After two years of zero budgets, Finance Minister Bill English has opened up the kitty with $800 million of new spending for the next financial year.
However, it is once again a relatively boring budget, without too many financial fireworks, although English hit out at expectations of splashy spending.
“New Zealanders were conditioned in the 2000s to believe that Budgets should be about the novelty of new, expensive spending programmes that held out promises of economic and social transformation, arranged by the Government,” English said in his speech.
“Those promises were illusory. There was no sustainable revenue stream to pay for the increased spending, and there was nothing genuinely transformational to show for it.”
English said Budgets should be about “careful stewardship of public money”.
So boring is the name of the game. Happily, the Government is currently on track to post a surplus in 2014/15 and reduce government debt to 20 percent of GDP by 2020.
The surplus will come from tax revenue picking up and the Government continuing to restrict growth in expenses, said English, but it was not dependent on the Mighty River Power share sale.
Proceeds from last week’s Mighty River Power float will be placed in the Future Investment Fund, which will be used to pay for new public assets, across health, infrastructure, education and the Christchurch rebuild. $1.5 billion from the Fund will be allocated: $426 million will go towards redeveloping Christchurch and Burwood Hospitals, $94 million for the fourth year of KiwiRail’s turnaround plan, $80 million to invest in irrigation infrastructure, and $50 million to speed up the School Network Upgrade Project.
The Christchurch and Burwood Hospital project will be the biggest building project in the history of our public health system.
The biggest focus is finding a way to control the property market, which is considered to be in dangerous bubble territory. The Budget measures aren't so much focused on helping first home buyers but rather look at halting a runaway housing market and making sure it doesn’t interfere with the positive momentum of the economy.
The Government will be introducing legislation to speed up the provision of new housing in areas where pressure is greatest and housing is least affordable. The legislation will apply for three years and is “an immediate response to housing pressures in areas facing severe affordability problems”.
Funding of $100 million over three years has been provided for the Healthy Homes insulation programme, targeting low-income households with children or high health needs. It’s expected the programme will see around 46,000 additional houses insulated, while $21 million has been provided over the next four years for rheumatic fever prevention.
There’s another $1.5 million for budgeting services for low-income families, and the Government is exploring a ‘warrant of fitness’ programme for social housing, as well as a low or no-interest loan scheme for low-income borrowers.
A new initiative is the $100 million-a-year internationally focused growth package, which includes a $200 million boost in funding over four years for science, innovation and research. That includes a tax break for R&D for start-up businesses. (Read tech editor Sim Ahmed's take on it here.)
Investment in education will increase next year to more than $9.7 billion, with new operating funding of $172 million to early childhood education, $215 million for schools and $80 million for operations grants over the next four years. There will also be $6 million for a new mentoring programme to help “vulnerable” students achieve NCEA Level 2.
Tertiary funding will see $130 of new investment and “reprioritised funding” over the next four years. That includes more money for Maori and Pasifika trades training, to boost science and engineering courses, and increase the proportion of young people with higher level qualifications.
Student allowance costs are in the crosshairs; those aged 40 and over will be restricted to 120 weeks of student allowances, while those over 65 won’t be able to get an allowance at all.
Frontline officers in the Police will be given smartphones and tablets, so they can deal with issues on the street without having to return to the station to do paperwork; $160 million is allocated to this over “a number of years”.
The Canterbury rebuild is also a huge focus, with an additional $2.1 billion of operating and capital spending to support the rebuild. More than $900 million of this will come from the Future Investment Fund, and another $300 million will be allocated to “anchor projects” for the Christchurch CBD. Another $650 million of additional capital funding from departmental balance sheets will be used for health and education projects in the area.
Contributions to the Super Fund will be delayed an additional two years, while ACC levies will be reduced. (Read more on those tweaks here.)
The Government will put the House into urgency tonight in order to pass Budget-related legislation; it is likely to sit tomorrow and Saturday.
“New Zealand is on the right track,” English concluded. “The Government’s books are the envy of most developed countries. I’m confident we will grasp those opportunities and keep building the brighter future New Zealanders deserve.”
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