This, as former Australian Prime Minister Paul Keating might have said, was a budget that brought home the bacon.
It was a relentlessly political document with its emphasis on beneficiaries and Maori paying off core elements of Labour’s support base.`
The politics was evident in Finance Minister Grant Robertson’s speech — which apparently he wrote himself — nothing that it was the 30th anniversary of National’s 1991 “Mother of All Budgets.”
“On this 30th anniversary of that Budget, our Government is undoing some of the damage done all those decades ago,” Robertson said in the Budget speech.
“Today, we address the most inequitable of the changes made 30 years ago. “
That indicates what the Budget is all about but it also points to what it is not.
Apart from some indications about the future economic management of climate change adaptation, this is a Budget short on sweeping economic reform.
Pressing issues like low productivity do not get specifically addressed though the Training Incentive Allowance gets a boost.
Instead it is all about benefits and Maori.
The key points:
- Weekly benefit rates lifted by between $32 and $55 per adult, in line with a key recommendation from the Welfare Expert Advisory Group (WEAG).
- In total, 109,000 families and whānau with children will be, on average, $175 a week better off as a result of changes made by the Government since 2017.
- Student living support will increase by $25 per week on 1 April 2022.
- $380 million delivering about 1,000 new homes for Māori including papakāinga housing, repairs to about 700 Māori-owned homes and expanding support services.
- $242.8 million for Māori health initiatives, including setting up the new Māori Health Authority.
- $150 million in Māori Education to support Māori boarding schools and lift kōhanga reo teachers’ pay.
- $42 million to build a sustainable Māori media sector and invest in programme content. • $15 million for Māori tourism.
- $14.8 million for the implementation of the Māori language strategy.
This is not a Budget which focusses on the macro economy; GDP growth at 5.0 per cent this year is a peak; otherwise it tapers off to 2.4 per cent by 2025.
But translated into real GDP per capita figures, the outlook is a little rosier; possibly because population numbers are not expected to climb at their pre-Covid rate.
Those figures show the annual Real GDP/capita rise at 4.4 per cent in 2023 — then tapering off to 2.9 per cent in 2025.
Alongside that the Budget Economic and Fiscal Update is forecasting annual hourly wage increase to actually rise between 2023 and 2025 to 3.0 per cent.
Unemployment is forecast to peak this year at 5.2 per cent — a forecast that would seem overly pessimistic — but to drop to 4.2 per cent by 2025.
There are some pointers to the future, particularly on climate change.
- $300 million to accelerate investment in low-carbon technology
- $67.4 million to implement the Carbon Neutral Government Programme, including a significant boost of $19.5 million to the successful State Sector Decarbonisation Fund, and $41.8 million for leasing low-emissions vehicles
- $19.7 million to support the Government’s policy response to the Climate Change Commission’s final advice
- Commitment to recycle future Emissions Trading Scheme (ETS) revenue to achieve more emissions reductions from Budget 2022
The move to hypothecate the ETS revenue would see between $600 and $700 million available for climate change adaptation measures. Revenue will depend on the ETS unit price.
Robertson has already made the point that the public sector is stretched with the scale of the reforms already proposed by the Government.
Some idea of the scale of the reforms comes with the sums set aside to begin implementing them.
$486 million has been set aside to begin the transition to Health NZ and health reforms and $242.8 million for Māori health initiatives, including setting up the new Māori Health Authority.
Meanwhile District Health Boards are to get an additional $675 million more a year, as well as $700 million over four years for capital projects.”
However that will need to be set against a projected aggregate deficit for the boards of around $650 million for the 20/21 year.
The Three Waters programme gets a further $296 million to fund the costs of the creation of new entities.
“The Government is committed to water remaining in public ownership, with local authorities, communities, iwi and others playing a central role,’ said Robertson.
There is also a substantial increase in the Government’s overall capital allowance which Robertson said would mostly be directed to infrastructure.
“At the beginning of this Parliamentary term we already had $42.2 billion on the books for infrastructure investment over the next four years,” he said.
“Budget 2021 lifts that investment to $57.3 billion of Crown spending on infrastructure from 2021 to 2025.”
The Government is also increasing the multi-year capital allowance from $8 billion to $12 billion over the forecast period. Budget 2021 will invest $3.9 billion of that $12 billion allowance including:
- $810 million for KiwiRail to purchase new locomotives and wagons and complete upgrades to mechanical facilities, as well as invest in maintenance of its existing assets such as locomotives, wagons, ferries, and IT.
- $761 million of capital for Education including $634.1 million for school property.
- $700 million for District Health Boards to invest in new assets.
- $306 million to support the much-needed redevelopment of Scott Base to ensure it remains operational.
- $300 million of additional capital for New Zealand Green Investment Finance Ltd to continue to invest in climate change mitigation.
$4.5 billion per year is also invested in transport services and infrastructure through the National Land Transport Fund, which comes from petrol excise duty and road user charges. It funds public transport, roads, cycle ways, rail and safety improvements all over Aotearoa New Zealand..
There is an allocation of $131.8 million for the design, enactment, transition, and initial implementation of the Resource Management Act reforms through to mid-2024.
The big Budget numbers show deficit forecasts in billions as
Debt to GDP ratios will be:
|Debt to GDP ratio|
Robertson was at some pains at his media presentation to point to the anomaly in the New Zealand debt ratio calculation which excludes the NZ Super Fund as a Government asset; had that been done so, he said, the debt ratio would be nearer 25 per cent.
But this is a political Budget. It answers the question from many of Labour’s core supporters about whether the Ardern Government could be transformational.
Robertson has continually stressed that it is only the first of a set of three before the next election; expect the next two budgets to be much more focussed on climate change and the macro economy.