our emissions targets.
Let’s be bold and brave
The Budget is an opportunity to address some of the country’s biggest issues. This is what Government is all about – investing in the future of its people, environment, and economy. I want to see the Government fret less about reducing public debt and think more about how we start to repay the debt we owe to future generations.
*Michael Worth is a partner and environment and sustainability leader at Grant Thornton in Auckland. This article first appeared here and is used with permission.
65 Comments
A job guarantee scheme is literally designed to control inflation - when the economy is hot, employment is high, and the number of people on the jobs guarantee reduces. This reduces the Govt fiscal stimulus (paying people on the jobs guarantee) - having a cooling effect on the economy. When the economy is slumping, more people move onto the jobs guarantee, and Govt fiscal stimulus increases - wamring up the economy.
A jobs guarantee basically uses a bufferstock of employed people to smooth out the inevitable peaks and troughs in economic cycles, rather than relying on a bufferstock of unemployed people to do this. The job guarantee is a far more natural 'human' response to be fair - what human settlement in history would tackle increases in the price of stuff by stopping people working and making them live in poverty!?!
Yes, the point of a job guarantee scheme is that it acts as an automatic stabiliser - meaning that an economic downturn does not cause thousands of people to be thrown into poverty. As I said, the idea that a human society would react to increasing prices for certain goods by making people that want to work sit idle is complete madness.
"when the economy is hot, employment is high, and the number of people on the jobs guarantee reduces"
You assume that people will gladly move from doing nothing and getting the job guarantee, to getting up early, braving the traffic, dropping their kids off to the creche and paying for it, and doing actual work… The reality might be quite different!
Fair challenges all. The job guarantee sets the floor standard for a 'transition job': pay, conditions, access to childcare etc. Note this negates the need for a minimum wage. Other jobs have to offer more to attract people. It will make labour a bit more expensive but it is about time we had a bit of a reset of the wage gradient - it is getting ridiculous and people shouldn't need benefits to top-up wages so they can afford to eat!!
My heart is on board with this but my head isn't. I am deeply skeptical about the numbers - both at a macro and micro level. In no small part is the current cost of living crisis due to de-carbonising the economy - is the RBNZ going to look through this?? Maybe they need to come out and be honest instead of tippin us into a recession? We need export dollars.
The spending is real by the way, $30m has been allocated for pest erradication in the land behind us, plenty of dead deer around from heli culls.
It's not that simple, it's some of the most remote country in the NI. By all mean's hike for days in seriously rugged country (or pay for a heli) if you want to get in there and get the "protein" out.
It's got zero to do with Kaitiakitanga either, it's an introduced species out of control. Jesus, was it that hard to understand?
"What's the carbon cost of a steak from a beefie off a farm?"
It all depends:
- On whether it was poached from a paddock near a road, or followed a more traditional EOL trajectory.
- If poached, whether the hunter/gatherer walked, cycled, or drove home.
- If drove, whether in an EV, SUV ( diesel or petrol?), chopper.
- If traditional, whether the beefie was moved from farm to feedlot to finishing, and by what means, before, as the saying goes, the Axe Fell.
- If the Axe was wielded manually or used external power.
- If external power, whether FF, wind, solar, hydro.
Oh, it's Complicated.....particularly as the event chain differs substantially farm to farm, province to province, city to city.......
It sure sounds tricky when you put it like that :)
What's the carbon cost of a feral deer, pig, goat or possum? With no farming activity involved. No medicines. Just the survival of the fittest (within their range).
Can I just write off the carbon of the failed hunting trip as 'recreation & leisure'
Forest and Bird estimate that introduced pests cause carbon costs equilvalent to all domestic airtravel .
https://www.forestandbird.org.nz/resources/new-report-climate-crisis-fu…
Whats the carbon cost of all the invertebrates chewing through foliage?
For sure feral deer are getting well out of hand again in a lot of areas. Will the deer populations crash before the forests do? It definitely needs some attention and now. As in the first wave of carnage with booming feral deer populations, it feels like we'll be too slow off the mark responding to the current blooming populations too.
Those deer had to be shot Te Kooti, I am not aware of where you speak of but in general the population of deer, goats, stray stock and possums is out of control. That is without mentioning cats, mustelids, pigs and rats. There are areas with stray dog problems also. Is the past environment of NZ doomed? I would say yes. Pest free NZ 2050 is a pipe dream. While there are private land owners who refuse to co-operate with nation wide pest control schemes the resident pests will continue to contaminate eradication areas. Do I think eradication across NZ will be achieved? No
The carbon is from us burning fossil fuels for energy.
It is increasing scarcity, coupled with ever-diminishing EROEI, which is driving the wedge between 'price' and 'the results of work done'.
Physics is, regardless of culture. Or of how ignorant folk are of it.
Energy - and everything we do with it, which is everything - will get 'more expensive' from now on. Try and get above blaming some 'other'; it is what it is.
What good is running a cash surplus if our children can’t rely on quality air, clean water and a healthy place to live?
It's not that much of a problem. New Zealand is in such a state that fewer and fewer young kiwi couples can afford to have children anymore. This is reflected in our fertility rate.
The "kiwi" kids of tomorrow are going to mostly be imported from places with very different cultural values and lower environmental standards.
It's not really about money, there's a really strong link between educating women and giving them careers, and plummetting birth rates.
Probably doesn't make it easier that the cost of living is increasing, but at the end of the day women appear to prefer not being baby making machines.
Yes, in countries where those things are low to begin with. However, we now have highly educated women in first-world countries taking a financial caning and the birth-rate is still plummeting. It's time to accept that living costs ARE the thing causing low birth rates in countries with well-educated women.
You couldn't be more right. The number of people who glue their babies and toddlers in front of screens to be able to do their "own thing" is sky-high (29% in 2019 according to MSD).
Anecdotally, I have found "personal freedom" to be a major driver of low fertility among us millennials.
Most of the people I grew up with don't want kids so as to not give up their late night drinking at pubs, binge-watching shows on Netflix, sleeping 8 hours at night and buying more stuff for themselves.
How about we reduce the size of government by 50%, cut debt and income taxes, this will allow people to afford the changes we need to make to our lifestyles without burdening future generations with fiscal and carbon stress. Subtract 50% of our social carbon footprint from the equation and the world becomes a better place.
Is it possible to get your (serious and valid) point across without extinguishing hope? Because without hope, what's the point of worrying about carbon now? When I read your posts I don't think "I must do something now". I think "we should just live it up and go out with a bang rather than suffer a slow and miserable existence."
If you don't have hope to offer, no-one will listen, like with Cassandra.
I think they couldn't understand her, because the didn't have their narrative (vernacular) right.
On the other point, I demonstrate enjoyment of a low-energy, low-consumption (by NZ standards, not by peasant standards) lifestyle. It depends what you mean by 'hope'. Hope for more material consumption? Nope, not a (collective) chance. Hope for a satisfying life, vis-a-vis social interactions, personal wellbeing? Sure, 100%.
This is the vision that needs the selling. Not just the picture painting of what people will not have, but what they will have. A la Vaclav Smil's discussion of degrowth, and how life might look more like elderly relatives' recollections of the 40s and 50s.
If we can paint a picture of what we are working towards in both lights, that at least gives a target to aim at rather than living it up now because you're probably going to be in the wrong part of the Elysium movie world.
This is the time for more austere budgets that reflect the rising costs of debt servicing. The era of low rates and inflation is over, we had more than a decade to sort out all the infrastructure, energy included. Now it's about very carefully managing what we've got.
Climate money should be focused on bang for buck:
• Electric cars
• Renewable power generation
• Replacing industrial heat.
Stay focused on those three things. They can all be solved by capital investment.
Keep the messaging on better technology and abundance. We aren’t taking your luxuries away, we are giving you better and more efficient toys. We aren’t asking to save power, we are producing more power so you can enjoy modern life.
Schools need power during the day, slap solar panels on them and it saves the schools money and helps the planet. The government can donate the panels and pay for the installation - win/win. So much more positive than talking about people giving up stuff. Productive capital, that is what we should talk about.
No - as per an above comment, it does not 'help the planet'
It harms the planet a little less (I've lived off grid for over 20 years, mostly on solar, so no anti-bias).
And it harms the planet more than passive-solar - which does not break down, is free to run, and is forever. I've lived that way for over 40 years; it's not rocket science.
Indeedy.
Minister Shaw's lack of due diligence in that case makes me really nervous when he has such a large influence on how best to move towards correctly pricing emitters.
And tripped up when the speculators gamed that auction of carbon units.
Good intentions doesn't always equal the best person for the job.
https://www.greens.org.nz/all_coal_boilers_to_be_removed_from_schools .
The amount of investment required is quite small .
I debated it with you in the comments. Your assumptions are flawed because you misunderstand the nature of innovation. You look at the status quo and see fossil fuels at every root and you ignore the potential for that to change. The abundant energy is that which comes from the sun, the cost of tapping that via different means is modifiable via technology and not fixed. Coal and oil are already more expensive than many renewables and will only get more so as we bend cost to our will.
OK - Innovation: All this can do, in energy terms, is drive efficiency(ies). We cannot create energy, we can only be more efficient in our capture, storage, transmission and use. Efficiencies are curtailed by the Laws of Thermodynamics, and Carnot (ask a physicist). So there are upper limits to every option, efficiency-wise, and as we approach them, it typically required more complexity (fuel injection and variable valve timing being prime examples).
No, the cost of any infrastructure, is dependent on the energy required to do it. This is Boolean algebra/bootstrap territory (ask a math-sy). All solar capture infrastructure is fossil-fuel built, fossil fuel delivered, fossil fuel maintained. We have NOT achieved renewable build of renewable; the reason is NOT to do with 'cost' in money terms, it is to do with cost in energy terms. Called EROEI - Energy Return on Energy Invested. My PV panels are positive EROEI - but not by much. Not by as much as a tankful of petrol or diesel; by a long mile.
That technology requires more mineral materials, than the planet contains (assuming a like-for-like energy demand), and those are requiring ever-more energy per ton, to retrieve (as we've cherry-picked the best, first). And we've not achieved renewable-driven extraction either - EROEI again.
And as Worth points out, we're out of time. We have to go with existing technology (as Lord Rees pointed out 17 years ago - just sayin') and we have perhaps 5 years. Given global contention(s), perhaps less. And inflation tells us that 'prices' have bottomed-out. Don't make the mistake of projecting the past, forward; ECOEs dip then climb in a bounded system.
https://surplusenergyeconomics.wordpress.com/2020/06/19/175-the-surplus…
Note Figure 2 in the link.
I'd stop immediately, if a valid rebuttal was mounted.
:)
https://www.resilience.org/stories/2022-02-22/dennis-meadows-on-the-50t…
We can expand off the globe.
Dennis Meadows shows that the globe does not have sufficient energy resources to cater to our expansionist nature, but then jumps to the only possible conclusion being we must change human nature and confine ourselves to the energy resources of the globe. Unfortunately this idea of changing the human nature by suppressing freedom of other people for [insert-crusade-here] is basic human nature for the power hungry and so the premise has quite the following.
The energy produced by the sun is 1 billion times larger than hits our globe. Gross solar energy available is more than enough to allow us to continually expand at our current rate for 100s of thousands of years, off globe. There is no need to accede to the demands of the power hungry or accept that billions will need to die in service of a Malthusian project.
Open your eyes and look up young man.
The author is certainly not wrong about how we've been living beyond our means by passing massive debts onto the next generations.
As a result, prior growth in prosperity per person has gone into reverse. People have been getting poorer in most Western advanced economies (AEs) since the early 2000s. With the same fate now starting to overtake emerging market (EM) countries too, global prosperity has turned down. One way of describing this process is “de-growth”.
In recent times, we’ve tried to use financial gimmickry – credit and monetary adventurism – to counter this adverse trend. Since money acts simply as a claim on economic output generated by energy, this is wholly futile, and can be likened to “trying to fix an ailing house-plant with a spanner”. We’ve been piling up financial excess claims on prosperity at a rate that guarantees a crisis in the financial system. This crisis must take the form of value destruction, which may happen through ‘hard’ defaults, ‘soft’ inflationary destruction of the value of money, or some combination of both.
Borrowing and spending is fine when the economy isn't at capacity.
However, with employment below 'sustainable' levels as defined by RBNZ all government spending does is reallocate labour from the private market into government projects and generate inflation while they are at it.
The above is extra true for the 'jobs for nature' initiative. There isn't enough labour to go round as it is.
Well that's not strictly correct, there is always enough labour it is just the mix of skills we have got wrong and this won't correct itself if we just import labour and continue churning out useless skills like baristas or marketing people.
"Borrowing and spending is fine when the economy isn't at capacity.
No, it is not. It is future energy and resources - availability thereof - which determines whether debt can be 'repaid' in meaningful terms.
If those aren't there, you are borrowing without ascertaining whether you can repay. Since 2008, so many numbers have been keystroked into the ether - we have to see a reconciliation with the real world - I suggest that's what we are seeing the beginning of.
Were you economics-trained? That'll do it...
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