2017 Mini Budget Special, 14 December 2017

2017 Mini Budget Special, 14 December 2017

 The new Labour led Coalition Government, along with its in-Cabinet coalition party New Zealand First, and outside-Cabinet coalition party, the Green’s, have certainly made a dash for the first 100 days in Government – and they are half way through.  While, I personally consider a 100 day target a bit of a construct used in management and political speak to show that “We are doing something important”, we have seen a surge of policy announcements leading into Christmas.  And this mini budget special, delivered by Finance Minister Grant Robertson on 14 December 2017 continues in that vein.

Finance Minister Grant Robertson stated that the Government’s policy programme will deliver a stable and growing economy which is fair for all New Zealanders.  “The Budget Policy Statement (BPS) released today sets out our agenda to build a sustainable and productive economy that shares the benefits of prosperity with all New Zealanders.  We will fix New Zealand’s social and infrastructure deficits by investing in families, education, health, housing and our regions.”

Delivering greater fairness with prosperity

The Government is delivering on its commitment to manage New Zealand’s finances responsibly while ensuring the dividends of economic growth are more fairly shared, says Prime Minister Jacinda Ardern.  “We promised we would be a Government of change.  Together with our coalition partner, New Zealand First and our confidence and supply partner, the Green Party, we have made a clear choice to put the wellbeing of all New Zealanders firmly at the heart of what we do.  “Today’s Budget Policy Statement and our 100-Day Plan announcements are proof that the Government I lead will be different, one that will lead the country in a new, positive and inclusive direction.” 

The following is the Executive Summary of the Government’s Budget Policy Statement (BPS)

“Executive Summary

This Budget Policy Statement (BPS) is the new Government's first action in preparing Budget 2018. It sets the broad fiscal parameters within which details for the Budget will be determined and states the Government's priorities for the Budget. The BPS also summarises the Treasury's updated economic and fiscal forecasts based on current prospects and policies, as set out in the Half Year Economic and Fiscal Update (Half Year Update).

The Government will lift the incomes of families to reduce child poverty, protect the environment, create more jobs and build more affordable houses, while running surpluses and reducing net debt. We are committed to building a strong economy, to being fiscally responsible and to providing certainty to the public and markets. There will be a clear focus on sustainable economic development, supporting regional economies, increasing exports, lifting wages and reducing inequality.

This BPS reaffirms our commitment to operate within the Government's Budget Responsibility Rules. These rules include running sustainable operating surpluses across the economic cycle, reducing net debt to 20 per cent of GDP within five years of taking office and keeping government expenditure as a percentage of GDP in line with historic trends.

The BPS confirms operating allowances of $2.6 billion per year in Budget 2018 and $1.875 billion per year in Budgets 2019 to 2021. Capital allowances have been set at $3.4 billion for Budgets 2018 and 2019, $3.1 billion for Budget 2020 and $2.7 billion for Budget 2021. Major investments will be made in housing, health, education, police and infrastructure to address the social and infrastructure deficits that have emerged in New Zealand.

The operating balance before gains and losses is expected to be in surplus of $2.5 billion in 2017/18 (0.9 per cent of GDP), rising to $8.8 billion in 2021/22 (2.5 per cent of GDP). These surpluses help ensure net core Crown debt reduces to 19.3 per cent of GDP in 2021/22.”

The Government also provided more detail on their Families Package

“The Families Package will provide targeted assistance to improve incomes for low- and middle-income families with children. It is part of the Government’s focus on reducing child poverty, and ensuring children get the best start in life.  The Families Package will:

  • boost the incomes of low- and middle-income families with children by increasing the Family Tax Credit and raising the Working for Families abatement threshold
  • introduce a Best Start tax credit to help families with costs in a child’s early years
  • introduce a Winter Energy Payment to help older New Zealanders and many of our poorest families heat their homes over winter
  • increase the rate of Orphan’s Benefit, Unsupported Child’s Benefit and Foster Care Allowance by $20.31 per week
  • increase paid parental leave to 26 weeks
  • reinstate the Independent Earner Tax Credit
  • implement the Accommodation Supplement and Accommodation Benefit increases announced in Budget 2017
  • repeal the tax cuts and changes to Working for Families announced in Budget 2017.”

NZ Superannuation Fund - The Government has announced it is resuming contributions to the New Zealand Superannuation Fund.  “We will restart contributions to the Super Fund tomorrow (15th December 2017), fulfilling our promise to New Zealanders,” says Finance Minister Grant Robertson.  “Restarting contributions is projected to increase the size of the Fund to over $63 billion by 2022/23 and will help protect the Government’s ability to pay New Zealand Superannuation at age 65.”

Housing New Zealanders - The Government’s KiwiBuild initiative will deliver 100,000 affordable houses over the next 10 years, giving hope to first-home buyers and addressing New Zealand’s housing crisis, Minister of Housing and Urban Development Phil Twyford reported today (14th December).  Treasury forecasts show that KiwiBuild will boost residential construction investment by 10 per cent by 2022.  “The latest forecast in the Half Year Economic and Fiscal Update shows an extra $5.4 billion of residential construction investment will take place over the next four financial years, largely as a consequence of KiwiBuild,” Phil Twyford says.

Further information can be obtained from www.treasury.govt.nz and www.budget.govt.nz/

Budget responsibility rules

“We must consult our means rather than our wishes.” ― George Washington

On 11 December 2017 Mr Robertson gave a speech to the Auckland Chamber of Commerce.  He stated the Government had developed and were committed to the following Budget Responsibility Rules, which he reaffirmed in his mini-budget speech to Parliament on 14th December 2017.  These are:

  • delivering a sustainable operating surplus across the economic cycle
  • reducing the level of net core Crown debt to 20% of GDP within five years of taking office
  • prioritising investments to address the long-term financial and sustainability challenges facing New Zealand, such as restarting contributions to the New Zealand Superannuation Fund, and investing in the infrastructure required to support a growing population and reducing the risks posed by climate change, and
  • maintaining Government expenditure within the recent historical range of spending to GDP, which has averaged around 30% over the last 20 years.

Previous announcements

Below is a brief (relatively brief) recap of other some other activity and announcements post-election (some from election promises, some from coalition negotiations) – for a full list of media releases go to www.beehive.govt.nz.  For want of space and time, not all announcements have been included.

  • Foreign speculators house ban - Legislation to ban overseas speculators from buying New Zealand homes will be introduced into Parliament 14th December, Housing and Urban Development Minister Phil Twyford and Land Information Minister Eugenie Sage announced on 13th December.  This follows on from the statement by  Prime Minister Jacinda Ardern (31 October 2017), “We expect legislation to be introduced before Christmas and take effect immediately once passed early in 2018.”  The legislation will be via an amendment to the Overseas Investment Act to classify residential housing as “sensitive”.  This means non-residents and non-citizens cannot purchase existing residential dwellings.  Australians will be exempt (as New Zealanders are in Australia).  It appears that the rule change will not affect “new housing” also consistent with Australian rules, where overseas buyers can purchase bare land and build residential property for on-sale, or buy existing residential property for demolition and rebuilding of more residential houses (i.e. they must build more).  The Christchurch Press reported on 14th December 2017 that there would be qualifying criteria for non-citizens e.g., those holding a residency visa and living in New Zealand will have further requirements to be met. 
  • Tax Working Group Terms of Reference announced – 23rd November.  Finance Minister Grant Robertson and Revenue Minister Stuart Nash announced the Terms of Reference for the Tax Working Group and that the Group will be chaired by Sir Michael Cullen.  "This review is a core part of the government’s programme and I’m confident it will deliver recommendations that will enable us to put in place a tax system that is fair for all New Zealanders,” says Grant Robertson.  Other members of the Tax Working Group have yet to be announced at time of publiciation.
  • Minister commissions stocktake of New Zealand’s housing crisis – 25th November.  Housing and Urban Development Minister Phil Twyford has commissioned three of New Zealand’s leading experts to provide an independent stocktake of the housing crisis.  The experts are Shamubeel Eaqub, Philippa Howden-Chapman, and Alan Johnson, with the report due before Christmas (2017)!
  • Minister for Agriculture, Biosecurity, Food Safety and Rural Communities Damien O’Connor announced 13th December that the Ministry for Primary Industries (MPI) will reorganise its functions to create a stronger focus on core responsibilities.  Mr O’Connor says government will set up four portfolio-based entities, Fisheries New Zealand, Forestry New Zealand, Biosecurity New Zealand and New Zealand Food Safety.  Reorganisation of MPI’s functions will occur in the early part of 2018 and will be in place by April.
  • Education Minister Chris Hipkins announced on 13th December a one-off investment of a $9.5 million teacher supply package to address immediate pressures on teacher supply.  This will support more te reo Māori and Māori medium teachers into classrooms, Associate Education Minister Kelvin Davis said.  Mr Hipkins had earlier announced (8th December) new Digital Technologies & Hangarau Matihiko curriculum content as being included in The New Zealand Curriculum and Te Marautanga o Aotearoa.  “One of my goals as Education Minister is to make sure we are future-proofing our education system.  This means we need to change the way we do things to keep ahead of changing technologies,” Mr Hipkins said.  A package of support will be rolled out for teachers and kaiako to build their capability and confidence in teaching the curriculum from 2018. 
  • Education - 80,000 people eligible for fees free – the Government has confirmed (5th December) its 100-day promise of delivering the first year of fees-free post school training and education and industry training from 1 January next year, says Education Minister Chris Hipkins.  “The Government has budgeted for up to $380 million in the current financial year across the fees-free policy and the $50 increases to student loans and allowances.  Of the about 80,000 eligible students, estimates are that about 50,000 will train or study at a polytechnic, as industry trainees, at a wānanga or a PTE.  The remainder will study at university.”
  • Multinationals tax legislation introduced - The Taxation (Neutralising Base Erosion and Profit Shifting) Bill contains measures aimed at preventing multinationals from achieving a tax advantage, introduced on 7th December [note that this is legislation brought over from the previous Government] 
  • The Minister for Workplace Relations and Safety Iain Lees-Galloway and the Minister for Women Julie Anne Genter reaffirmed the new Government’s commitment to halting the Employment (Pay Equity and Equal Pay) Bill that was introduced by the previous Government – 1st November.  “All three Government parties were clear during the Bill’s first reading that we were opposed to the legislation, and that we would not rest until New Zealand workers have genuine opportunities for pay equity,” says Iain Lees-Galloway.  “While both sides of the House seemed united in lauding the TerraNova decision in favour of care and support workers and Kristine Bartlett, the previous Government immediately introduced legislation that fundamentally changed the ability of anyone else to achieve the same result.  The current legislation diminishes the opportunity for people to make a pay equity claim, and we were clear that if we were elected then it would be the end of the line for this Bill.  We were, and it is.  The Government will stop progress on the Employment (Equal Pay and Pay Equity) Bill and start work on new legislation that adheres to all the principles of the Joint Working Group on Pay Equity”.
  • Paid Parental leave - The Bill extending paid parental leave to 26 weeks by 2020 passed its third reading (30th November), fulfilling a Government commitment to giving our children the very best start in life, reports Minister for Workplace Relations and Safety Iain Lees-Galloway.
  • Research, Science and Innovation Minister Megan Woods announced (8th December) over $2 million of funding for 33 innovative science projects through the 2018 Unlocking Curious Minds contestable Fund.  “Unlocking Curious Minds supports innovative science projects that engage New Zealanders, particularly young people, with science and technology in their everyday lives”  The Unlocking Curious Minds contestable fund is an initiative under A Nation of Curious Minds – He Whenua Hiriri I Te Mahara – a National Strategic Plan for Science in Society, and is jointly run by the Ministry of Business, Innovation and Employment (MBIE), the Ministry of Education, and the Office of the Prime Minister’s Chief Science Advisor.
  • Foreign Affairs Minister Winston Peters has announced major investments in Tokelau’s transport and internet infrastructure (6th December).  “We are investing $15.8 million to upgrade the reef channels and wharves.  This will make transfers much safer and will allow cargo to be moved much more efficiently” says Mr Peters.
  • The Government is putting the Digital Convergence Bill on hold to seek greater consensus and ensure the Bill is fit for purpose.  The Minister of Broadcasting, Communications and Digital Media, Clare Curran says a draft Bill produced under the previous government was muddled because of inadequate consultation (6th December).  “It appears that a meaningful digital convergence legislative and regulatory regime was never taken seriously by the previous government,” Ms Curran says.  “It’s essential to achieve consistency and certainty for the public on classification and standards, and ensure fairness across the sector so I’ll be consulting with stakeholders to reach greater agreement on the Bill”.
  • The Government is acting on key consumer concerns, with Minister Megan Woods asking MBIE to further investigate fuel prices and Minister Faafoi moving to progress broad market studies powers for the Commerce Commission.  The decision follows an update by MBIE the on the Fuel Market Financial Performance Study released earlier in the year.  “I’m aiming to get legislation complete and to have market studies powers in place by the end of 2018.  And the Commerce Commission also needs to be able to self-initiate these studies where they see that markets are not doing a good job for New Zealanders” says Ms Woods.   “Having thorough information and shining a light on a market enables us then as Government to decide if we need to take any action,” Mr Faafoi says.  “While these powers are being provided for, I have also instructed MBIE officials to continue to monitor the market and explore options for regulatory interventions to enhance competition as required,” says Megan Woods.
  • Health Minister Dr David Clark says a new report (released 6th December) on The Performance Improvement Framework (PIF) Review of the Ministry of Health paints a picture of a Ministry that needs support to provide stronger leadership and governance of the health sector.   “We need a strong, stable and high-performing Ministry leading our health and disability sector.  The challenge for the Ministry’s new leadership will be to deliver just that.  As Health Minister, I welcome this review and the Government will closely consider its findings.  I will also refer the review to the new Ministerial Advisory Group on the Health System, which was set up to focus on exactly these sorts of issues.  Health Minister Dr David Clark also announced the establishment of a new Ministerial Advisory Group on the Health System (5th December).  Dr Clark has appointed Sir Brian Roche as chair of the group.  Professor David Tipene-Leach, Muriel Tūnoho, Dr Karen Poutasi and Dr Lester Levy have been appointed members for a term of two years.  They will report directly to the Minister.   The PIF Review is available here - http://www.ssc.govt.nz/sites/all/files/pif-review-health-dec2017.pdf
  • Conservation groups across New Zealand will benefit from $4.2 million in new funding grants announced 8 December by Conservation Minister Eugenie Sage.  The DOC Community Fund is designed to provide community conservation and recreation groups with a boost to reach their goals for protecting native wildlife, restoring vital habitat and improving access to New Zealand’s outdoors.

Posted: Friday 15 December 2017