- Economic fundamentals look to be in reasonable shape despite global headwinds
- The long-term benefits for the country should be significant
- There is evidence of a joined up, cross-Government approach
What's in it for me?
This is not the right question. This Budget was never going to be about 'me'. It is focused on what is in it for 'us' – it is about improving the wellbeing of all New Zealanders and particularly of those most in need.
Those most in need are the big winners and nobody is quibbling about that. It is no surprise that this Budget is full of initiatives, policies and spending on mental health, child poverty reduction and lifting outcomes for Maori and Pasifika.
If all of those initiatives and policies, and all of that spending, deliver on the promises, the long-term benefits for the country will be significant. And so, they should be given the size of the expenditure: $823 million to improve frontline mental health services, including suicide prevention; $346 million for housing the homeless; $320 million to address family and sexual violence; as well as many smaller, targeted programmes to tackle, for example, rheumatic fever and to assist 2,200 more young Pasifika into work.
Most of the wellbeing spending is tightly targeted. Very few of the new spending initiatives are universal in their application (unlike previous big-ticket items like Fees Free and the Winter Energy Payment).
In most cases the outcomes look relatively easy to measure, albeit some will need to be measured well out into the future. The focus on mental health, child poverty reduction and Maori and Pasifika outcomes are intended to be intergenerational in their effect, so this is not surprising.
There is good evidence of a joined up, cross Government approach – the best example being the programme to address domestic and sexual violence which involves no fewer than 8 Ministerial portfolios.
Siloed single portfolio behaviour is less easy to spot – the press releases have generally been made by the Government rather than individual Ministers and the Minister of Finance was flanked by 7 of his Cabinet colleagues in the Budget lock-up.
"Business should be part of the 'us'."
So, what's in this Budget for business? #WIIFB? How does Grant Robertson's second Budget address the needs and concerns of businesses large and small? How does it anticipate the Government partnering with business to improve productivity, to enable easier access to capital, to be more innovative and to grow exports?
The economic fundamentals
The most important question for business is about the economic fundamentals. They look to be in reasonable shape despite global headwinds.
The Government is projecting operating surpluses for the forecast period – growing to $6.1 billion by 2022/2023. GDP growth was 2.8% for the year to December 2018 (ahead of the OECD average) and set to average 2.6% for the next few years.
Unemployment is at 4%. Net core Crown debt is set to squeak in just under 20% in 2021/2022 meeting the Government’s self-imposed target of 20% (and smack in the middle of the new 15 – 25% range) and then tracking at just under 20% through to 2032.
Contributions to the New Zealand Super Fund continue with $9.6 billion to be made over the next five years. The Government’s child poverty reduction targets look set to track according to the plan.
There is no denying that ultimately employers will benefit from the Government's broader wellbeing initiatives directed at improving health and wellbeing outcomes and lifting people out of poverty.
Healthier and happier workforces and safer workplaces are good for business. The Government cites mental illness as costing the economy $12 billion (5% of GDP) in 2014. Currently employers bear much of the upfront and ongoing costs of supporting their staff through mental health, addiction, domestic violence and other societal problems often linked to poverty.
Better resources, more investment and wrap around services will alleviate some but not all of the costs borne by employers. The Government needs to keep its eye on the compliance and real costs faced by businesses here and provide support.
Support for workforce participation
Across the country businesses are concerned about shortages of skilled staff and productivity. There is some support in the Budget for workforce participation and apprenticeships: a $50 million boost for the Mana in Mahi programme to expand its reach from 150 to 2,000 participants. Employers involved in the programme receive a wage subsidy and the participants receive incentives to stay in work and to undertake training.
The underspend on the first year tertiary Fees Free programme is redirected to implementing changes to vocational training that are intended to address the shortage of skilled tradespeople. Higher quality better coordinated, and more effective vocational training is good for business.
The details are scant, but it is good to see the Government emphasising the need for it to work with industry groups and businesses as well as iwis and regions to achieve better vocational outcomes.
Businesses – and communities too – need this Government to up the ante on infrastructure investment. There is a $1 billion boost in funding for KiwiRail for new trains, improved tracks and ultimately new Inter-islander ferries, plus money to complete Auckland's City Rail Link.
The $1 billion boost includes $300 million from the Provincial Growth Fund for investment in regional rail initiatives. Many will be pleased to see a sizeable portion of the PGF being allocated to transport initiatives and keen to see which regions' priorities are ranked the highest.
There is some capital investment in schools and hospitals – always welcome. And the 'leaked' confirmation of the $1.7 billion to purchase the maritime patrol aircraft.
Filling the "capital gap"
In terms of access to capital there is a new $300 million venture capital fund, albeit redirecting $240 million otherwise earmarked for the New Zealand Super Fund and $60 million from the NZ Venture Investment Fund's existing assets. The funding is intended to take start-up businesses "to the next level". Will it fill the "capital gap"? It's a start.
Specific measures to support exporters are not immediately obvious.
Innovation investment is largely in initiatives (a $106 million spend) to support transition to a low carbon future. Most Kiwis support the direction of travel, but businesses would have liked more support for investment in innovation more generally.
CA ANZ coverage for Budget 2019
Expert commentary and analysis leading up to and on the day of the Budget.Read More