Date posted: 20/05/2021

NZ Budget 2021 – The CA ANZ Scorecard

Budget 2021 was a winner for welfare but contained slim pickings for businesses.

in Brief

  • The Government scored reasonably well against three of our five measures
  • The economic outlook provided by the Minister of Finance was cautiously optimistic
  • Budget 2021 was a winner for welfare, but contained slim pickings for business

We identified five areas of focus for Wellbeing Budget 2021 – Grant Robertson’s fourth budget, and his first free from the shackles of previous coalition partner New Zealand First. How has the Minister of Finance measured up against our expectations in his Securing Our Recovery budget?

Our policy principles scorecard shows that Government scores well against some of our key metrics, with room for improvement against others. Against the backdrop of stronger than expected economic recovery, the Budget seeks to strike a careful balance between government-led efforts to support and stimulate the economy, and careful spending to rein in debt and retain a buffer in case of a rainy day.

As with Budget 2020, there is little in the way of direct support for business. However, the increased spending on welfare, health, education and infrastructure, aimed at addressing long term and often entrenched issues, will stimulate spending across the economy which will indirectly benefit business and help bolster employment.

Read on for our scorecard and commentary on the Government’s Securing Our Recovery budget.

Agile and bold ✔ and X

The benefit boosts were the headline item of the Budget, and heralded as a bold initiative, returning New Zealand to the pre-1991 benefit levels undone by the “Mother of all budgets” in that year. The two stepped increase to benefits is bold – they will lift all benefit rates by between $32 and $55 per week in line with recommendations by the Welfare Expert Advisory Group. Most other spending was pre-signalled.

In his pre-Budget speech to business leaders last week, the Minister of Finance was clear that the Government’s existing commitments to substantial health reforms; a wholesale review of the immigration system, significant changes in education, the replacement of the Resource Management Act, and the Three Waters Reform Programme left it with little capacity for any further reforms of note.

Clear and measurable targets ✔ and X

New Zealand’s vaccination rate is front and centre of the Government’s health work plan. $1.4 billion of the $50 billion COVID Response and Recovery Fund has been allocated over two years for the vaccine roll-out, with a billion of that going towards the purchase of the vaccinations themselves. This allocation is to ensure all New Zealanders can get vaccinated against COVID-19 for free. Despite the roll-out of the vaccination running slightly ahead of schedule, only 6.43% of the population has so far received one dose – and New Zealand is ranked 112th in the world in terms of vaccine rollout.

A successful vaccination programme is a crucial first step in the opening of New Zealand’s borders and our economic recovery. The Government needs to get this one right. Milestones in achieving the target must be measured and the plan adjusted as soon as there is any slippage. Transparency is key to retaining public trust.

Clear framework for measuring outcomes X

Budget 2021 further reinforces the intention for the ‘recovery for all’ to be government-led. An additional $15.1 has been set aside for investment in infrastructure over the next four years bringing the 2021-2025 allocation to $57.3 billion, $810 million has been allocated to Kiwirail for maintenance and for the purchase of new locomotives and wagons, $634.1 million has been allocated towards investment in school property and $700 million towards new assets for District Health Boards.

These significant taxpayer-funded projects must be subject to clear and measurable targets covering short, medium and long-term milestones as well as consideration of both the benefits to, and obligations placed on, businesses and employers. Given the significance of the government-led recovery, where relevant, it is crucial that measures are introduced to ensure that the quality of expenditure is measured and maintained. The stakes are high, and the wellbeing of current and future generations of New Zealanders rides on the Government making good quality decisions now.

Support for business X

Budget 2021 contains slim pickings for business in the form of direct support or incentives or initiatives. Business would have welcomed more support, including those outside the worst-affected sectors such as tourism and hospitality. However, many businesses will benefit as the money flows through to them from the targeted Budget spending focused on boosting benefits, infrastructure investment, health and education spending.

The additional $44 million investment in the Digital Boost Program and advisory services, aimed at digitally upskilling SMEs, will be welcomed by businesses that are able to access it. However, this funding is only expected to assist up to 30,000 of New Zealand’s 530,000 small and medium-sized businesses. The Government has fallen short on supporting small businesses to improve their digital capability.

A wellbeing focus will have positive implications for New Zealand’s businesses and workforce, but the Budget lacks a clear acknowledgement of the important role of business in advancing this priority.

Government commitment to its promises ✔

The Government, like many before it, hasn’t always stuck to its promises. However, for Budget 2021 the Government held to its word on most if not all fronts. The promise to continue to keep New Zealand safe from COVID-19 is addressed by the $1.4 billion allocated to the COVID-19 vaccination program. The commitment to an accelerated recovery and rebuild, the number one focus of our members in our pre-Budget survey, was addressed through the large commitments to spend on infrastructure.

As promised, debt and deficits remain under control with net core Crown debt forecast to peak at 48% of GDP in 2023, impressive by global standards. As is the forecast return to surplus projected for 2027. In addition, the $300 million commitment to recapitalise NZ green investment fund along with the pre-Budget allocation of $67.4 over four years for the Carbon Neutral Government Program reiterates Public Sector commitment to carbon neutrality and the Government’s commitment to a sustainable economic recovery.

NZ Budget 2021

Read more of what the CA ANZ advocacy experts say about the NZ Budget.

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