- Housing was a focus, with NZ$3.8 billion allocated to infrastructure support
- Members have been vocal about the lack of consultation
- No real mindfulness and deep understanding of the burdens businesses face
Last year New Zealand elected a Labour Government. On 20 May, the country got a Labour Budget, or at least one delivered by a 21st century Labour Government that delicately balances increased spending and fiscal discipline.
Earlier in May, the Australian Government delivered a pre-election Budget focused on stability and recovery.
The messaging in New Zealand's mid-election cycle Budget was heavy on "investment", but, as we highlighted before the Budget, we have concerns about the level of discipline being applied to some of this spending.
We would like to have seen clearer and more robust frameworks for measuring outcomes.
As pointed out in our Budget day coverage, there were "slim pickings" for business in the form of direct support or incentives or initiatives. This was not surprising given the level of support provided to businesses affected by COVID-19 in 2020 and the obvious need to make major investments in health and social assistance this year.
The NZ$44 million earmarked to digitally upskill SMEs through the Digital Boost Program and advisory services is expected to help up to 30,000 businesses, or less than 6% of New Zealand's 530,000 SMEs.
"A bold, agile and successful vaccination program is a crucial first step in economic recovery."
Not clear is how open the Government is to hearing alternative views. Members have been vocal about the lack of consultation on the phase-out of interest deductions on residential property.
Only limited components of that package are up for public consultation, which is disappointing given that the reforms go to the heart of fundamental principles underlying the tax system.
Nor was there any indication in the Budget of real mindfulness and deep understanding of the burdens that fall on business and employers and the challenges that they are currently facing. Skill shortages continue to plague many sectors, including our own.
The increased spending on welfare, health, education and infrastructure will stimulate spending across the economy, with the benefits flowing through to businesses.
The attention-grabbing Budget announcement was the increase to benefits of between NZ$32 and NZ$55 per adult per week by April next year. This is expected to lift another 33,000 children out of poverty. Overall, the boost to benefits will cost NZ$3.3 billion over four years.
As expected, housing was a focus with NZ$3.8 billion allocated to infrastructure needed to help make land build-ready – the number one issue identified by local councils and developers.
Another big winner was the health sector with District Health Boards receiving NZ$2.7 billion of new funding to help overcome cost and volume pressures.
This spending targeted some long-standing and growing needs and was balanced – as the Government planned – with a projection that the Budget deficit will fall from 5.3% of GDP to 0.6% in 2025 with a return to surplus in 2027.
Continuing the Budget's cautiously optimistic tone – the pandemic was frequently referenced – is the forecast for GDP growth to rise to from 2.9% this year to 4.4% in 2023. Exports are forecast to grow, on average, by 5.8% over the next four years.
Business investment is forecast to grow at nearly 6% a year.
Treasury projections of low inflation, low unemployment, much lower house price rises and open borders have been called 'heroic'. At the very least they seem optimistic.
Ahead of the Budget, Chartered Accountants Australia and New Zealand suggested we needed a fiscal plan that proved the Government was capable of both agility and boldness.
In particular, we were looking to see these attributes to the fore in a drive to vaccinate Kiwis at speed to lead an economic recovery and open our borders. A bold, agile and successful vaccination program is a crucial first step in economic recovery.
Just under NZ$1.5 billion was allocated to the COVID-19 vaccine and immunisation program, including about NZ$1 billion for advanced purchase agreements for vaccines.
More than a year ago we saw the Government acting with great agility and boldness with the rollout of the wage subsidy. Now we need to see a similar commitment from Government to the vaccine program.
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NZ Budget 2021
Read more of what the CA ANZ advocacy experts say about the NZ Budget.Read more