By Frank Newman on 9th June 2019
Here are some key observations from Budget 2019.
Government spending is expected to increase $25 billion over the next four years. This year’s surplus of $3 billion is expected to fall to $1.3 billion next year.
Crown debt is expected to be $5 billion more than had been forecast in December. However debt as a percentage of GDP is expected to remain at or below 20% of GDP. Essentially the government is banking on the economy growing an average 2.5% p.a. to fund increased social spending.
Treasury has based the expected growth forecast on continued immigration-led population growth, increased government spending, easing monetary policy, and growth in the economies of our trading partners. Concerns about Treasury’s forecasts have been raised by a number of economists.
In a pre-Budget speech, The Minister of Finance announced that from 2022 the Government would relax its debt target from 20% to a range of between 15-25% of GDP.
Big ticket items in this year’s Budget include $1.9 billion for mental health and addiction support. Of the new money for mental health, $455m will go to boosting front-line staff to assist those with low to mid level mental health problems.
$1 billion for KiwiRail, mostly for new locomotives and work to tracks.
Education got some attention, although at the margins. From 2020, decile 1-7 schools will get a $150 per student payment from the Government in lieu of ‘voluntary’ donations, at a cost of $266m over four years. NCEA fees are to be scrapped.
In the welfare area, benefits are to be indexed to the average wage instead of inflation. The difference is expected to add between $10 and $17 a week to benefits by 2023. The cost is $320m over four years.
On the business front, the building a productive nation well-being received $300m in the form of new venture capital funding – $240m from the government and $60m from the NZ Venture Investment Fund. The NZVIF was established by the New Zealand Government in 2002 “to build a vibrant early stage investment market in New Zealand”. It currently has $245m under management. Funds are invested through privately managed venture capital funds.
The Mana in Mahi (strength in work) apprenticeship scheme has received a $50m funding boost to place a further 1,850 individuals into the scheme. The scheme was launched in August 2018 to give employers funding to support, hire, and train 18-24 year olds. To date it has placed 150 individuals.
Absent from the Budget was KiwiBuild. It received no new funding and did not get a mention at all in the Finance Minister’s speech. A policy “reset” has yet to be announced.
So no transformational changes for the business sector.