Venkat Raman
Auckland, February 9, 2021
Finance Minister Grant Robertson at the BNZ Breakfast (TV One News)
Efforts to reduce employment with increased job opportunities, especially for women and youth, investment in more houses for first-home buyers, reducing child poverty and continued efforts to contain Covid-19 are some of the highlights of the New Zealand’s Budget for 2021-2022.
Although it is early to predict the shape and form of the Budget (which is due for introduction to Parliament in May), Finance Minister Grant Robertson provided some indications at his Breakfast Speech at BNZ in Wellington this morning. It was timed for the announcement of the government’s Budget Policy Statement announced today.
Five Wellbeing Budget Objectives
He said that his government will continue the concept of ‘Wellbeing Budget,’ and that it will cover four core objectives. They include the following:
Just Transition: Supporting the transition to a climate-resilient, sustainable and low-emissions economy while building back from Covid-19
Future of Work: Enabling all New Zealanders and New Zealand businesses to benefit from new technologies and lift productivity and wages through innovation, and support into employment those most affected by Covid-19, including women and young people
Maori and Pacific: Lifting Maori and Pacific incomes, skills and opportunities, and combatting the impacts of Covid-19
Child Wellbeing: Reducing child poverty and improving child wellbeing
Physical and Mental Wellbeing: Supporting improved health outcomes for all New Zealanders and keeping Covid-19 out of our communities.
Focus on Housing
Mr Robertson said that Climate Change, Housing and Child Wellbeing are among the issues that challenge New Zealand’s Wellbeing Objectives and that Budget 2021 will focus on Housing, since sustainability in this sector will contribute towards the goals.
The sustainability of our housing stock will contribute to our Just Transition and climate change goals and will greatly influence in improve access to warm, safe, dry and affordable housing, as will physical and mental wellbeing.
“There is a crisis when it comes to the housing situation right now in New Zealand. In a sign of how economic forecasts have swung wildly during Covid, midway through last year, economists were lock-step in predicting that house prices will fall 5% to 10% over the next year due to the pandemic downturn,” he said.
New measures coming
The government will announce a series of measures to address the housing crisis, the first of which will be the demand side measures which will come into force this month. We all know that building more houses, particularly affordable houses, is critical. But we also can do more to manage demand, particularly from those who are speculating.
Mr Roberton said that New Zealanders are seeing family members being crowded out of the opportunity to purchase a home of their own by speculators and investors.
“We want to tilt the balance more towards first home buyers, while also incentivising more investment in the construction of homes. The effects of rising demand for property by speculators and investors has blown those mid-year projections for prices to fall, out of the water. “In fact, between June 2020 and December 2020, the nationwide median house price rose by 17%, and remained 19% higher than in December 2019,” he said.
House Price Index rises
The House Price Index of Real Estate Institute of New Zealand was up 17% from a year ago – 9% in the final three months of the year. Rents, in comparison, have remained relatively stable. Two monthly measures of Statistics New Zealand for rental property prices, incorporating bonds lodged for rentals, were up 1.5% and 3.1% annually in December 2020.
Mr Robertson said that based on the advice received from the Treasury and the Reserve Bank of New Zealand on tackling the housing prices, he will shortly present proposals, including perhaps new regulatory framework to the State Cabinet.
“Anyone who tries to tell you that there is a single silver bullet for addressing the housing crisis is not facing reality (or is speaking from the safety of Opposition). What we know is that now is the time for bold action. The market has moved quickly in a way that is not sustainable. We have to confront some tough decisions, and we will do that,” he said.
Reducing public debt
Stating that the government’s balanced and careful approach has improved projections, Mr Robertson said that the latest Crown accounts show the deficit in the first five months of this financial year was $1.9 billion smaller (or 30% better) than expected by the Treasury.
“New projections out from the Treasury today show continued improvement in our fiscal position over time. Projections at the time of the Pre-election update in September showed net debt falling from a peak of about 56% of GDP in 2024 to 48% of GDP in 2034. New projections using Treasury’s Fiscal Strategy model today show net debt now at 36.5% of GDP in 2034/35. That represents about $60 billion less debt at the end of the projection period than at the pre-election update,” he said.
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