$9 billion more for infrastructure but debt to fall
The government will borrow $9 billion to fund infrastructure and priority areas but Finance Minister Grant Robertson made no apology for the additional loans saying that New Zealand needs to improve its public services and ‘New Zealanders want it.’
Introducing his first Budget to Parliament this afternoon, he said that the government’s fiscal policy covers the next three years and looks at the next 30 years. The vision, he said, is to have an economy, an environment and a society which are sustainable, productive and inclusive.
Rising Operating Surplus
The Budget is expected to deliver an operating surplus of $3.1 billion for 2017-2018, rising in $3.7 billion in 2018-2019, with surpluses reaching an estimated $7.3 billion by 2022.
“These surpluses allow us to reduce debt. The Budget Responsibility Rules commit us to reducing the level of net core Crown debt to 20% of GDP within five years of taking office,” Mr Robertson said.
The Treasury forecasts that net core Crown debt will reduce to 19.1% of GDP by 2021-2022, giving the economy a good buffer for issues that we are yet to see the full consequences of, such as the Mycoplasma bovis cattle disease.
Mr Robertson said that the government’s Budget Responsibility Rule is to keep public expenditure below 30% of GDP. Core Crown expenses are expected to track at about 28% of GDP each year through to 2022.
“These will be the strong foundations for our future. To transform the economy, we have to be more productive. We have to work smarter, build our skills and resilience, explore new innovations and adapt to change. We cannot continue to rely on merely increasing our population, exporting raw commodities and an overheated housing market to drive economic growth,” Mr Robertson said.
The Budget accounts for unemployment falling to 4.1% in late 2019, in line with the Government’s target of reducing unemployment to 4% by the end of this government’s current term in 2020.
Stronger-than-expected revenue is being generated from economic and employment growth. This gives us breathing space to properly consider any changes needed to our tax system.
Shifting economic settings
Mr Robertson said that the economy needs to shift its settings to meet the challenges of the future, including productivity, making a just transition to a more sustainable low carbon economy, and adapting to a rapidly changing world of work.
“The Government is determined to ride the leading edge of these waves of change. If we are to stay ahead, we know we need a good plan, and we need to work together as a country.
“Our priorities are different from the previous government. We are determined to turn the page on the ideology of individualism and a hands-off approach to our economy that has left too many people behind,” he said.
Supporting low-income groups
From July 1 this year, the Best Start payment of $60 per week will begin for every new-born child in their first year and will continue for many thousands in their second and third years.
Also on the July 1, the Winter Energy Payment begins, helping superannuitants and those on main benefits meet their heating costs by providing $450 for a single person or $700 per couple. The minimum wage rose to $16.50 an hour from April, and this will rise in phases to $20 an hour by 2021.
Paid parental leave has been extended, rising from 18 weeks, to 22 and then to 26 weeks by 2020; The KiwiBuild programme has been established to deliver affordable housing; The Healthy Homes Guarantee Act has been passed to ensure that all rentals are warm and dry;
We restarted payments into the NZ Superannuation Fund, after no government contributions had been made since 2009; We have fully funded the first year of our fees-free post-school education and training policy; and We introduced the Prime Minister’s Child Poverty Reduction Bill to set the targets and measures for making a significant and sustained drop in child poverty.
“Transformation takes time. It cannot happen all at once. One Budget cannot instantly fix nine years of complacency and neglect. We have to balance our ambitious goals with our responsibility for fiscal sustainability,” Mr Robertson said.
Images from The Treasury Website.