The Government will spend $2.6 billion to help households handle the increased cost of living by providing cheaper public transport, 20-hours of free childcare for two-year olds, and subsidies for insulating older houses.
Budget 2023 includes $4.8 billion of new annual spending, with almost 80% of that figure absorbed by cost pressures in existing services — largely due to inflation.
The cost of the four headline policies comes to $2.6 billion across the next four years, during which the government will spend an additional $15.3 billion.
Despite the nominal increase, Government spending in real terms has already been reduced and will have fallen by 5% by 2025.
One of the large capital allocations is the $3.1 billions set aside to build 3,000 new public housing places by June 2025. In terms of tax, a key change is increasing the trustee tax rate to 39% from 33% to align it with the top personal tax rate from April 2024.
Meanwhile, extending 20 hours of free early childhood education to two year-olds is another big ticket spending item at $1.2 billion.
Minister for Education Jan Tinetti said childcare was one of the biggest costs for families and this policy would make a big different and allow more parents to return to the workforce.
“This is a win-win for families with young children; it will reduce costs, remove barriers to early learning and allow parents to return to work or take on more hours if they can,” she said.
The government will also scrap the $5 co-payment for prescription medicines, at a cost of $618 million, to help remove barriers for low-income people.
Minister for Health Ayesha Verrall said more than 135,000 adults did not collect their prescriptions in 2021 and 2022 because of the cost of doing so.
“Free access to medicine will also relieve pressure on the health system. Removing the co-payment charge will help reduce the demand on hospitals and other health services”.
The budget sets aside $327 million to set up free travel for children under 13 years old and half price for people under 25 years old. This could save as much as $30 per week for the average household of two children.
Approximately 770,000 New Zealanders will be eligible for cheaper fares because of this decision, adding to the 895,000 made eligible for half price fares in the previous budget.
Transport Minister Michael Wood said everyone in New Zealand will benefit from the policy, either through improved access to public transport or reduced congestion on roads.
The final flagship spending item was one on the Climate Change Commission’s wishlist: retrofitting older houses with better insulation and heating products.
Budget 2023 provides $402 million of funding to double the Warmer Kiwi Homes programme which will deliver 26,500 insulation and heating retrofits in each of the next four years.
Energy Minister Megan Woods said a study by economic research group Motu found the programme reduced electricity use by an average of 16% in the winter months and cut the risk of respiratory illness.
Many of these policies were pitched as serving dual-purposes. For example, the cheaper public transport fares help households cope with the cost of living while also incentivising uptake of the cleaner mode of transit.
Better insulation in households reduces demand for electricity and makes it less likely the power grid will require generation from fossil fuel power plants, as well as being cheaper for users.
Providing cheaper childcare allows more parents to return to workforce, which could help ease the labour shortage and provide an extra income stream for families.
Other large operating costs include $160m in subsidies for the gaming industry, $465m of funding to build 3,000 state houses, and $120m on vehicle charging infrastructure.
Budget 2023 has allocated $10.7 billion of capital spending on a range of infrastructure projects.
The largest of these is a $6 billion allocation into a new National Resilience Plan which will initially support the cyclone rebuild before morphing into a vehicle to address the long-term infrastructure deficit.
You can read Budget 2023 in full online.
152 Comments
Agreed. Speaking from experience, innovative business operating on a global scale are much better off retaining their core activities in NZ than moving them across the ditch.
We produce good talent in NZ that local innovators don't have to compete for with oversized banks and mining companies.
This is a classic boom/bust outcome in the making. Interest rates will continue to rise until one day it all goes THUD. Until the Reserve Bank sees definitive signs the economy is slowing by way of rising unemployment together with cooling of inflation to its target band, its the status quo. Those who are paying colossal amounts of dead money by way of interest to a Landlord Bank secured by an asset that's declining in value, are feeling mislead and unsupported. There are some eerie similarities with past cycles. Meanwhile, the gap between rich and poor will continue to widen.
Yep, I'd say the same. One gets the feeling, if it hadn't been for the cyclone, they might have been aiming in further 'right' directions.
I am surprised that adding the 2-year old cohort to the 20 hours free ECE has such a big ($1.2b) price tag. In a perfect world, of course, I'd rather pay the parent(s) that to keep the child at home (and parents can become active in Playcentre for socialization). That two incomes are needed to support a family is just a shame, but a reality, of our out-of-control housing (and renting) costs.
If there was one-only, cost-of-living reduction that a government could bring about, I'd say that should be targeted at bringing down rents.
But, by now, I think all interest.co.nz commentators know that 'hobby horse' of mine :-). Sorry to keep bleating on about it!
Yes - we need to bring rents down. Not cover the cost as that is inflationary, but look to decrease rents. The approach may be to inflate them down, which would be the most painless solution imo. Subsidies don't work and rent controls are seemingly political nightmare.
But the parents don't want to be paid to keep the kids at home. We want to go to work, instead of being isolated working from home because the kindy's cannot take our children (and the alternatives are horrendously overpriced).
Waikato Kindergarten Association was amazing, allowing our eldest children there as two-year olds.
Auckland Kindergarted Association is great too - but our youngest has had to wait until they turned three to attend - so there's a different standard of education for them. We ended up pulling the four year old out a couple of days a week just so the younger could have someone to play with.
We used to be heavily involved in Playcentre (at a national level, not just local, too), but it's not the same in Auckland. Waikato was extremely well-organised, Auckland is very much not.
The big issue, however, is working from home while having the kids around has gotten really old after three years of it. Right now, we're arranging an au pair for the rest of the year. This will cost money, but the sanity's going, so we figure it's worth it. Perhaps the government could provide au pairs for everyone?
Definitely agree about the rents though.
For some it's the increased cost for a family, but for a lot it is the societal pressure that both parents should work.
It is now unfashionable for one parent to stay at home - which is a shame considering the research is clear on the benefits to our kids and society in general.
Not sure it is a matter of fashion, more so that it is a big struggle for many paying a mortgage, feed their families on just one income and WFF. With the cost of living increases and mortgage rates currently there will be a lot doing it tough and bucking the food budget right back to bare bones. Imagine those who bought at the peak and then had a child soon after, they will barely be able to manage unless the sole working parent has a well paying job, adding more pressure to the mix.
I think there is a big difference in being cranky because you can see a massive iceberg on the horizon and you're shouting at the captain and crew to change direction and it's falling on deaf ears because they are too busy enjoying their sherry in the mess vs the angry drunken rants of a political hooligan.
I'll leave you to determine who is PDK and who is Shaft in these scenarios.
Real government consumption is expected to decline by 5% between June 2022 and the start of 2025, with over half this decline having already occurred.
“This decline in real government consumption reflects partly the conclusion of Covid-19-related spending, and partly the impact of wage and price inflation eroding the Government’s spending power”.
“This fall in real government consumption helps unwind excess demand in the economy. It also follows a period of strong growth over the Covid-19 period when … real government consumption increased by 19%,” it said.
https://www.interest.co.nz/public-policy/121276/treasury-forecasts-nz-a…
But when I looked at the Total Operating Average of the section that relates to initiatives in the Budget document, and then compared it to last year I saw the following.
2022 - $5.8B vs 2023 - $4.8B
I'm not an economist, but doesn't that mean they're spending less than last year? Like, about a Billion dollars less?
And at a high level, they're planning to spend 32.5% of our GDP on Core Crown expenses, which is less than the 35.4% they stated in 2022.
That's also a reduction in spending. Hardly inflationary is it?
What are you basing your statement on Peter?
It's less inflationary because it's less, but it's still inflationary. Why?
It's still deficit spending. Which means the government is spending more than it has taken in in taxes.
https://budget.govt.nz/budget/pdfs/at-a-glance/b23-at-a-glance.pdf
See the OBEGAL graph on the last page.
Maybe I'm being too cynical, but $1.2 billion for 20 hours of free kindy - how much does that actually help each individual family? $1.2b is a heap of money, but 20 hours is like 2.5 days, after which you're straight back to paying for it again.
Is there something I'm missing here? Or am I just an ungrateful bastard?
Edit: Turns out I was missing something. It's 20 hours per week. Yeah, that's pretty significant.
I think 20 hours fee-free is reasonable, given most parents I know only send kids to daycare for 3-4 days a week.
I hope a decent chunk of this funding flows directly to ECE teachers. These got the short end of the stick for a long time and still don't get much attention in MSM.
FYI the majority of daycares run 52 weeks a year, closing only for public holidays.
FYI the majority of daycares run 52 weeks a year, closing only for public holidays
That's because they are money factories. The govt announcing this will likely cause daycare centers to increase their prices to recoup the cost since the govt will only pay a set contracted rate which they would otherwise charge MUCH more for for 2yr olds, resulting in any older kids parents paying out more and removing the net benefit. Always unintended consequences when things are supposedly free
Day cares play games with these schemes. Our first child's daycare fees barely changed we she turned 3, despite the "free" care kicking in. It's arranged such that it doesn't ever cover a full day and covering the remainder of the day is like paying for a day.
Essentially, the day care double dips.
Was chatting to a family member last night who said they know of daycare centres logging the max hours on all kids even if they don't use them to ensure they are milking the max from the government funding, and still double dipping with high daycare fees. Why the greed NZ, why, won't we think of the children
On one hand, I'm not going to look a gift horse in the mouth. We have our kid in for about 18 hours per week and it's currently costing us $150 per week (as we opted for them to supply her food etc). So unless the daycare centre works out some clever shenanigans and rorting we should be making out like bandits off the back of this. In fact if my math is right we should be up about the finance payment on a post clean-car rebate EV.
On the other hand, we have a good household income. My brother and his wife, however, have a middling income and no kids. They get nothing. Such is life when you're trying to buy votes I guess.
Still won't change my vote and I don't feel the need to be grateful for getting back a bit of the extra Grant has relieved from me over the past years, thanks for the extra cash all the same.
You're an ungrateful bastard lol.
Be thankful you're getting something. I occupy the unenvious position of not having kids, and earning too much to qualify for literally any government spending, but not so much that I'm 'creaming it' or own more than one home. Heck, mortgage is = ~75% house value atm.
Minister for Education Jan Tinetti said childcare was one of the biggest costs for families
Probably right, but if your children are 4,5 or 6 etc...this aint going to help is it.
Minister for Health Ayesha Verrall said more than 135,000 adults did not collect thier prescriptions in 2021 and 2022 because of the cost of doing so.
So are the doctors going to remove their fee of writing out the prescription. Think that would put a lot off.
well you obviously have not seen the school fees lately...I mean "donation", and materials contribution fee for every subject, that if you don't pay your child is made to miss out on numerous activities...plus the over priced uniforms and shoes they are made to wear.
On the contrary. The majority of trusts are probably owned by regular non-wealthy people trying to protect themselves from the insanity of the property relationships act of 1976. What the government has effectively done is to push the truetee rate way above the marginal tax rate of either the settlor or the trust's discretionary beneficiaries. This amounts to a government incentive not to increase the equity of your trust through income. It's just an irritating little intrusion which will force people into making awkward financial arrangements.
The shareholders of Chemist Warehouse will be laughing all the way to the bank - they were previously subsidising the $5 prescription fee to get people into their stores. It caught on with other pharmacy's too - my local Life pharmacy also offers "free prescriptions". Competition was delivering free prescriptions to the masses - the government didn't need to step in
So Govt is going to spend $618 million to cover the 135,000 prescriptions that were not collected - thats a lot of money for such little benefit
and bugger all difference to hospital admissions
never mind that yet again a large number of people in NZ - me included - dont need these subsidies so just throwing money back away
Yeah, not great value for money. They should have just waived the fee for everyone with a Community Services Card - far more targeted where needed - and would save a heap of money where all those folks that don't need it are concerned.
I think the rule as it stands today, is that after you've spent some certain amount on the $5.00 fees - then all else in that year is free anyway. Which is good for elders and others who have multiple prescriptions to fill.
"Another large capital allocation was the $3.1 billions set aside to build 3,000 new public housing places by June 2025"
Where?...
This is great for us speculators. More cheap shitters to throw into the current oversupply situation.
If they want to free up thousands of houses then ban or heavily tax the sihite out of Air bnbs
"Energy Minister Megan Woods said a study by economic research group Motu found the programme reduced electricity use by an average of 16% in the winter months and cut the risk of respiratory illness. "
This Motu group are a bit dumb...
https://www.motu.nz/our-research/population-and-labour/individual-and-g…
Open that link and make sense of that title heading.
.. a bunch of overpaid numpties with poor English comprehension
🤣🙄insulating a house with leaky cladding, windows, doors...brilliant🤣🤣🙄
Insulating house so they keep the single glazed windows shut!... brilliant for your health, mould and condensation.
Give me cheap power instead of throwing insulation in a house with single glazed, leaky joinèry all day long.
FFS, you guys need to understand how builders laugh at this Dumb insulation €$$$ handout crap.
It's like being nude in a snow storm with a woolley hat on.
I'd love to see more R&D into wool, imagine the possibilities. There must be numerous ways to treat and use it that will fill the gaps for imported products, and it feeds right back into our own global strength of agriculture. We would however have to consider the processing costs as we can;t keep shipping it all off to china to process and ship back.
You're probably aware, insulating the roof is by far the biggest bang-for-buck investment. Most sane countries with similar climates to NZ's cooler regions would mandate a foot or so of insulation in the roof. I've seen places here with barely an inch or two.
Fixing the joinery and installing double glazing are less clear cut wins, but I'd certainly want them done in my own home (and have done so).
"Meanwhile Treasury believes a toxic combination of higher interest rates and weak wage growth will smash house prices. In December, it forecast prices would eventually reach their pandemic peak by 2027 - but now it forecasts no end to the crisis" Note the main Herald header - "no end in sight for house price crash"
https://www.nzherald.co.nz/nz/politics/budget-2023-breakdown/5F62D7ZLSJ…
HW2, were you really holding breath for the 2PM Budget release? What were you hoping for? Zachary Smith, what's your take on this rapid reversal of forecast?
Nice try Zachary, they certainly did! Unlike other "desperate" residents, I don't need to make stuff up :). Now inside the article has been heavily edited! "House prices are likely to continue crashing until next year, the Treasury is predicting in today’s Budget" https://www.nzherald.co.nz/nz/budget-2023-house-prices-to-fall-21-per-c…
They are forecasting a rise in house prices to occur in the not too distant future however they are not willing to hazard a guess as to how long it will take to reach the peak of the pandemic high.
The Herald seems to think that the "end of the crisis" is when house prices reach that peak again rather than start to turn around. If you bought your first home at the peak that may well be the case however for most people the end of the crisis would be a return to low inflation and house prices gaining a little each year.
If you already have an older family you could leave them to begin a new reproduction cycle. That way you'd be on payroll. On a serious note the additional childcare support should help some struggling families make ends meet. Bit of a non-event overall...classic small target approach.
I mentioned further up that my family will benefit from this childcare support, but we definitely aren't a struggling family. We will benefit to the tune of well over $100 per week, whereas the poster above or a young couple of with no kids gets nothing.
I'd prefer that the policy is means tested or some kind of credit you can claim back against childcare costs if you have under a certain income, as even though we will benefit from these it honestly feels a bit unfair that people on much smaller household incomes will miss out on getting anything just as they don't have kids.
That being said it's a clever vote buying ploy. My wife has a Snapchat group chat with some friends all with similar aged (1-2 YO) children and they are going off with excitement about this announcement.
My wife has a Snapchat group chat with some friends all with similar aged (1-2 YO) children and they are going off with excitement about this announcement.
Seems that anything child related instantly gets the vote for the mothers of young kids - egalitarianism goes out the window.
Well I'm actually quite pleased they didn't adjust those, as if they did, I thought they may just have a sniff of getting reelected, but they delivered bugga all in this budget for a large majority, so thinking this is a good think come October. Infrastructure spend goes to about 5 of the biggest companies in NZ, one of those is family owned, two foreign owned, other on NZX and ASX, so if you happen to be a shareholder with them you'll be happy I guess.
I suspect Labour will adjust the tax brackets as part of their election package (perhaps even introduce an Aussie-style, tax-free threshold) - but I also suspect with that, there will be an offset in terms of a new tax - perhaps a further higher bracket (I think in the old Muldoon days, we had a top rate of 60 cents on the dollar); perhaps a CGT (excluding the family home), or an inheritance tax (likely only over a certain sum).
One thing Labour usually do well is target their target constituency.
Spend, spend, spend, all this government is capable of, no wonder they've doubled NZ government debt in less than six years.
Government yearly spending has increased to 61% more a year under them, and now covid is not costing them anything their spend is still going up, can't blame it on covid anymore, might have to accept reality, that the former arts student Robertson has no idea what he is doing.
Spend, spend, spend, all this government is capable of, no wonder they've doubled NZ government debt in less than six years.
Yep blow all the cash and borrow a TON more, then get voted out and use the cleanup of the next government to then scrutinise their 'mismanagement' of the economy to try and get the votes swung back again. The classic Labour cleanup usually takes two terms before people forget
A quick and dirty study by Motu can't trump the results of the $30m evaluation of the original Warm up NZ programme, which found that people didn't use less energy, they took the heat dividend and were healthier as a result. That's zero fewer emissions, zero less electricity consumption and heaps better health outcomes. The rest is a veneer.
Sigh, I expected more from the budget to be honest.
Regarding comments such as these below, yes, I have spoken to several families in the last few weeks.
They are all waiting for the election, and if no change they are seriously consider leaving.
“Prime Minister, your job is to fight to keep Kiwis home in this country,”
“This Budget needed to deliver a plan for New Zealanders to grow the economy and it didn’t.”
“Prime Minister, your job is to fight to keep Kiwis home in this country,”
Chippy: "No worries team, I've just struck a deal that makes it more attractive and easier to jump ship to Australia so that when we lose the election, you are welcome to bail. Come next election we'll be back in with a force when we can paint the next Govt as useless!"
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