Budget 2023 will have room for about $5.5 billion of new annual spending, although much of that will be absorbed by increased costs and pre-commitments.
That $5.5 billion figure is made up of the $4.5 billion annual operating allowance and an additional $4 billion of cost savings found by Ministers in their existing four year budgets.
Details on when that extra money will become available and how it will be spent are yet to be revealed, but it is equal to about $1b across the next four years.
Much of the savings are expected to be used to cover existing cost pressures within various parts of the government.
About $1.9 billion of the $5.5 billion has already been allocated to Health, Justice, and Natural Resources in a multi-year funding decision in the previous budget.
Over $2 billion of spending (across the next four years) has been allocated in pre-Budget announcements, ranging from better pay rates for soldiers to the construction of new classrooms.
Some of this money comes from the multi-year capital allowance, which was increased from $5.1 billion to $12 billion to be spent over the next four years.
In December, Treasury forecast Budget 2023 would be $461 million in deficit and not return to surplus until the following year.
However, a weaker economy has resulted in less tax revenue which could mean a deeper deficit and a one-year delay to the surplus.
Prime Minister Chris Hipkins has pitched this as the ‘No-Frills Budget’, ruling out any “major” tax changes—such as a wealth tax or cyclone levy— and saying it would focus on the cost of living and cyclone recovery.
Finance Minister Grant Robertson said the four budget themes would be the cost of living, delivering services, recovery and resilience, fiscal sustainability.
Line items
The biggest pre-budget announcement was a billion dollar cyclone rebuild package, made up of $941 million in operating spending and $195 million of capital spending.
This was designed to make a start on repairing damage from the Auckland floods and Cyclone Gabrielle. The two events are expected to cost the local and central government between $5 billion and $7 billion in total.
Defence spending also got a significant boost, with $419 million set aside over the next four years for pay increases for Defence Force staff. An additional $328 million for asset and infrastructure upgrades was also announced.
Education spending will get a $400 million boost, with $200 million to be spent on building new classrooms and $100 million for short-term measures. The last $100 million will be spent on building up to four new schools.
Other smaller announcements include $22.9 million for the South Island town of Westport to build flood protections, and $73.5 million of funding for preventing family and sexual violence.
Finally, the Government will increase the Clean Car Discount scheme’s repayable Crown grant by $100 million, after it almost ran out of money earlier this year.
What else to watch for
None of the pre-budget announcements have particularly focused on easing the cost of living crisis which has been making life difficult for many New Zealand households. Cost of living is supposedly a key focus of the budget, so expect an announcement on that.
Hipkins also indicated that science, research, and skills would get some fresh investment in the budget, but there have been few hints as to what form that might take.
One wild-card possibility is that the Government could shift the tax brackets upwards to account for inflation. It would help with the cost of living while taking some of the wind out of National sails ahead of the election.
This would be a surprise, since ‘major’ tax changes have been firmly ruled out. But the Prime Minister has refused to rule out “minor change” when pushed by journalists, so perhaps it could happen.
For what it is worth, National Party leader Christopher Luxon agrees. He told business leaders in Auckland there was “a real chance Labour will deliver something on tax” — though it would be “too little, too late”.
Opposition’s alternative
The National Party has not released an alternative budget or outlined many specific plans for how it would spend tax revenue if in government, but did criticise Labour for spending too much.
Luxon gave a pre-budget speech in which he announced three fiscal restraint policies, although none of them actually involved less spending.
A National Government would require the Treasury to write reports into the effectiveness of large policy programmes, have Inland Revenue produce personalised receipts for each taxpayer showing where their money had been spent, and restart performance pay for public sector CEOs.
In Budget 2023, Luxon said he would’ve wanted to see disciplined spending, a macro-economic plan, and some tax relief.
The ACT Party, while the junior opposition party, produced a full alternative budget which would cut taxes by $3.7 billion, slash $6.8 billion of operating expenditure, and spend $1.9 billion on new initiatives.
These would include building new prisons, performance pay for teachers, sharing GST on construction with local councils, and lifting defence spending.
Spending cuts include lifting the retirement age to 67, ditching climate policies, ending the free year of university, cutting research and development tax credits, and abolishing all demographic ministries.
71 Comments
There was also new trains and rail infrastructure for the lower North Island, no final cost, but expected to be between $ 700 and $900 Million. I am hoping for extension of Auckland electrification to Tuakau or Pokeno , or at least advanced planning for it .
Some have mentioned a higher trust tax rate to match higher paye rates, i would like to see a higher tax rate for companies earning more than * millions , i would have thought aligning with Australia on this is a good move.
New trains...are they the diesel hybrid things ? Think they aren't expected for at least 5 years.. Would have thought the money would be better spent on electrifying the lines, which would reduce carbon and allow existing electric trains to be used. Hybrids are a bit of a band aid solution with a limited life, while long term fully electric is the solution, and electric trains can last 50 years .
Electrifying the tunnel could be an issue due to height clearances. But agreed, they could electrify the rest of the line and run battery/electric units.
What surprised me is how Taihape of all places has overhead electric for their railway lines (do they even have a commuter rail service???) but Wairarapa with 6 peak rail services a day still runs on the old Diesel set.
The stretch of the Main Trunk Line between Palmy and Hamilton was electrified as part of the Think Big (Muldoon Government) energy-related projects;
Around 460 km (290 mi) (approximately 65%) of the line is electrified in three separate sections: one section at 1600 V DC between Wellington and Waikanae, and two sections at 25 kV AC: 412 km (256 mi) between Palmerston North and Te Rapa (Hamilton) and 34 km (21 mi) between Papakura and Auckland Britomart.
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Hence Taihape is on the MTL and Wairarapa is not.
The problem with this is the trains are already too slow from the edge of the network. Papakura to Britomart is ~50 minutes, with careful planning that journey is much faster by car and more reliable.
I've been a frequent train user in the past and every few months I give it a go again for a week. It has always left me frustrated with cancellations and delays, so I end up back in my car.
I'd like to see improvements to level crossings and the existing network to allow for faster and more reliable travel, before pushing the edges out to Pokeno. Compared to other countries even our "new" network and trains do not offer a good service.
The Debt Ceiling is really a call on the productivity of the USA economy - the US$ being the Reserve Currency backed by that. And one of these days, they are going to say "You know what? That's enough. We aren't going to create any more US$ to pump into circulation in the Global Economy" and on that day, we'll all find out how expensive our own currency is.
I have made a tonne of tax free capital gains, that legally fall out side any bright line test.....but no Party seems keen to promote a tax on them? I suggest a lot of people have made a lot of money.... I can see why national says no, but Labour is looking VERY WEAK here on this issue.....
As we can see, capital gains are a fluid affair. Relying on them for tax revenue is about as silly as factoring them into one's own budget forecasts.
Prosperity from doing stuff has become a much more challenging proposition. Some entities have done well partially by the happenstance of their positioning, but margins are pretty squeezed and some costs have escalated significantly with no decline in sight. Some will now have excess inventory. Some still can't get supply of raw materials. Getting things done, is still bloody hard even for good operators and I imagine this is many magnitude worse via the public system.
It's also evident many of our frontline public servants need more money (and staff), so I imagine the government probably needs to be spending significantly more than it already is just to try to get to where it should have been.
Not to argue with the sentiment of your post , with which I agree , but actually , a lot of people have done very well over the last few years.
No doubt , many are having a hard time making ends meet, but many are also going on cruises , overseas holidays , new cars , untaxed capital gains, so on and so on . Even most of the "squeezed middle " are comparitively well off.
I just wonder what it would take to stop the top half moaning. Even standing still , they are in a pretty good position. .
Granted people have to look at what they have and be grateful, however it’s really hard when costs are spiralling higher, crime is increasing dramatically, hospitals are overwhelmed, and education is failing. At some point it’s also good to take stock of just how bad labour are rather than bury your head in the sand and hope it gets better. I think many NZers take for granted that things are just going to magically improve, and maybe can’t see the downside risks that are leading NZ to a very dark place.
Ha, I had a conversation with my National supporting friend last night. The only thing he could describe that National will improve is to reduce wasteful spending - hardly aspirational stuff. I did agree with him that Labour seem to have spent a lot of money achieving very little.
Cutting wasteful spending can be done in the first week of getting into office. So Luxon diverts most of those windfall savings towards paying down public debt and tax cuts. What after that? Migration and housing speculation to pull the economy ahead, as has been for the last decade or so?
Throwing cheap labour at labour-intensive industries won't solve the problem it has helped create.
All depends on whether to consider the state of affairs "something Labour did to us", vs "something that's happening we're going to have live through".
Some of these problems will take time to right. Which you'd expect, because they happen faster than a governments ability to resolve them.
Education. For us of reading writing and maths. Can not argue with that policy.
Health - fees free if nurses stay bonded for a period of time. That’s a great idea, although not new.
Crime - actually just police crime, put violent offenders in prison.
Society - scrap co-governance
No point comparing Nationals policies from the past, JK is gone. It’s about policies for the future.
I will give you a state HSL. In the 1950s NZ had the 4th highest standard of living in the OECD, we are now near the bottom of the rankings. For the majority of time between then and now a National government has been in power. I would say most of the issues you are pointing to result from NZ getting poorer over time.
One thing people never identify when they trot out the "NZ was up the top of the OECD in the 1950s" is that most of the rest of the OECD was still barely functional over that period due to WW2. Our position was a dividend for being one of the least effected place by WW2 on earth.
So it's less that NZ got poorer and more that much of Europe and Asia recovered from a conflict that left a lot of their industries and institutions in ruins.
Each of the above has got worse under Labour. National have not been in power all of the years since 1950. Can you explain what labour have done to improve the above areas in the last 5 years. What does labour see as the future of the country? How do you rate their efforts? National might not be the answer but they are as sure as hell better than labour.
Here's a good question for you; how hard (or easy) do you think it's been for any government or large organisation to maintain its status quo in the last 3 years or so, let alone improve things?
Because you're sort of arguing why yields are so low a year or so after a flood wipes out crops.
It's a serious question. Does your income derive from some entity just popping it in your bank account?
The last 3 years have been a nightmare for any organisation having to organise and oversee stuff. It's really only the foundational strength of our institutions that's managed to see us through.
Some probably, the larger ones usually have far longer tails.
Housing and population demographics issues are decades in the making.
Race affairs issues have roots centuries old
About the only large issue with origins in this Labour governments' tenure is inflation, which is both outside their ability to manifest, or erradicate quickly.
Most of the issues Nz has now were created by successive governments of both blue and red following neoliberal economics and neglecting infrastructure for 30 years.
I work front line health and the decline has been steady for at least 20 years; do just a little bit more with a little bit less every year, which is sort of manageable until the excrement meets the air conditioning. And then we have a crisis which cannot be named by the minister of health. As a nation we have let this happen.
None of the current parties in parliament are offering anything that has not already been tried. A total lack of vision, and a continued decline is what we are being offered. If the events of the last few years are not enough to force an economic restructuring then nothing short of electoral revolution will make it happen. Yes I am talking about TOP getting into parliament.
ACT's proposals:
Spending cuts include lifting the retirement age to 67, ditching climate policies, ending the free year of university, cutting research and development tax credits, and abolishing all demographic ministries.
How about they ditch all private rental market subsidies? $3b per annum savings right there.
I speak to the Petitions Committee on this early next month;
https://petitions.parliament.nz/976f3ed6-afd2-4824-a6eb-da6940d67d88
Yes, it's a real problem. My thought on that is that as long as such properties are commercially rated by local government (commercial properties normally carry a higher targeted rate), it's a valid side-business for many.
We need far more corporate build-to-rent apartment complexes. I think we went all the wrong way years ago with the unit titles. That ownership model hasn't served either unit tile holders or renters well.
And you don't ask why there has been an explosion of AirBnB? Maybe the loss of interest deductibility and the RTA demonising landlords? The changes are making it harder for certain people to find rentals and having to default to state housing or emergency accom. Hints-don't look like a gang member, pit-bull owner, crack whore or someone sucking a benefit. Life is just going to get tougher. Disclaimer-I sold my 2 rentals some years ago (big mistake)/
My in laws recently bought a new place and have left their old home unoccupied (although currently looking at AirBNBing it) because they don't want to get a tenant in who will trash the joint and be hard to move on, having had a bad experience with this in the past with a rental that they eventually sold.
To be honest, if I bought a new house and had the means to keep my existing one, because of its proximity to the CBD and the type of the property I'd probably AirBNB it too for the same reason. I'm not convinced I'd make much more off it once you factor in having to pay for cleaning and take into account vacancy. I also support the idea that AirBNB/short term rentals should attract business rates ... why not if you are operating a business after all?
I wonder if part of the reason so many people are AirBNBing homes instead of renting them to proper tenants is because they don't want to wind up in a situation where they have some nightmare tenant who moves in and is tricky to then move on?
Is there any data or research on this?
Cheers, wish me luck! Here's a more thorough explanation of the initiative;
Big thanks to interest.co.nz for the platform - it made linking to it an 'easy as' written submission to the Committee :-).
Santa cannot make it to NZ this year.
He has had to pay exorbitant elf wages due to labour shortages and had material costs through the roof from greedy suppliers and inflation, doing his research, he then realised he couldn't afford to refuel his reindeer in NZ due to spiraling food costs, and the families could not longer afford to feed him his core diet of cookies and milk due to a cost of living crisis. He wished he could get there, and give all children the gifts they deserved, but again he couldn't even source local coal to do so for the naughty ones, only some low-grade rank stuff from Indonesia floating about in Huntly.
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