ANALYSIS: Just a week out from the Budget, Finance Minister Grant Robertson will deliver his second major budget speech.

He is expected to answer a question that’s been hovering over the Government since last week’s surprise austerian turn: how bad is it going to get?

Attacked from the left as a Scrooge and from the right as a spendthrift, Monday’s speech should settle the matter by giving an indication of just how big (or small) next Thursday’s budget will actually be.

It’s likely to give us an update on the size of the operating allowance – that’s the money set aside for new spending this budget – and possibly the Government’s debt track. Those numbers will tell us how much Robertson plans to spend and how much he's prepared to borrow for it.

Robertson has been billing the budget as “balanced”, a term which could mean anything apart from what it literally means. A balanced budget in financial argot means that revenue – what the government gets in taxes and other income – matches up with expenditure.

With the economic recovery from Covid-19 leading to both decreased revenue and increased spending, this budget certainly won’t be balanced in the literal sense. Revenue will, for the next few years, be well below expenditure.

Instead, Robertson intends to balance the budget politically: responding to perennial calls on government money while keeping equally perennial fears over increased government spending in check.

The starting point to the Budget was published in the Budget Policy Statement earlier this year, in which Robertson kept to Labour’s election promise of operating allowances of $2.625 billion.

For all the talk of austerity, that’s still $800 million more than National had in its 2017 budget ($1.8b), which was delivered in an election year in the midst of an economic recovery.

However, it's still short of the amount of new spending in recent Labour budgets. Robertson has a habit of finding an extra few hundred million down the back of the couch ahead of budget time. Budget 2019 topped up the allowances for that year to $3.8b, and set the allowance for Budget 2020 at $3b.

There's every chance he may pull the same trick in this budget and top up the allowance.

Stuff understands that Monday’s speech might not include a fixed number, but Robertson will give an update on where the allowance is heading.

While it might have been unthinkable that a Labour finance minister would trim operating allowances from what had been promised, Labour’s recent pitch towards performative austerity with last week’s effective pay freeze on many public sector workers was a shock and has led to some quiet speculation that Robertson might even prune back the operating allowances in a show of fiscal prudence.

However, given Robertson promised the current allowance in his party’s fiscal plan at the election, it’s highly unlikely that he’d cut that spending back. To do so would be to break an election promise, a backflip with a cost in political capital hardly worth the relatively modest fiscal savings.

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It’s still not clear what Robertson planned to achieve with the pay freeze. No one knows how much money the freeze will save – most people think not much – but the fact that it was billed as a debt reduction measure is telling. The freeze, if it reduces debt at all, will only do so marginally. Claiming it as a debt- reduction measure when it manifestly isn’t is pure politics, but if voters see through the Government’s performative parsimony it risks undermining labour’s hard-won fiscal credibility.

Ironically, the freeze came against the backdrop of yet another month of rosy Crown accounts. Every single month since the election the accounts have come back better than forecast, showing the country to be enjoying a relatively affordable pandemic.

That rosier economic picture would give Robertson every reason to increase the operating allowance – to $3b, say. However, Robertson has been clear for months that improved forecasts mean less money to borrow rather than more money to spend.

The budget will also include Treasury’s latest set of forecasts, the first substantively new numbers since December. The forecasts will show the size of Crown deficits in the decade to come, as well as the level of Government debt.

Ordinarily, the Government would be obliged by the Public Finance Act to set a debt target. However, the Act has an out that allows finance ministers, in the middle of a crisis, to borrow up large and only promise to eventually return to sustainable debt levels over the long term.

Those on the left hoping Robertson would use that out to trigger a paradigm shift in the way we think about public debt will be disappointed. While we’re probably unlikely to get a numeric target any time soon, Robertson will want to chart a path to lower debt levels in future.

This budget, of all budgets, is destined to be boring. Labour is soaring in the polls and election is just under three years away – there’s no need to splash the cash.

It’s also worth thinking about the audience for this budget. While it will be delivered to a room of business leaders, it’s also destined to be heard by executives of every ministry in Wellington. As the first budget of the current term, Robertson may want to set expectations in the public service, and let Wellington know there’s no magic money tree growing in Labour’s garden.

He’ll want to cauterise issues like housing. The emergency housing crisis is a fiscal crisis as well as a social and moral one, and it’s a crisis that will hurt Labour if it’s not solved quickly.

But these calls on spending will be balanced by a desire to save for a rainy day – that rainy day that comes around Budget time 2023, election year.