Finance Minister Grant Robertson has outlined how his first “wellbeing” budget, to be delivered in 2019, will shake up the way the public sector works.
Delivering his Budget Policy Statement, Robertson explains all ministries and agencies will be collectively responsible for delivering the Government’s priorities.
For the first time, they’ll have to make budget bids through the lens of the Government’s priorities.
They will have to work together, across portfolios, on initiatives that will deliver set outcomes.
Robertson has announced his priorities are:
- Creating opportunities for productive businesses, regions, iwi and others to transition to a sustainable and low-emissions economy
- Supporting a thriving nation in the digital age through innovation, social and economic opportunities
- Lifting Māori and Pacific incomes, skills and opportunities
- Reducing child poverty and improving child wellbeing, including addressing family violence
- Supporting mental wellbeing for all New Zealanders, with a special focus on under 24-year-olds
$6.1 billion in new spending
While the Government's spending allowances were increased in May at Budget 2018, they haven't been been upped again in light of Robertson announcing his priorities for Budget 2019.
An allowance of $2.4 billion a year over four years has been allocated for operational spending, meaning the Government will have $2.4 billion at its disposal for new spending in 2019. A year ago, the projection was for it to have $1.9 billion.
An allowance of $3.7 billion has been allocated for capital spending in 2019. A year ago this was projected to be $3.4 billion.
ASB chief economist Nick Tuffley is "somewhat surprised" these allowances haven't been lifted. He says there is room for "modest" increases in spending, but notes Robertson's caution in light of his Budget Responsibility Rules and risks in the global economy.
ANZ economists, Miles Workman and Sharon Zollner, say: "We still feel there’s a case to loosen the purse strings and address New Zealand’s infrastructure deficit faster.
"The key caveat is that it doesn’t significantly crowd out/compete with private investment – and that’s a tricky nut to crack, with demand for private investment not a particularly easy thing to accurately anticipate."
Spending pushed out into 2019
The Budget 2019 priorities haven’t had a major effect on what Treasury expects the Government's tax take versus expenses will look like.
The Crown posted a larger than expected operating balance before gains and losses (OBEGAL) of $5.5 billion in the year to June, as capacity constraints essentially meant it couldn’t spend its money as quickly as it planned.
Treasury, in its Half Year Economic and Fiscal Update (HYEFU) released today, forecasts the OBEGAL will fall to $1.7 billion in 2019, as the Government plays catch up and spends the money it had planned to spend in the previous year.
The OBEGAL is expected to pick back up, reaching $7.6 billion by 2022. While this is higher than what was forecast in Treasury's May Budget Economic and Fiscal Update (BEFU), the surpluses for the two years prior are expected to be lower.
Debt track looking good for now
Robertson hasn’t showed any signs of ditching his Budget Responsibility Rules, which include the goal of reducing net core Crown debt to 20% of GDP by 2022.
It is already hovering at this level, and is expected to pick up slightly to 20.9% in 2019. Treasury expects it to fall to 19.0% in 2022 and 17.4% in 2023.
Workman and Zollner say: "While our own central economic outlook is a little softer than the Treasury’s, we also see the Government’s books improving over time.
"That said, if the economy evolves as we expect it could take a little longer for the Government to reach its debt target, and/or it could result in the Government having to find cost savings further down the line – or loosen its debt targets."
Treasury hasn't changed its projections since BEFU when it comes to the portion of off balance sheet debt it expects the Government to take out.
It expects debt taken out by Crown entities and state-owned enterprises to account for just over 20% of total government borrowing over the next four years. This portion is larger than under the previous government.
Treasury has confirmed the Government isn't planning to issue any more or less bonds than it said it would in Budget 2018. It will issue $8 billion worth in 2019.
56 Comments
(Comment unrelated to the article above deleted, Ed. Please remember our commenting policy. The homes for comments of a general nature are on the 90@9 & what happened today threads, Ed - https://www.interest.co.nz/news/65027/here-are-results-our-commenting-p…)
Robertson can't win. He needs to burn through the BRR to make any real impact but doesn't have any effective options to spend his money on, or ministers who are capable of delivering. He's not likely to tip the country into crisis, but he sure as hell won't be able to achieve what he wants to either.
Fees free tertiary / trade training (something older generations received) is at least a better investment than handing out 60% of our social welfare budget to old folks regardless of need. And a darn sight cheaper, even before the return on that investment is factored in.
Requiring young Kiwis to take on significant debt to enter the workforce whilst handing money (and free transport) out to old folks who don't need (and received free education in their turn) it is profligate and unbalanced.
Agreed. My two grumpy uncles have millions between them and are super annuitants, it disgusts me. One of our family friends owns three dairy farms and spends half the year in Bali. He's also a superannuitant. My younger friend is struggling to complete his engineering degree, has an enormous student loan and gets no allowance to support his study. If ever there is an example or three of how unfair and selfish babyboomers are there you go!
“Lifting Māori and Pacific incomes, skills and opportunities” - I really really don’t like breaking policy down to racial/ethnic groups. If you are poor or disadvantaged you are poor or disadvantaged regardless of race. I think it sets a dangerous us and them attitude.
It gets very messy and unpleasant when you deliberately hold down successful ethnic groups (say Taiwanese) to help unsuccessful ones (say Maori) especially when a neutral Pakeha such as myself has four Maori multi-millionaire friends and I do meet poor Asians. Best if the govt tries to be like God and treat each and every one of us on our merits as individuals.
Yes the South has taken a hammering from this govt - in just 12mths. This govt would rather give subsidies to foreign forestry owners to plant trees than give the south, it's children and adults, a decent health service or keeping 24/7 policing for places like Wanaka.
I can't quite put my finger on why certain groups are focused on but others are missed? is it buying votes, political correctness, a sense of self loathing/guilt for actions your not responsible for, some sort of cult/ideology, a good marketing point, external perception?
Who knows, maybe it's none of the above. Either way, NZ is enabling it by voting for it sadly enough.
I own a Backpacker and hostel that we rent out on a weekly basis, as such we get a lot of people from WINZ that are underprivileged, with very low skills and really bad, embedded habits. They are adults and it's too mostly late for them. In my opinion it starts at school level, where we should teach basic parenting and budgeting skills. It's a battle that will take at least 2 generations.
It's all very well trying to teach them at school. It's the home environment that's the problem, and like you say it's embedded habits and mindsets carried over multiple generations.
You almost need to take them out of the family home for a couple of years and teach them how to be adults.
Davo36,
That assumes that the parents / guardians know those skills themselves.
Having been raised in such an environment where both parents were illiterate, and lacked basic financial literacy skills, the lessons learned at home from watching both parents were incorrect. In many lower-socio economic families, parents don't have the basic financial literacy skills, so it is a case of the blind leading the blind. There are so many cases in South Auckland.
Financial literacy is one essential life skill, that can significantly improve an individual's quality of life, if applied correctly. The skill can be self-taught, but the individual raised in a low-socio economic family needs to be aware that they may have learnt the wrong lessons / examples from their parents / guardians and then be pro-active in learning the correct approach from a knowledgeable person / source and then apply those financial literacy skills.
Also in some cultures, finances are not discussed, as well as cultural customs which impact finances. (e.g Samoan funerals can be a big affair and family members are required to chip in - https://www.tvnz.co.nz/one-news/new-zealand/samoan-funerals-costing-60k… )
I recently read about a school in South Auckland - James Cook High School in Manurewa offering a life skills 101 and 201 workshop which covered essential life skills to school students who were interested. This course was offered at the end of year when the normal school curriculum was essentially completed. This needs to be taught to all students - even more importantly in low socio-economic families.
I wonder if it would be useful to useful to hold onto school kids till 5 pm and teach them all these other skills in a positive and enjoyable way rather than overloading, confusing and undermining the academic teaching earlier in the day. It would compensate for shortcomings of their home experience (where the home is deficient) and possibly keep them away from bad company and the freedom to get into trouble. it could also make it easier for working parents.
Are they really underprivileged, or just disabled by welfare?
I agree with Nzdan. If people have had inter-generational welfare dependency, they are probably unable to change themselves and the way they live.
I'll probably sound like an old fogey, but young people especially need to be removed form their home environment to do some kind of national service (it needn't be military) to teach them self-discipline, self-reliance, resilience and basic life skills.
mlpc - The Roxburgh residential Children's Camp was one such place that children from Otago and Southland could go to learn a different way of living/doing things. Over 380 kids a year went through it and it was a huge help to many of those kids to make changes for the better in their lives. This govt in their wisdom decided, without robust checking of the alternatives, decided not to fund it.
Lift kids out of poverty was almost a mantra with Jacinda Ardern before the election - she appears to have forgotten to add the caveat - not those in the provinces. When it comes to health services, children's services and reducing poverty, in provincial NZ, this government speaks with a forked tongue.
More education will not fix broken homes. There's also the unfortunate fact that some people are just limited in their ability, and will never make anything of themselves.
I think the nanny state is the true religion of this country. People are always thinking if only we steer it in a slightly different direction we can solve all our problems, if only there was more spending it would all be ok... but we keep spending and it keeps getting worse.
How is he going to create opportunities for business and keep them here?
He said
"Creating opportunities for productive businesses, regions, iwi and others to transition to a sustainable and low-emissions economy"
Like this guy
http://www.ubcobikes.com/products/
So how will you keep him here and how will you stop China with wages of $3 a day, wiping him out along with Honda Yamaha etc anytime they feel like it?
The first thing that needs to happen is stopping those Aussie banks repatriating 5 billion dollars pa.
The regional low emissions economy side of things has an experimental project funded already: https://www.radionz.co.nz/news/national/369351/carbon-neutral-project-i…
That's a cool looking electric bike. I was looking at this scooter from China:
https://www.niu.com/en/
which is half the price but the 2x2 seems more my style. An extra battery is expensive at $2500 but 120km range is great.
It's actually not too expensive for what it is considering the scooter probably only gets 40km.
Hernstein & Charles Murray's "The Bell Curve" surely applies in NZ as much as it applies in other multicultural societies. Science must find systems, strategies, methods, special training or whatever that help to overcome impediments that make it difficult for certain groups to survive with dignity in our increasingly complex societies. If we keep the migration floodgates wide open, we may have immense future problems if we can not find solutions. However, I suspect that we have not given NZ quite the same problems that for example Europe now has.
They (Ministries and other Gubmint fiefdoms) will have to work together, across portfolios, on initiatives that will deliver outcomes identified by the Government’s priorities.
(My Bolding...in case y'all didn't guess)
This is the real change - the rest is just BAU with a bit of lippie and new shoes.
And as such it faces quite a number of challenges: a sampling:
- IR and relativities. This will be a union feeding frenzy, as wildly differing 'portfolios' like Health, WINZ, Police, Education, TPK, MBIE and no doubt others lower down the food chain, all need to coordinate to solve as basic an issue as substandard accommodation leading to poor health, education and life outcomes. Unions (note the plural) are gonna see opportunities for barrow-pushing at every twist and turn.
- The first (and maybe second, third...) Budget rounds will be a fustercluck, as Ministries, always jealous of Their Vote, need to learn to Play Nicely with Others. I've seen a lotta such budget rounds, none are easy, and this is gonna add complexity, drag timelines, and generally clog the whole process. It's easy to preach from the bully pulpit of Parliament, but hard to Get Stuff Changed....
- There's no clear immediate measure for much of the 'outcomes'. Just as Roe vs Wade in the US was (hilariously) held responsible for a drop in crime 10-15 years later (Freakanomics, IIRC - the potential perps were aborted...), many of the fluffier outcomes will have lags measured in decades. Just how this fits into the 3-year Parliamentary term, and an annual Budget round, is anyone's guess.
But as the sadly missed Leonard Cohen sang (Tower of Song), some things ain't gonna change:
Now you can say that I've grown bitter but of this you may be sure
The rich have got their channels in the bedrooms of the poor
And there's a mighty judgement coming, but I may be wrong
You see, you hear these funny voices in the tower of song
Labour's approach makes fiscal sense. Health and education etc,, public spending ultimately lifts productivity. Letting the poor get poorer in order to fudge "surpluses" is just a hoax economic policy for government to pursue.
We are seeing the false economy play out now.
The false economy is named neo liberalism. The growth in impoverished and under educated citizens has been consistent with the timeline these policies have followed in NZ and indeed in the USA and UK too. No one wants to acknowledge that we have enormously underinvested in succesive generations education and health but instead try to blame it on too much welfare, when infact welfare has been so reduced in real terms it is infact a poverty and education trap. We've caused the problem ourselves.
Very true. Welfare is warehousing people on the cheap, providing just enough they don't starve or get violently rebellious. In addition official economic doctrine includes NAIRU. There are not enough jobs for everyone and this is by design. Would not a better option be a Job Guarantee at minimum wage, wherever you live, whatever your circumstances, for as long as you need it? No more involuntary un or underemployment. Even the US is debating it. Here - nothing
Then I will take a swipe at the short sighted immigration settings over the same timeframe which has seen a large infusuon of lowly educated or outright uneducated immigrants from the pacific and india who, only make matters worse by diluting the skill base of the country instead of raising it.
High levels of low wage immigration is totally fat-headed. Simple common sense that behind every resident there is a fortune in roads, hospitals, teachers, schools, law courts and police, bridges, railways, mid-wives, ports, etc. However bring the right immigrants in and their taxes will help pay for expansion of this investment. Like most things simple moderation makes sense. Most of the recent immigrants I meet from the Pacific and India appear to be hard working with good English - I have nothing against them except the numbers. Some Chinese have poor English - I don't know why - maybe they are coming in the investor category i.e. buying residency for money laundering purposes or an escape when things collapse back home. However many Chinese I meet do speak English well and appear proud to be in NZ.
"Debt track looking good for now"
Why is under 20% government debt-gdp ratio "good" for us exactly?
Why not say "government on track to reduce net financial assets of private sector to under 20% of gdp."
http://bilbo.economicoutlook.net/blog/?p=10384
The well-being stuff reminds me of empty Blairite Third Way pseudo-political philosophy. Lots of upwords and appeals to newness (thriving...digital....innovation) without much clarity about how competing forces and imperatives are to be reconciled...
Politics is the art of looking for trouble, finding it everywhere, diagnosing it incorrectly and applying the wrong remedies. Groucho Marx
Read more at: https://www.brainyquote.com/quotes/groucho_marx_146422
Disappointing to see little mention of raising the productivity of all NZ enterprises or empowering the Commerce Commission to strengthen competition so that peoples purchasing power is increased. Both of these are among the only real ways to raise the real incomes and purchasing power of all New Zealanders. (off course this would cause all sorts of problems for the Reserve Banks need for positive inflation, so they would wipe out any gains by raising interest rates. The low inflation part of Inflation/OCR model is seriously flawed)
The rest boils down to a lot of window dressing and tail chasing. If Robertson wants some simple measure of the welfare and well being of our people maybe he should be measuring their net disposable income across the different stratum of society and or how much we can reduce the governments need to provide welfare, benefits and subsidies. Unfortunately governments of either stripes seem to think that the way to solve the problem of inequality is to throw more and more welfare support at the poor rather than addressing the real root causes. The net effect is that more and more people are caught in a poverty trap which saps any initiative or hope of escape, and does them and the country no good.
Understanding human well being better would be a good start.
The Toxic Effects of Western Society https://www.youtube.com/watch?v=W_ALpvLadQI
Why Capitalsim makes us Sick https://www.youtube.com/watch?v=AaAJQR_9Dg8
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