2017 New Zealand Budget
“The budget is not just a collection of numbers, but an expression of our values and aspirations.” Jacob Lew
The New Zealand Government released its 2017 budget on 25th May 2017. Newly minted Finance Minister Stephen Joyce presented the budget in Parliament. But in what now seems to be the new tradition most of the announcements had already been made in the weeks leading up to Budget day with the 16th of May being a particularly busy day for our ministers.
Mr Joyce says that the budget is centred on providing opportunities for all Kiwis to get ahead focussing on creating the conditions for further growth and greater prosperity for all New Zealanders. The Government has set a new medium-term fiscal target of reducing net debt to between 10 and 15 per cent of GDP by 2025 down from the expect debt of 24.3% as at 30 June 2017.
A key element of the Budget will involve investing in the public services and building the infrastructure for a growing New Zealand. "As the economy grows, we have a little more headroom to invest in better public services. However, as always, our focus will be on achieving better results, and not just tipping in more taxpayers money," Mr Joyce says.
“It is also very important to remain mindful that the money the Government spends comes from hard working Kiwi families. We remain committed to reducing the tax burden on lower and middle income earners when we have the room to do so.” Mr Joyce says the Budget will continue a relentless focus on reducing debt as a percentage of GDP.
On the 10th May, Mr Joyce announced the first 9 months results. Which is a bit of a spoiler actually. Wouldn’t you rather hear this on budget day? Corporate taxes up, GST down.
“Growing tax revenues coupled with lower than expected expenditure has resulted in the higher outturn,” Mr Joyce says as he pulled a $1.6 billion surplus rabbit from the government top hat predicted to rise to .$7.2 billion by 2021. A few weeks ago Mr Joyce announced that “Tax revenue growth has softened a little in the last month, but over the nine months tax revenue is still up 7.3 per cent compared to the same period last year. It is clear New Zealand is now one of the few developed countries currently running a fiscal surplus, and that’s a real tribute to the hard work done by all Kiwis over the last three years. These accounts show that if you have a strong economic plan and stick to it, you can achieve real progress.” One wonders if this announcement, just 1 day after the Australian budget was intended to be a dig at our not very friendly neighbours, who have a deficit of $29.4 billion in 2017-18, with budget forecasts returning to a surplus of $7.4 billion in 2020-21.Still not to be outdone, Treasury updated these figure for Budget day.
For more information you can go to http://www.treasury.govt.nz/budget/2017 for official budget information.
“It's clearly a budget. It's got a lot of numbers in it.” George W. Bush
Below is a summary of what’s what.
But first has there been a change in tax rates? No.
Has there been a change in tax rate thresholds? Yes.
The $14,000 tax threshold is raised to $22,000 resulting in an estimated $70 pa less income tax per $1,000 movement. And the $48,000 threshold moves to $52,000 with an estimated $125 pa savings in tax for every $1,000.
Has there been a change in Working for Families? Yes
Working for Families tax credit rates for children under 16 go up. But the point where tax credits start reducing kick in at a lower income level ($35,000 compared to $36,500 previously).
Has there been a change in accommodation supplements? Yes
The accommodation supplement goes up by an average $36 per week. With more areas eligible for the higher payments; for example, Queenstown, Wanaka and Tauranga, and in all Auckland suburbs, will join central Aucklanders in getting the higher payments.
Any surprises you didn’t see coming? Yes
The Government has announced it will address the black hole expenditure many businesses face when carrying out feasibility studies. Many businesses will welcome this proposal, after a recent court case closed deductibility down.
And Radio New Zealand receives $11.4 million extra operating funding over four years.
Investing in People
$321 million Social Investment Package including:
“It’s important to intervene early and target support to families and whānau whose children are at risk of poor education, health and social outcomes,” Anne Tolley, Minister for Children.
On 27 April 2017 Māori Development Minister Te Uruora Flavell announced a funding partnership between Te Puni Kōkiri and Waikato-Tainui to support employment opportunities in Waikato. $100,000 from Te Puni Kokiri on a pilot programme and a further $150,000 over two years will support a similar programme in Manukau.
$27 million for Marae and Māori housing
Minister Flavell also got another bite of the budget cherry by announcing on 8th May a $27 million spending package that will help more whānau live in safe, secure and healthy homes. This is made up of $10 million over four years allocated to help repair and restore whare and revitalise the paepae, building resilience of those charged with maintaining the protocols of marae. “Marae are places of refuge for our people and provide facilities to enable us to continue with our own way of life. Our language and tikanga are given their fullest expression on the marae at our tangi and hui”, said Mr Flavell.
The budget will also continue to build on the momentum of success generated by the Māori Housing Network – Kāinga Ora, with a further $8 million allocated in this year’s Budget and a further $9 million to the Pathways to Home-Ownership – Te Ara Mauwhare over three years to trial innovative new approaches helping whānau achieve more housing independence.
Education Minister Nikki Kaye has announced that Budget 2017 will commit $5.2 million of operating funding over the next four years to expand the innovative teacher training programme, Teach First NZ, to provide places for a further 90 participants in 2018. NB: Teach First NZ has been operational as a pilot programme since 2013 where trainee teachers are based in schools. These trainees are university graduates in subjects that are harder to staff, such as maths, science and technology, and are given a hands on teaching training. They are employed by schools as teachers while undertaking their teaching qualification. Instead of being based in universities, with some in-school experience, students participating in employment-based have their study moulded around time spent in the classroom.
Minister Kaye announced that the Ministry of Education will work with schools and communities to develop an Area Strategy for the Havelock North/Hastings area, as well as Napier if necessary. “An Area Strategy looks at the education needs in a particular location and how these will be addressed, taking into account factors such as projected population and roll growth,” says Ms Kaye. “The Area Strategy will consider medium and long term population growth, as well as how the existing network of schools could accommodate this growth. It will also consider the school property requirements needed to support a quality education network for the local community …In the Hawke’s Bay region, we’ve announced around $5.9 million for new classrooms and $19 million for school redevelopments since June 2016.”
Other announcements include:
Social Housing Minister Amy Adams announced on 16th May a Crown Building Project using Crown land and building new houses. 8,300 old, rundown houses in Auckland will be replaced with 34,000 purpose-built houses over a 10 year period. 24,300 of these will be built by Housing New Zealand through their Auckland Housing Programme. Phase one of the Auckland Housing Programme, which covers the next four years, will cost $2.23 billion and will be funded through Housing NZ’s balance sheet and new borrowing of $1.1 billion. Phase two will be funded through property sales and rental returns.
With a net gain of housing in Auckland of 25,936 Minster Adams estimated between 5,000 to 6,000 would be social housing. Meanwhile the estimated shortfall in housing in Auckland alone is currently estimated at 35,000. The construction of 100 new homes on land formerly set aside by NZTA for roading began officially on the 16th May with Minister Adams posing at the sod-turning in New North Road Mt Albert, Auckland, 50% earmarked as affordable “for Auckland”. NB: an “affordable” house in Auckland is considered under $650,000.
Over the next ten years, the Crown Building Project intends to build 13,500 social houses and 20,600 new affordable and market homes. Minister Adams stated that 95% of residential land is held privately, so the Government is only focussing on its 5% share. But are Government policies such as requiring a 40% LVR for investors encouraging private rental supply?
Meanwhile Building and Construction Minister Dr Nick Smith announced also on 16th May the Government has removed the reserve status on land surrounding Christchurch’s Riccarton Racecourse opening the way for a $300 million, 600-home development part of the Ngāi Tahu Property initiatives. “The benefits for Canterbury of freeing up this significant block of land are an increase in the supply of housing and a financial boost for the racing industry,” Dr Smith noted.
And not to be outdone, but being busy Dr Smith also managed to make a joint statement on the 16th May with Queenstown Lakes Mayor Jim Boult with Queenstown well on its way to hitting the target laid out in the Queenstown-Lakes Housing Accord of 1634 consents issued to date with six months of the original accord still to run on a target of 1750 new residential sections and homes in the three years to October 2017. The original Queenstown-Lakes Housing Accord increases the supply of housing in the district by speeding up the consenting process for developments and freeing up new areas of land for housing. A further three year accord is planned extending within the district to include areas such as Wanaka.
Investing in Infrastructure and recovery
$11 billion in new capital infrastructure over the next four Budgets, including $812 million for reinstating State Highway One, north and south of Kaikoura up from the projected spending of $3.6 billion over the same four years last year.
$2.5 million in funding over three years to help three local councils affected by the November 2016 earthquake. Plus previous announced $2.6 million funding for the Hurunui and Kaikōura councils and Environment Canterbury to manage building waste, especially asbestos and other hazardous waste. An additional $500,000 investment to fund:
Primary Industries Minister Nathan Guy announced on 18 May $26.7 million over the next three years provides matched grant funding to regional scale irrigation schemes, helping them progress through the phases of development to reach construction. Plus a further $63 million of new capital funding will support investment in the construction of regional irrigation infrastructure. Both initiatives are administered by Crown Irrigations Investment Limited (CIIL).
$548 millon in new money for the country's rail network, which includes $450 million for KiwiRail over two years and $98.4 million for Wellington's metro rail network.
Auckland's City Rail Link will also receive a boost of $436 million earmarked as the first part of the government's investment.
Investing in tourism
Tourism Minister Paula Bennett announced a new $102 million Tourism Infrastructure Fund which has been launched alongside $76 million in new funding for our most important tourism asset, the DOC Estate. “Tourism is hugely important to New Zealand. It creates jobs and brings in billions of dollars to the economy. That’s why it’s important that we keep investing so we continue to attract high-value tourists and give them an amazing visitor experience,” Mrs Bennett says. The Tourism Infrastructure Fund will provide $100 million over the next four years in partnership with local councils and other community organisations, for projects like new carparks, toilets and freedom camping facilities.
“Last year international tourism expenditure reached $14.5 billion, which is more than 20 per cent of New Zealand’s total exports of goods and services. It’s also a significant employer, generating around 188,000 jobs directly, and a further 144,000 indirectly,” Mrs Bennett says.
This $100 million fund is made up of $60.5 million in new money from Budget 2017 and $41.5 million in funds which have been reprioritised from the Tourism Growth Partnership and the Regional Mid-sized Tourism Facilities Grant Fund. Of that, $2 million over four years has been provided to manage the fund. And the $76 million DOC funding is made up of $44.6 million operating funding over four years and $31.3 million capital expenditure.
Investing in health
26th April Health Minister Jonathan Coleman announced an additional $18 million has been approved for the Christchurch Hospital Acute Services Building taking the total project to $463 million.
Pharmac’s budget has increased by $60 million to $870 million with more funding made available to subsidise new medicines and treatments. “Pharmac works within a fixed budget and looks for the best health gains for the greatest number of New Zealanders,” Dr Coleman stated when announcing the changes on 7th May. “These changes would in some cases save lives, in others they would dramatically improve the quality of life of the individual as well as their family.” At any one time, Pharmac has a list of proposals for new medicines and medical devices which medical experts have recommended as a priority for any funds that become available through savings or budget increases.
In a joint announcement Health Minister Jonathan Coleman, Associate Health Minister Peter Dunne and ACC Minister Michael Woodhouse reported that Budget 2017 will invest an additional $59.2 million over four years to have road ambulance call outs double crewed. “The Government is focused on getting patients the care they need when they need it, and our ambulance services have a key role to play in this,” Dr Coleman says. Vote Health in partnership with ACC will be funding this initative, with Vote Health committing $31.2 million with the additional $28 million coming from ACC. This cost will be met from a combination of the ACC Non-Earners’ Account, which is funded from general taxation, and from ACC levies.
Also announced on budget day is $11.6 million to help Corrections manage prisoners at risk of self harm and $224 million over four years for mental health services including for a fund to trial new addiction and mental health treatment approaches,
Investing in R & D
Science and Innovation Minister Paul Goldsmith announced an additional $74.6 million in funding through the Innovative New Zealand programme in Budget 2017 to meet the growing demand for Callaghan Innovation’s research and development (R&D) Growth Grants. “Encouraging business R&D helps high-tech, innovative Kiwi companies to bring products and ideas to the market sooner, which has significant benefit for export revenues,” says Mr Goldsmith.
Investing in the world of make believe
Budget 2017 will allocate $303.9 million to support the continuation of the New Zealand screen industry production grants, both globally and domestically, say Economic Development Minister Simon Bridges and Arts, Culture and Heritage Minister Maggie Barry. This includes $222 million over four years and $18 million in 2016/17 for the International Screen Production Grant to bring international productions to New Zealand.
Up to $63.9 million over four years remains available to ensure the domestic component of the grant continues. “Our screen industry has a reputation for being one of the best in the world and this grant helps the industry compete internationally for a wide range of projects which bring jobs and economic opportunities to New Zealand,” Mr Bridges says.
Investing in our native population (of the feathered variety)
Conservation Minister Maggie Barry says the Department of Conservation (DOC) will fight this year’s beech forest mast year increase in rat and stoat numbers for the Battle for our Birds control campaign. “The Battle for Our Birds 2017 campaign will use $21.3 million of new operating funding in the 2016/17 financial year to undertake one of the largest predator control programmes in our history, across more than 800,000 hectares of land.”
Meanwhile the fourth round of the DOC multi-million-dollar fund to support community conservation projects opened for applications on 16th May with around $4.15 million for this year (expressions of interest closes 23 June 2017). “Predator control and War on Weeds are high priorities for the Government and projects that focus on these two priorities are preferred for this year’s round, although all eligible applications will be considered.” Says Ms Barry.
Investing in our Heritage
Internal Affairs Minister Peter Dunne announced on 15th May 2017 funding of $8 million of operating funding over the next two years and $2.1 million of capital funding in the next year in Budget 2017 to safeguard New Zealand’s heritage collections and record of Government.
The funding will progress plans to increase storage capacity and resilience of Archives New Zealand’s Wellington repository. It will also advance plans for a shared Archives-National Library off-site storage facility, which will better preserve some National Library heritage collections held in older regional storage facilities.
“We need to preserve this history for future generations and this boost in funding will go a long way to ensuring that happens,” Mr Dunne said. “Our vast collections include important Government records, valuable documentary heritage, artwork, scientific data and taonga.”
Australia in comparison
On 9th May 2017 the Australian Commonwealth Treasurer Scott Morrison announced the Budget for 2017. As noted earlier, Australia has some way to go towards surplus. Some key changes:
Mr Morrison told reporters the only people facing tax increases as of 1 July would be “big banks” and multinational corporations, targeted by anti-avoidance measures. Seems he forgot the students and beneficiaries when making that statement. Meanwhile the chief executive of the Australian Bankers Association, Anna Bligh, reacted angrily to the bank levy, declaring it policy on the run. “The banks don’t have a secret stash of money,” Bligh said on Tuesday night as the markets reacted strongly to the banking announcements by dropping $14 billion in stock values.
“When completed, the budget must provide the services we have promised to our constituents.” Jane D. Hull
Posted: Thursday 25 May 2017