Finance Minister Grant Robertson says the Government remains committed to “building back better”.
Releasing his 2021 Budget Policy Statement, he said the Government’s priorities at the May Budget would be:
- Just Transition to a Low Carbon Economy
- Future of Work: Lifting Productivity and Innovation
- Lifting Maori and Pacific Incomes and Opportunities
- Reducing Child Poverty and Improving Child Wellbeing
- Improved Mental and Physical Health Outcomes
More specifically, Robertson said Budget 2021 investments would fall under four high-level priorities: “Continuing the COVID-19 response, delivering priority and time-sensitive manifesto commitments, supporting core public services through managing critical cost pressures and continuing to deliver on existing investments.”
Robertson said Budget 2021 spending allowances are unchanged from the Half-Year Economic and Fiscal Update, released in December.
However, updated Treasury modelling shows net core Crown debt as a percentage of Gross Domestic Product (GDP) falling quicker than expected at the Pre-Election Economic and Fiscal Update, released in September.
In September, Treasury saw this figure falling from 56% of GDP in 2024 to 48% by 2034/35. Now it sees it falling to 36.5%. That represents about $60 billion less debt.
Incorporated into the new projections are increases in capital allowances, totalling $7 billion by 2033/34. This money is earmarked for infrastructure investment.
“We need to strike a balance with rebuilding and maintaining a strong fiscal position,” Robertson told those gathered at a breakfast hosted by BNZ on Tuesday morning.
“The recovery is the result of the hard work and sacrifice that New Zealanders collectively put in across 2020. We now have an opportunity, through our better-than-expected recovery and fiscal position, to address some of our long-standing challenges.
“At Budget 2021 I will continue my focus on making sure spending is targeted at the areas and people that need it the most. We will manage the books carefully including ensuring we are getting value for money in all areas of Government spending and reprioritising spending where appropriate.
“We will also continue the balanced approach to invest in strong public services and addressing issues like housing, while keeping a lid on debt.”
Under the Public Finance Act, spending also needs to be done according to “Wellbeing Objectives”.
Robertson to target speculators
On housing, Robertson hinted the demand-side housing policy changes he's due to unveil at the end of the month will target speculators.
"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," Robertson said.
"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.
"As I said late last year, we have received advice from both Treasury and the Reserve Bank on our existing measures to manage demand and discourage speculation, and how they can be enhanced or changed. Proposals will shortly go before Cabinet.
"As the Prime Minister has outlined, we will also make more announcements on the supply side as Budget 2021 is finalised. These will build on the Government’s housing programme that has seen us build more houses than any Government since the 1970s."
See a copy of Robertson's speech at BNZ here.
68 Comments
You left out the best parts from GR's BNZ breakfast presentation.
"We all know that building more houses, particularly affordable houses, is critical,” he said. “But we also can do more to manage demand, particularly from those who are speculating."
The Government has received advice from Treasury and the Reserve Bank on measures to manage demand and discourage speculation and proposals will go before Cabinet shortly, he said.
Exciting!
Banks will always look to maximise return on capital on behalf of shareholders, hence lending priorities will be determined by the asset class that demands the least capital and provides the most liquid collateral - there is a reason why the risk weights for sovereign bonds are zero.
Residential property standard risk weights can be reduced by implementing 'the internal models based approach'. ANZ has reported a figure as low as 27%.
Banks have migrated away from lending to productive business enterprises because the risk weights can be as high as 150%. Thus around 60% of NZ bank lending is dedicated to residential property mortgages held by one third of already wealthy households.
The number of households eligible to participate will inevitably diminish as the value of bank lending to this sector ratchets upward.
Bank lending to housing rose from $50,788 million (48.36% of total lending) as of Jun 1998 to $292,645 million (59.71% of total lending) as of November 2020 - source.
"...on our existing measures.."
I am far from excited about the likelihood of this phrase from Grant being a key indicator of what to expect later in the month. So far, I have mostly seen Jacinda utilize her highly praised communication skills with talk of kindness and hollow platitudes, to mislead and manipulate the people with the least in this country, to vote against their own interests, while Labour allow inequality to continue growing at a rapid pace.
The Finance Minister is blowing hot air like Twyford did before losing his portfolios.
There is nothing about productivity. It's just a catch phrase used without any understanding of productivity. Central Government organisations are run on budgets rather than productive performance which is why they don't understand.
Given the average Kiwi thinks their family home is their best performing investment I would say these are the speculators he is targeting. No doubt they will be punished severely.
There is no targeting of anything. The RBNZ rules are so loose that the banks have tightened up on investors (whether announced publicly or not).
'Building Back Better'
A skeptical person might say, in light of the housing affordability crisis, they have deliberately hijacked the word 'Building' to give it another meaning. Or is the irony completely lost on them?
It makes it sound any failure to date has been due to a natural disaster rather than policy failures.
Build back better was thrown around a lot at the start of this economic crisis.
After exchanging hugs and complimenting each other on coming up with cool slogans, our leaders realised that we have no skills, leadership or investor appetite to pull off something productive.
So they instead let the market run free with pulling all the chips out of international tourism and migration, and going all-in on our national housing portfolio.
"Building Back Better" .... LOL. I guess this makes a good 'sound-bite' so that a large portion of Kiwis think that the Govt is actually doing something. Meanwhile, the rest of us know that they can't use the word "Building" by itself as that makes us think of the Kiwi Build failure. I wonder how long it took to come up with this? It is time the Govt acted rather than talked and created media spin.
GR - As I said late last year, we have received advice from both Treasury and the Reserve Bank on our existing measures to manage demand and discourage speculation, and how they can be enhanced or changed. Proposals will shortly go before Cabinet.
So basically extending brightline test. That's how it reads to me. GR is a useless meat-dummy
"Robertson didn’t provide further details on the plans, but said it was time for “bold action”."
This is the Arden Government's (and probably any Labour Government for many elections into the future) last shot at future re-election, and they know it.
Whatever 'bold' turn out to be will be the determinant.
I totally agree. But at some stage we are going to have to fix this mess, by design, or it will be done for us at the most inopportune and economically disastrous of times.
No one has had the optimism, that this Government knew what it was doing and convinced me to switch my vote allegiance, beaten out of them than me.
But hope is eternal and all of that.
The thing is, a structural reset back to logical levels (3x - 4x) incomes will require testicular fortitude the government has shown no evidence of possessing to date. I hope, for my sake the sake of my children, that I am wrong, and a logical and fair (i.e. non-punitive to owner-occupiers and non-property investors) solution is in the works. But I fear this is simply wishful thinking on evidence to date, regardless of how wrong I want to be.
Given we had a 20% rise in house prices in a short I suggest a drop in house prices would not be harmful (yes - some will hurt)
But there has been vast harm that needs reversed. From those without housing at all through to those on good incomes with a mortgage that will keep them at near poverty.
'A' drop - yes. But who takes the pain? Owner occupiers didn't cause this most-recent bull-rush, nor did renters. But they will be the ones who feel the pain when investors are forced to sell-up en masse to avoid negative equity and end up inflicting it on owners and causing massive turbulence in the tenancy market.
Back at the start of the lockdown in 2020, there was a risk of the housing market going into a decline. Only a perceived risk. Yet, action was immediately taken to remove LVR's, put a loan moratorium, cut interest rates. But, now that a fire is raging in the housing market, the same urgency seems lacking. Lots of foot-dragging , tossing the blame ball between RBNZ & Finance Ministry. Am I excited with the measures GR said he would unveil to douse the flames? Sure. As excited as one wanting to dip into a heated swimming pool on a blazing hot summer's day
I strongly suspect that his use of 'speculators' and having received advice 'on our existing measures', suggests a mere tinkering of the bright line test or similar - something that won't really do anything to dampen demand from investors and help first home buyers to compete with them and not collapse in defeat after enduring their 11th multi-offer process. Nor any attempt at addressing the ability of people on lower incomes, doing long hours and necessary work in our society, of ever escaping the rent trap and getting into their own homes without significant outside help.
[Part of comment removed by editor]
[He] can't even come up with an original slogan to polish his turds with.
https://www.independent.co.uk/news/uk/politics/biden-boris-johnson-buil…
The horse has already bolted. Grant and Jacinda are guilty of dereliction of duty with their blatent disregard of advice and total lack of action on housing. There is no way out of this stinking mess of their creation. Without a house price crash New Zealand is now just an economically unviable place to live let alone raise a family.
If they think they are going to ride in like white knights now with some token measures and expect gratitude from their victims they are sorely mistaken. They can shove their Aroha up their lying hypocritical backsides.
Exactly right, I have been advising all the young people I know to move to Australia as soon as practically possible for a couple of years. For young people in NZ you are being burdened ridiculously from a government that doesn't care about your future. A couple of those young people have left already, I have heard both are in decent jobs over there making a lot more than they ever did here. Oh, they both own a house (well one of them just bought an apartment). The one in Perth bought a doer upper with the deposit they had saved in NZ and instantly owned 70% of the house they are living in and are now doing up.
Even though we bought land here and are building, I still might head over once COVID is semi sorted, and I am middle aged. This country hates productive workers (see the new tax Labour are putting in for the highly paid) and LOVES speculators, despite all the rhetoric from our leaders.
Considering how little scrutiny of their election promises there was this time around, and how the media are more interested in accountability for National and whatever their current leader says vs. what the PM said to get elected in 2017, I think PM Ardern has one more cruisy win left in her.
Best that you can hope for is that there is a leadership coup within Labour, somebody with more guts takes over and addresses the housing problem meaningfully. I.e. throw absolutely everything at it, right down to co-opting the military to build houses as they do for other countries facing disaster. As far as I can see they have nothing to loose and might as well go out fighting to do their best as opposed to mumbling and fumbling their way to ignominy. Who knows, they may regain some respect and scrape home in the election.
Just more neo-liberal clap trap with a focus on government "debt" with no apparent understanding of what this debt actually represents. It is our high levels of private bank debt that should be worrying them.
As economist Wynne Godley explains with sectoral balances, a government deficit creates a private sector surplus and it then becomes our savings and therefore less government debt must also equal less private savings.
Economist L. Randall Wray tells us this,
If the government always runs a balanced budget, with its spending always equal to its tax revenue, the private sector’s net financial wealth will be zero. If the government runs continuous budget surpluses (spending is less than tax receipts), the private sector’s net financial wealth must be negative. In other words, the private sector will be indebted to the public sector.’
Most households will also want to put aside some of their income as savings. They may want to save for a deposit on a house, a holiday, for retirement or against an unexpected occurrence. The government will therefore have to ensure that it is adding enough currency into the economy, net of taxes, to meet the needs of savers. Depending on what the rest of the world is doing, if the government wants the private sector to save rather than go into debt it will probably have to spend more than it taxes.
https://gimms.org.uk/fact-sheets/sectoral-balances/
Unfortunately National are not a viable opposition regarding housing. They are likely to be worse on affordable housing development favoring their developer mates building 200m2 plus mansions. If Labour loose the next election and National get in with what ever bedfellows they can muster, it'll not be because of any housing policy, simply Labour incompetence. Thus NZ is stuck between the choice of the better of the incompetents. Not much different from the rest of the Western democratic world.
Totally agree. The media should be putting pressure on the Govt over the housing crisis, but I also worry about National. I hope that they are taking this time to formulate some really effective monetary policy rather than simply putting Labour down. The class divide between the rich and poor has grown under Labour, while the middle class, working poor are being squeezed from both sides.
Electrification, and more concentrated use of our rail network is a no-brainer. Whangarei Harbour doesn't have the infrastructure currently to be a major import destination and with it's ownership structure (PoT a major owner) is unlikely to be a major export gateway for the foreseeable future. Moving PoA imports to NorthPort might work but there's a pile of money needed to be spent to make it work. Notice how the discussion has faded away under the guise of the "Covid response"? Maybe Winnie and co's demise could come back to be a greater loss than first envisaged - especially for Northland.
I don't believe affordable housing is going to be solved with gradual, incremental policy changes. If they wanted change they'd already have layed their cards on the table.
That said the bait and switch with the 'climate crisis' might garner enough votes if they can stretch out the Covid-19 response for a few years. Best to have another crisis in the pocket however just in case the public need another scare to keep voting Labour.
Haha - Most transparent Govt yet, Let's do this, Let's keep on, 100K houses in 10Yrs, Team of 5 Million and now we have Building Back Better - has NZ actually ever been sold a continuing line of BS, sloganeering and under achievement of such magnitude in such a short period of time(<40mnths) in the last 20yrs?? Take a bow all of you who voted for them (some of you twice!!) - well done!
In STUFF this pm our sagacious and kind pm, with platitudes aplenty announces, she wants to “tilt the playing field towards first home buyers.” so after three plus years of tilting it the other way, credibility check please. Let’s see now “the cat and the bag are no longer an item” “the goose has been abducted by the fox, running fast too” “the stable door is clanging, anybody seen the horse” “those that find shalt keep and prosper.” Or let’s have it from the Bee Gees “it’s only words, and words are all I have etc etc and etc again”
Grant Robertson is using the tired and abused system of blaming a vague sector of the public to blame for the ills of society. He wants to take action against those who are “speculating” in the property market.
Remember it was he (and she who must be obeyed) who blamed the Asians and foreign buyers on house price rises complete with a list of Chinese names. It was he (and aswmbo) who banned them. When that didn’t work he targeted local speculators by heaping costs and taxes and punishments on them. That hasn’t worked either. Now it’s “investors” muddled together with “speculators” that are to blame. It’s always some shadowy group who cause the problems in society, the same grubby trick used by all power mad politicians to fool the masses.
The fact is that ordinary home owners buying and selling tax free, who are the true speculators and the cause of price rises. Why doesn’t he tackle them? No prizes for the answer.
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The phrsase "Build, back, better" has a sting in the tale. It is now being used worldwide and is the catchphrase espoused by the WEF (World Economic Forum) and the UN. Sky news did a piece on this last year. Take a moment and a look into this because it will effect all of us markedly over the next few years. Our government is rolling it out now, though you will never hear a comprehensive outline of the timeline or plan on MSM so far, You will only here the catchphrases. If you want detail go on the World Economic Forum website or the multitude of clips on youtube or bitchute on this. Here's just one clip about the Build, Back, Better https://www.youtube.com/watch?v=aCpgPFylXn0
I'm sorry! I'm still stuck in the 2006,2010 era when there was an economist talking about, warning government officials of the pending "Doom" of how the US economy was going to tank because of their overly cooked housing market. No need to tell you all about what happened next ... we're still living with the repercussions from that time.
In little ole NZ, we might not be in that kinda cycle but, it's worth noting that without MMT we are doomed, a debt mountain for the rest of the decade and longer because Robo's math only accounts for the topline numbers. Not the nett if we take into account the $57b-$60b of capital injection in subsidies for everyone except to the poorest in our country, which is normal for NZ.
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