No-Surprise Budget sets new priorities, scraps tax cuts

Families to get $5.5 billion, Housing ($3.8 billion), Health ($3.2 billion)

Venkat Raman

The first Budget of the Labour-led government presented by Finance Minister Grant Robertson had few surprises, given the promises made during the election campaign last year and the course set by the ‘100-Day Plan.’

It is equally expansionary, although there is caution in spending in some areas, including debt risk management, with the promise of returning a surplus this year.

Economic Indicators

Introducing his Budget to Parliament about an hour ago, Mr Robertson said that the financial outlay to priority sectors will be spread over the next four years, spent on a growing economy.

Noting the Treasury forecast of economic growth at 3% per annum on average over the forecast period of four years, he believes that his government can deliver a stronger-than-expected revenue, generated from economic and employment growth.

Tax cuts gone, net debt down

While Mr Robertson has not proposed any new taxes, he has scrapped the tax cuts announced by the previous National-led government, bringing in $7.9 billion. Another $9 billion will accrue from fiscal space created by core Crown net debt target of 20% of GDP over the next four years. The government also expects $5.3 billion from higher tax revenue from higher-than-expected economic growth.

Mr Robertson also announced additional funding of $183 million over the next four years to Inland Revenue to crack down on tax dodgers.

“Budget 2018 begins steps to restore tax fairness. Other recently announced initiatives will reduce distortion in the tax system. These include ring-fencing rental losses and closing the loophole on offshore companies avoiding GST on low-value goods sold locally,” he said.

Labour’s promise of increase of benefits to low-income families comes with a price tag or $5.5 billion in the next four years.

Families Package

Mr Robertson said that the ‘Families Package,’ will accrue additional money to middle and low-income families and is projected to significantly reduce the number of children living under poverty.

“The Package includes increased Working for Families support, a new Best Start payment to help families with children in their early years, a Winter Energy Payment to help superannuitants heat their homes through the coldest months and accommodation supplement increases to support those under housing stress. When fully rolled out, 384,000 families with children will be better off by an average of $75 per week,” he said.

Housing and Health

The Budget provides $3.8 billion for Housing, to build 6400 more State Houses by 2022 and $170 million for emergency housing, insulation subsidies and low-income families.

Housing New Zealand will be allowed to borrow $3 billion.

Budget 2018 provides for $3.2 billion for health, of which $850 million would go towards capital expenditure. It is expected that some of the neglected hospitals in South Auckland and South Island would be the beneficiaries.

District Health Boards (DHBs) will receive the bulk of the budget – $2.2 billion over the next four years, while elective surgeries and other services will get $126 million. The government will spend $750 million on hospital upgrades and rebuilds.

Cheaper Doctor Visits

More than 500,000 people will benefit by cheaper doctor visits, while the Budget extends free GP visits to 13-year-olds.

About 540,000 people who are eligible for Community Services Cards will get $20 to $30 cheaper GP visits, costing $385 million to the Exchequer.

“Budget 2018 puts our District Health Boards (DHBs) back on track to deliver the quality care New Zealanders expect and deserve, when they need it. It provides investment in core services including maternity services, disability support, air ambulances and bowel screening. We are funding a significant primary care package that delivers low-cost GP visits for Community Service Card holders and widens access. Budget 2018 provides significant operating and capital investment for our hospitals and DHBs to expand service capacity and replace sub-standard infrastructure,” Mr Robertson said.

(More analysis to follow)

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