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Government has more money to spend from stronger-than-expected growth

BUDGET 2018: Grant Robertson spends more but sticks to budget responsibility rules.

Brent Edwards
Thu, 17 May 2018

The government will spend an extra $2.8 billion this year as stronger-than-expected economic growth has given it more money to play with.

Most of the new operational spending will be soaked up by health, education and housing. As well, the 2018 budget has allocated an extra $3.8b in capital spending, much of it again to help build hospitals, schools and houses.

Finance Minister Grant Robertson says over the next four years the coalition government will spend $24b more than the previous National-led government had planned to spend on infrastructure and social services.

“Our priorities are different from the previous government. We are determined to turn the page on the ideology of individualism and a hands-off approach to our economy that has left too many people behind,” Mr Robertson says.

But while the government is spending substantially more, he says it is also adhering to its budget responsibility rules and living within its means. Government spending will remain below 30% of GDP and net core Crown debt is forecast to fall to 19.1% of GDP by 2021-22.

As well, the Treasury is forecasting a budget surplus of $3.1b in the financial year ending June 30, $3.7b next year and rising to an estimated $7.3b by 2022. That is based on forecasts of economic growth of 3% a year over the next four years. Wages are expected to rise 3.1% a year while unemployment should fall to 4.1% in late 2019.

Health gets biggest share
Health will get $3.2b of new money over the next four years to cover its operating costs, with district health boards getting $2.3b of that. The budget also sets aside $750 million for new capital spending, with Mr Robertson describing it as the biggest commitment to rebuilding health infrastructure in a decade.

While the government is not going to immediately meet Labour’s commitment to cut the costs of visits to GPs for everyone it will make GP visits free for everyone under the age of 14 and the cost of doctors’ visits for people holding community services cards will drop by $20-30 a week.

Elective surgery will get an extra $126m to help cut waiting times while $103.6m will be invested in midwifery services over the next four years. Under that funding there will be an 8.9% rise for community midwives to bring them into line with hospital midwives.

The budget also includes $67m to extend the national bowel screening programme and $83m to support air ambulance services.

Education also gets a boost
New operating spending for education totals $1.6b over the next four years, with early childhood education getting a $590m boost. Schools will get an extra $203.6m in operating funding to help meet rising costs and to cope with the growing number of students. As well, the budget provides for the employment of an extra 1500 teachers in the country’s primary and secondary schools over the next four years.

The budget sets aside another $395.8m to rebuild schools and provide more classrooms. The Christchurch schools rebuild programme will get $62m of this money.

The government has come under pressure over the support provided for children requiring extra learning support. In response, learning support funding will rise by $272.8m over the next four years, with teacher aide funding being boosted by $59.3m.

The housing crisis
The government intends to provide another 6000 homes for people with housing difficulties, most of them new state houses, over the next four years. The budget provides $234.4m of new money for both Housing New Zealand and community housing providers.

Overall, it commits another $1b in new spending on top of the $2.1b allocated in the December mini-budget for the KiwiBuild programme to build 100,000 affordable homes over the next 10 years.

Dealing with poverty
It says the housing spend-up, as well as the families package announced in December, will help lift children out of poverty. Oranga Tamariki, the Ministry for Children, will also get an extra $269.9m over four years to ensure more children and young people can get the care they need.

What about business?
As earlier announced the research and development tax incentive is funded in this budget with $1b set aside over the next four years. It is still unclear whether research and development grants will be scrapped once the incentive is in place.

The budget also confirms the $1b a year for the Provincial Growth Fund, which Mr Robertson says represents the biggest investment in the regions in his lifetime. This year the fund will include $684.2m of operating funding and $315.8m of capital spending.

As well, $100m is set aside to set up the Green Investment Fund to help kickstart investment in new environmentally friendly initiatives.

The government also believes its increase in funding for the Ministry of Foreign Affairs and Trade will help secure better access to overseas markets for New Zealand exporters.

Helping farmers
As dairy farmers face the risk posed by the cow disease mycoplasma bovis the Ministry for Primary Industries gets an extra $38m over four years to keep the country safe from pests and disease. Biosecurity also gets another $9.3m.

It does not appear a great amount when Agriculture Minister Damien O’Connor warns mycoplasma bovis could eventually cost the country $1b.

Mr Robertson says more spending to counter the cow disease is inevitable but the government is yet to receive a final report from officials on just what it will take to respond to the disease.

Funding security
Both the police and Defence Force do well out of the budget. The police get an extra $298.8m over the next four years to meet the coalition government’s commitment to hire another 1800 police officers.

The budget is also spending money on building new modular units to house another 600 prisoners but the government still has the goal of trying to reduce the prison population.

The country’s armed services will get another $345m over four years to enable them to contribute to peacekeeping and be able to better respond to natural disasters. In partnership with the Ministry of Social Development some of the money will also go toward expanding the Limited Service Volunteer programme for young people under 25.

It's all about well-being
Grant Robertson says this will be the last budget presented in this way.

“Next year we will be the first nation in the world to deliver a Wellbeing Budget reporting our annual progress against a range of measures that highlight the health and wellbeing of our people, our environment and our communities. We will use the living standards framework developed by the New Zealand Treasury to help develop our budget and to measure our success.”

Brent Edwards
Thu, 17 May 2018
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Government has more money to spend from stronger-than-expected growth