Historically, the first budget of a third term starts to lay the groundwork for the government’s legacy. With popularity remaining high, it is also an opportunity to deal with issues with an eye on the 2017 election.
So it proved when Finance Minister Bill English introduced his Budget for 2015 to Parliament on May 21.
On the face of it, this budget continues to progress the four priorities of the National-led government, which have consistently opened Minister English’s budget policy statements: (a) Responsibly manage the government’s finances (b) Building a more productive and competitive economy (c) Delivering better public services within tight financial constraints, and (d) Rebuilding Christchurch.
There will be short-term focus on matters like the property taxes, reduction in ACC levies releasing welcome cash flow to businesses and households, and continued health and education spend. There is also significant initiative towards addressing housing supply, especially in Auckland.
The continued focus on careful financial management in this Budget has not meant a lack of social interventions. While continuing to avoid tax-based solutions to problems linked with social inequality, Budget 2015 continues National’s approach to social intervention based on ‘what is good for New Zealand’s people, is good for the Government’s books.’ The increased spend on vulnerable families, early childhood education and Children’s Action Plan represent this approach of investing now for better future outcomes.
The move to address the economic situation for low-income families is welcome and perhaps overdue.
The fiscal disciplines imposed by the Government are demonstrated by the fact that benefit increases have been delivered in a Budget after a general election and not as a vote-seeking promise.
Doubtless, the Government will also argue that the quid pro quo of increased work seeking expectations, and removal of the KiwiSaver kick-start incentive, are ‘tough love’ to help fund the modest benefit increases.
From a business perspective, the Business Growth Agenda and continuing focus on long term, meaningful strategic and challenging targets for the economy means there are few real surprises in Budget 2015.
Contrasting with Australia’s unashamed stimulus package for small business, New Zealand’s approach is very much about a predictable environment and reducing red tape and cost. The R&D funding is confirmed, as is the framework for future efficiencies in dealing with Government.
Big picture though, New Zealand is at a turning point.
Over the last few decades, commodity industries and innovations have laid the foundation for an economy that has robustly weathered global financial turbulence and an earthquake event of far-reaching impact.
To take us forward over the next 30 years, we need a diversification of the economy and to raise the value chain in knowledge or technology industries. The challenge this represents should not be underestimated.
It is pleasing then to see the government looking ahead in this way, with a view to laying the framework for this change to enable a prosperous future.
Where the jury is out is ensuring that the change and impacts of it does not leave any elements of society behind.
KPMG believes that it is incumbent on business to assist this change process.
The way forward
In a nutshell, what got New Zealand to 2015 will not get us there in 2030.
A change in approach to issues of prosperity, Government interventions and making social outcomes (and not merely spending) a priority, are things that need a rethink.
The change to ‘social investment,’ and the Business Growth Agenda with its big picture aspirations and challenging paradigms are the beginnings of the framework to address the challenges the future will bring for this nation.
Budget 2015 is well balanced, yet challenging fiscal framework.
Ross Buckley is Executive Chairman of KPMG New Zealand, which is the Sponsor of the ‘Best Accountant of the Year’ Category of the Indian Newslink Indian Business Awards 2015.