Govt sees NZ$0.7 bln OBEGAL surplus in 2016/17; rises to NZ$6.7 bln by 2019/20; NZDMO to borrow NZ$2bln less this year and repay NZ$9.2 bln of debt by 2020; NZSF contributions to restart 2 yrs earlier in 2020/21

Govt sees NZ$0.7 bln OBEGAL surplus in 2016/17; rises to NZ$6.7 bln by 2019/20; NZDMO to borrow NZ$2bln less this year and repay NZ$9.2 bln of debt by 2020; NZSF contributions to restart 2 yrs earlier in 2020/21
Prime Minister John Key and Finance Minister Bill English walk into Parliament to deliver their eighth Budget on May 26, 2016. Photo by Lynn Grieveson for Hive News.

By Bernard Hickey

Finance Minister Bill English has unveiled his eighth Budget with few major surprises and barely enough room for tax cuts from next year.

At first blush, it appears to be a ‘holding pattern’ Budget that keeps the Government on track to meet its surplus and debt targets, but with the flexibility (just) to announce income tax cuts before the next election, if the economy keeps growing solidly.

It lacks the big bang announcements of previous years around benefit rate increases or new spending on doctor’s visits, and instead keeps the Government’s powder dry ahead of the 2017 election.

Here are the key details:

As largely foreshadowed, English increased the Government’s spending allowance in Budget 2016 for the 2016/17 year to NZ$1.6 billion from NZ$1.0 billion to accommodate extra spending on health and education because of population growth, and includes money spent up front on child welfare reforms.

English reduced the planned new spending allowance for Budget 2017 from NZ$2.5 billion to NZ$1.5 billion, partly by shuffling forward the NZ$600 million for extra spending this year and using the rest to repay debt.

This leaves little room for the NZ$3 billion of tax cuts indicated last week by Prime Minister John Key, but English was coy about what decision the Government would make next year, saying only that the Government would make its decision next year based on the fiscal conditions and the choices before the Government.

“Those are decisions for the future,” English told a news conference inside the lock-up in the Beehive.

The focus on debt repayment over the next three years, rather than the tax cuts indicated for 2017 and beyond at Budget 2015, meant the New Zealand Debt Management Office (NZDMO) was able to reduce its planned borrowing in the 2016/17 year by NZ$2 billion to NZ$7 billion. It also said it would reduce net bond issuance by NZ$9.2 billion over the three years up to 2019/20. It also means net debt was forecast to fall to 19.3% of GDP from 25.6% now.

This slight improvement in the debt track allows the Government to bring forward the resumption of contributions to the New Zealand Superannuation Fund by two years to 2020/21. However, English told the news conference that resumption would be one of the options the Government considers as it tosses up whether or not to offer tax cuts next year.

The Government cut its capital spending allowance to NZ$1.4 billion from NZ$1.7 billion in December, when English had lifted it from NZ$700 million. However total new capital spending, which includes NZ$883 million on 480 new classrooms and nine new schools, totals NZ$2.6 billion for 2016/17. However the second-biggest chunk -- NZ$857 million -- will go to the IRD's 'Business Transformation' new computer system.

However, English did highlight that a further NZ$599.6 million has been set aside in the Budget as a contingency for additional infrastructure investment, without being specific about how or where it might be spent.

Elsewhere, the Government scrapped its 1 for 2 concession for carbon credits in its emissions trading scheme and said tobacco excise duty would rise 10% per year on January 1 for the next four years.

Reaction

Labour Finance Spokesman Grant Robertson said the Budget failed to deal with the structural challenges facing the economy, including "a housing crisis, rising unemployment, underfunded health and creaking infrastructure."

“This Budget applies a sticking plaster to a compound fracture. There is nothing tangible in the Budget to create more jobs, deliver a real increase in wages and diversify the economy through encouraging new and emerging businesses to grow and export," Robertson said.

“The Reserve Bank Governor will be kept awake at night. With the economy being driven by population growth, the inadequate announcements in infrastructure spending ignores Graeme Wheeler’s plea for more economic legwork from the Government," he said.

Green Co-Leader James Shaw said the Budget showed "yet again, that in response to the great challenges facing our nation, all this Government is willing to do is plaster over the cracks when it could’ve been building houses."

"For eight years now, we’ve had a Government that has put together its budgets on the basis of what will do well in the polls, rather than what will fix the problems we face," he said.

(Updated with fresh picture, detail)

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46 Comments

A well balanced and sensible budget .... boring even

Just the way I would want it in the circumstances.

Where's the items of "significance"?

Ok, com'on whingers of self-interest.co.nz, let the complaining begin

Oh that's easy Yvil, "Won't somebody pleeeease think of the children!!!"

(wring your hands as you read)

12
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I'll start then. Pathetic, all in all, a do nothing budget, steady as she goes....to the bottom of the OECD

Agree

$100 million to clean up New Zealand's rivers, lakes and aquifers
The cynic in me says this is a feel-good thing more than a significant enough investment, but it's a good start.

14
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Nuts, First we subsidise the irrigators then we pay for the clean up. But it's a pie-in-the-sky sum anyway given the magnitude of our problems;

Canterbury facing 'chronic ecosystem failure' without action, ecologist warns

http://www.stuff.co.nz/the-press/opinion/80259117/canterbury-facing-chro...

Our national freshwater statistics include New Zealand having the highest rates per capita of coliform enteritis, campylobacter, cryptosporidium and salmonella in the OECD.

100% pure NZ.

how can 100 million clean the rivers? It's just more feel good jobs for bureacrats.

Why should the NZ taxpayer pick up the pollution bill of industry?

14
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Because this is the 'market economy' the centrist and right wing governments favour: socialise the losses, taxes for the poor, subsidies for corporates.
.
Where have you been hiding that you don't know this?

jezz, some might not get your sarcasm. I did

At least the IRD are still getting there billion dollar software upgrade. Money is going to slip out of your bank account so smoothly you won't even notice.

Just been having a little read into the US company they have decided to use for their software upgrade. Suprisingly low annual revenue. Looks like an off the shelf tax software package. I wonder where all that money is going.

... and all their job ads are for Visual Basic developers. *chortle*

...and that money will slip away before this upgrade is complete - major programmes of this magnitude rarely come in on time and budget.

i am glad focus is paying down the debt they have built up, thats a plus from me
national will never fund the NZ super fund its not in there DNA so you can take that off any future table

Once the boomers are past working age National will be happy for it to be funded.

I'm struggling to follow the debt repayment part. The way I read it they're only borrowing less. Is that the same as repaying?

We need a title:

The budget of cowards 2016?

How about 'The budget of boring ideologues who are just setting us up for a disaster at some future point'

Sorry not very catchy

The 50 shades of boring budget?

Winston has called it the 'kiwis get stuffed' budget

Unless you are involved directly or indirectly with, or benefit from any of the following:

$411m for science and innovation
$257m for tertiary education
$94m for regional development
$883m investment into schools
$857m for a new tax computer system
$115m for road projects
$45million for Tourism over 4 years
$36m for healthy homes initiative
$200m to support vulnerable kids
$384m to reform the CYFS system
$50m to reduce long term welfare
$40million for Whanau ora
$20m to reintegrate prisoners
$258m for 750 additional places in social housing and 3000 emergency housing places
$73m towards primary healthcare
$169m for disability support services
$15m to support air and road ambulance
$12m to improve access to mental health services
$39m to roll out a national screening
$100m to clean up our waterways
$21m to eradicate pests
$16mm to eradicate invasive wilding pines
$41million to 670,000 Gold card holders

But otherwise, nothing for Kiwi's.

The new budget announcement methodology: Announce the money even if it is just the normal expenditure forecast out for 3 years. The reality is that per user, per student, per school, per hospital, etc the spending is on a sinking lid pathway.

$1.7b of this "Spend" is reallocated from 2015/2016's budget savings ....what was appropriated last budget, that has been deferred throughout the year which will happen again with this 2016/2017 budget. They're broke and out of idea's eg; $52m buys 13 hectares in Auckland so now $100m will make that 37 hectares! It's all smoke and mirrors, more talk and no action. Reams and reams of plans but no idea of how to execute them. Its time they take a break and a new government is needed...they're in a third-term-itis funk. Time for them to go!

So the Herald's lead piece is 'Are you a budget loser or winner'
And that sadly sums modern NZ up - what's in it for 'me' in the short term rather than the collective future of the nation

The Herald is a tabloid rag that runs whatever they know will get the most clicks. There is not much overlap between this and quality journalism.

Radio NZ is a much better place.

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Nothing for housing ...just more denial from National.

They could of tapered the "Corporate Welfare" of WFF - I have said it before and will say it again, if a company or an organisation can not afford to pay a decent wage, it shouldn't be in business - why should the taxpayer prop up a corporation's wage bill.

Then there's the "Accommodation Supplement" - what a rort that is for landlords and the banks ! - again taxpayer money going to landlords, then to overseas owned banks, in the form of mortgage interest repayments ..... marvellous for the NZ economy.

There has to be new tax legislation, so that mortgage interest payments on residential investment property are not tax deductible (partly or fully) against income - shrieks of protest I hear you scream ! Well, in some countries a homeowner who lives in the property (note: not property investor) can claim mortgage interest payments against their income - what's good for the goose is good for the gander !

The accommodation supplement could buy you a new tax IT system every year

Great point kiwi, it just goes to show how reasonable us IT people are.

correct could pay for a lot of things, I guess he is calling landlords as the least well off
Rt Hon JOHN KEY: The Government has done a substantial amount to help the least well off, $1.2 billion on the accommodation supplement,

Whats in it for Richie and Dan.

Good budget. It'll keep the economy moving, and the predictable whingers will plot to get their hands increasing revenue next election. By then we'll probably be seeing house price falls like uk is now as building gets ahead of immigration - again like uk though.
Just take control of Auckland planning please

'Good budget'? you serious?
Minimal action on housing, the bubble gets bigger, the chances of a catastrophic crash grow....
doesn't sound like sound economics to me

extra spending on health and education because of population growth - (read due to migration)

And the winners are the Migrants whose immediate needs are being attended to

Yes.
As Winston says it is the "Kiwis Get Stuffed' budget.
It's all pretty surreal when a govt starts screwing over its own citizens

The worst thing is that (according to the polls) 45% of the voting public in this country would actually like to re-elect these muppets who came up with this insipid, luke warm, no action, wait and see, fiddle while Rome burns, deck chairs on the Titanic, head in the sand... enough with the analogies already...

approach. Time for some more zeds - much like this government.

Why no increase in excise tax on alcohol and sugary/fatty foods? Are they not as harmful as tobacco?

Looking forward, without much expectation of Great Things, to Nick Smith's National Policy Statement re housing.......

The opposition response speeches to the budget:

http://www.inthehouse.co.nz/video/43399
http://www.inthehouse.co.nz/video/43402
http://www.inthehouse.co.nz/video/43401

Media don't seem to feel the need to report on them much.

Thanks for posting the speeches xelnaga. Every voting NZer needs to watch them. Ive also just watched Paul Henries morning show which is so pro National that its an insult to journalism. Andrew Littles speech is very critical of budget but with no answers other than inventing money to solve the problems. Winston Peters sums up the cause of the countries problems but took a while to get there. POPULATION GROWTH. The budget tops up health etc as it turns out that all these immigrants didn't bring houses or hospitals with them.
The taxpayer will so obviously have to provide the infrastructure to support all these people. Winston nails it in his speech right down to the analogy that last years immigration growth was a city the size of New Plymouth.
Let me point out that if NZ has a million taxpayers, that means for the government to spend 1 billion that is $1,000 for each tax payer to come up with . If that doesn't sound much where talking multiples of billions to assimilate all these people into our population to then share the wealth that the country produces as yep, they didn't bring any farmland ,fishing or forestry with them either. The larger the population the less for everyone.

Nothing in it for me, however I would like to thank all the smokers in advance for propping up our countries economy. Cheers. Seriously though perhaps you should REALLY, REALLY look at quitting before your habit means you cannot afford to eat and that kills you before the smokes do.