Grant Robertson announces extra $6.8 billion to be allocated towards transport infrastructure; New capital spending won't get out the door until 2021; Treasury forecasts lower tax revenue and weaker economic growth

Grant Robertson announces extra $6.8 billion to be allocated towards transport infrastructure; New capital spending won't get out the door until 2021; Treasury forecasts lower tax revenue and weaker economic growth
Finance Minister Grant Robertson

The Government has announced it will allocate an additional $12 billion towards infrastructure over at least five years.

The investment will be broken up as follows:

  • $6.8b for new transport infrastructure, with a significant portion going towards roads and rail
  • $400m for schools’ capital funding
  • $300m for regional investment opportunities
  • $300m for District Health Board Asset renewal
  • $200m for public estate decarbonisation
  • $4b for the multi-year capital allowance - with the allocation of these funds yet to be determined.

Finance Minister Grant Robertson hasn’t detailed specific projects the funding will go towards.

He said “a number” of transport projects were “shovel ready” and wouldn’t rule out investing in Roads of National Significance - something the National Party has been calling for.

He stressed the roading projects National wants are a “wish list”, as these projects haven't been funded, even though some are consented.

Robertson recognised new funding wasn’t allocated towards housing, as a substantial amount had already been put towards this area.

The Government’s new capital expenditure, totalling $15.4b over five years, won’t meaningfully start getting out of the door until the year to June 2021 (IE $800m is expected to be spent in the year to June 2020).

It is only planning to issue an additional $2b of bonds compared to what was planned at May's Budget. This will bump issuance in 2023 up to $8b. Treasury has also announced it expects to issue $6b of bonds in 2024. 

Budget Responsibility Rules technically broken  

Robertson’s announcement coincided with the release of Treasury’s Half Year Economic and Fiscal Update (HYEFU).

Treasury expects net Crown debt will be $12b or 3.6% higher between 2019 and 2023, than forecast at the Budget released in May. It expects net Crown debt to total $344.6b over this time.

Net Crown debt as a percentage of gross domestic product (GDP) remained low in the year to June 2019 at 19.0%. It is expected to pick up to 21.0%, 21.5% and 20.9% in 2021, 2022 and 2023 respectively.

Robertson confirmed in his Budget Policy Statement that having reached the target of dropping net Crown debt to 20% of GDP within five years of the Coalition Government taking office, “The Government will maintain net debt within a range between 15 and 25 percent of GDP”.

Robertson said it would be “ludicrously stubborn” if he didn’t make the most of the low interest rate environment to invest in much needed infrastructure, for the sake of keeping debt below 20% in 2021 and 2022, as inferred by his Budget Responsibility Rules.

Economy weaker

Treasury’s HYEFU shows GDP growth is expected to be lower in the near term than forecast at May’s Budget.

It forecasts the annual average change for the year to June 2020 will be 2.2% (as opposed to 3% previously forecast), 2.8% in 2021 (same as previously forecast), 2.7% in 2022, 2.5% in 2023 (both higher than forecast) and 2.4% in 2024.

Looking at tax revenue as a percentage of GDP, this is expected to be lower across the forecast period.

It sat at 28.4% in the year to June 2019 and is expected to fall to 27.7%, 28.0%, 28.0%, 28.2% and 28.4% in the years following. 

Forecasts at May’s Budget sat between 28.2% and 28.8% over this time.

A lower tax take coupled with higher expenses means the Government's operating balance before gains and losses (OBEGAL) is expected to deteriorate, dipping $900m into deficit in 2020, before delivering smaller surpluses in the following few years than forecast at the Budget. 

2020 Budget priorities 

Robertson's Budget Policy Statement said investment in Budget 2020 will focus on the following priorities:

1. Just Transition - Supporting New Zealanders in the transition to a climate-resilient, sustainable and low-emissions economy  

2. Future of Work - Enabling all New Zealanders to benefit from new technologies and lift productivity through innovation

3. Māori and Pacific - Lifting Māori and Pacific incomes, skills and opportunities

4. Child Wellbeing - Reducing child poverty and improving child wellbeing

5. Physical and Mental Wellbeing - Supporting improved health outcomes for all New Zealanders.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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Wow what a shocking let down.

Agree. Not enough and BAU in terms of road focus.
Lame.

The one positive we can get from this is that Labour will continue to be limp wristed on everything they do. Good to know what we're dealing with.

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... hmmm .... must be an election coming up .... oh yes , next year ....

Ummm ... if you guys were so serious about infrastructure , how come you shut down the Gnats roads of national significance programme immediately after assuming power in 2017 ? ... oh yeah , immediately after shutting down our natural gas exploration industry ... that got destroyed first ...

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The higher natural gas price led to higher power prices. Oh boy, the Government needed to investigate the electricity market after that. Same as all the additional tax on petrol. Oh boy, the Government needed to investigate the petrol market after that. In both cases Government interference was completely ignored to shift the blame.

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Best thing they did. Roads just deliver traffic and spoil even more of NZ. Tidy up yer Auckland beaches and yous can all stay at home in the weekend.

Uber delivery via beaches ... wouldnt that get sand in yer pizza ?

Significantly stupid roads with ridiculously made up ROI. Colossal waste of money and resources and space.

As an example there is a short motorway to no where south from Tauranga, not used by the locals...

The problem is its tolled so heavy trucks pay to use it for efficiency but the locals many of who are typically smallminded provincal types, who have trouble driving correctly much less understanding the concept of paying 2 dollars to get somewhere faster are the big issue. Its not helped that the road was cheaply connected to the areas it passes through which just shows up the penny pinching ethos of the govt that built it.

Should we be spending billions on roads that are so low value that people wouldn't even spend $2 to use it?

We use it! It does what it's supposed to do - bypass the City. Come into town on SH 29 or 36 and connect up directly to SH29a or 2.

We did, from Auckland, but ended up going past the port when we were intending to go to Whakatane.
Not so good but the trip to White Island was great...by boat..

turn it into a cycle highway. first find some cyclists though. Then it can always have been part of “the great plan.”

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In other news - Government to allocate $5 Trillion to cut global 2100 temperature by IPCC modelled 0.004 degrees/rounding error.
"...if New Zealand meets its promise of zero emissions in 2050 and stays at zero for five decades, then the greenhouse-gas reduction, according to the standard estimate from the United Nations’ climate panel, will deliver a temperature cut by 2100 of 0.004 degrees.

New Zealand is considering spending at least $5 trillion to ­deliver a physically unmeasurable impact by the end of the century."
https://nypost.com/2019/12/08/reality-check-drive-for-rapid-net-zero-emi...

Just treat it as QE. The QE at least has a purpose despite questionable effectiveness. The US QE is a transfer of wealth with no benefit or improvement to anything.

No. Don't treat it as QE.

QE - Or as Dominic Frisby puts it - taxation without representation. What sort of cretin wants to tax unborn children? And lets face it $5 Trillion is a lot of kiwi kids - "A trillion seconds ago, there was no written history. The pyramids had not yet been built. It would be 10,000 years before the cave paintings in France were begun, and saber-toothed tigers were still prowling the planet."

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$ 5 TRILLION !!! .... cowabunga Batman ... that's alot of virtue signaling ...

... hmmm .... ought we start a sausage sizzle outside the New World or something to raise the funds ? .. . it's important to me that we hand Greta's stolen childhood back to her ... poor kid ...

Is a sausage sizzle environmentally friendly and sustainable?

We could use vegan sausages?

At a rough guess that's about 5% of the the exspected cost of WFF over that time.
And what if we make the country cleaner and more sustainable and it's all for nothing.

CO2 isn't pollution - for example it is pumped into greenhouses. Shutting down Tiwai and cranking up a smelter in China, or importing gas/coal from Indonesia, isn't helping on the pollution front either. We already have plenty of far cheaper laws in place for actual pollution.

Do you really think that money will just disappear without any positive effects on the economy?

positive effects or not, does the benefit outweigh the cost?

The benefit isn't just the negligible(?) reduction in global temperatures. And the cost isn't $5 trillion on top of what the 'cost' of building stuff normally would be. Why would we keep pumping money into the old ways (that will result in ecological disasters) instead of the new, more sustainable industries? We have practically infinite money, but we only have one atmosphere, one global ecosystem.

CJ. Can we assume you don't have a business, economics or goverance background.

did you even read the article?
"In these artificial conditions, if New Zealand meets its promise of zero emissions in 2050 and stays at zero for five decades, then the greenhouse-gas reduction, according to the standard estimate from the United Nations’ climate panel, will deliver a temperature cut by 2100 of 0.004 degrees."

That's pretty impressive, from a small country, we all have our part to play. And as a relatively small and well off country, with renewable electricity, we are in a unique position to lead the way.

Well your easily impressed. And now we can't lead the way, we are the small fish in amongst very big fish. We have no leverage against the big players

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This government has no plan. Two years of blocking/shelving numerous significant road infrastructure projects, and then they randomly do an about turn when election time gets close.

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Agree. Shambolic and no clear direction.

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Yeah, but they didn't just cancel those projects, they also diverted all the funding earmarked for urban infrastructure initiatives into handouts for lazy bums and greedy landlords. Despite warnings from several experts, the coalition went ahead with their welfare hikes and simply added to the already overstretched demand for basic resources.

Child poverty gone? Homelessness reduced? Median wage picked up? Oh, people are worse off now by those measures - then let's forget all that and prioritise something abstract like well-being.

Who knows, we have there should be benefits in what we are doing but we're not going to measure our success leader. How nice!

Nice that we can agree on something.

You should use that as your campaign platform next year Ashley.

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So this is an announcement to say there will be another, more detailed announcement later?

They've been drip-feeding this for maximum effect already.

First it was Grant saying at the Labour conference on the Saturday that they were going to spend some infrastructure money but he wouldn't say on what.

Then on Sunday Jacinda announced the $400M schools spending.

Now we have an announcement from Grant about the total amount being spent, but projects will be announced later.

With follow up announcements in future budgets, too.

If you want to be cynical then you could say the RBNZ's statement about "investment being more than anticipated" wasn't merely guesswork but a hint about this forthcoming announcement.

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Should allocate most of it to build a wall. Make NZ great again. The wall could go around the beehive.

And then fill it with water ?

concrete

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not surprised here
with our mass importation of people our infrastructure will always be behind

With 3.9% unemployment we're going to need to bring in more people to build whatever it is they want built.
Then we need to house those people.

Then we'll need to bring in more people to build houses for the people we brought in to build infrastructure.
And we'll need more infrastructure for the people we brought in to build infrastructure.

Then we'll need to bring in more people to build houses for the people we brought in to build houses for the people we brought in to build the infrastructure.
And we'll need more infrastructure for the people we brought in to build houses for the people we brought in to build the infrastructure.

Then we'll need more people....

Oh that's just cynical cmat ....jacinda told us that she knows what to do

Those unemployment figures are total BS. Here's some insight into that: https://duganotherhole.home.blog/2019/07/15/unemployment-stats-are-a-myth/

I did look at the underutilisation rate out of interest before commenting.

Agree, it's a better measure - but it's only been measured since 2016 so who knows where we sit historically on that.
Sure, you'd think the gig economy probably has led to higher underutilisation generally, but I have no way of confirming that or whether that labour is actually available.

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I'm betting it will be (driven by Green misanthropy) mostly white elephant train lines that new technology (autonomous vehicles and air taxis) will render uneconomic before they are even completed. Net effect: More debt for nothing of long term value.

You need to stop being so negative about New Zealand's next Think Big project.

Green Elephants , surely !

What colour elephant is the NCITR works.
It would be nice to have a road north of Kaikoura.

Wouldn't autonomous vehicles and air taxis make any transport spending uneconomic? Close the chequebook and wait and hope?

Totally agree here.

These projects will be dead on arrival with new tech in the next 10-15 years.

I put money on , rail to northport

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Option A: Ship to dock, dock to truck, truck to customer
Option B: Ship to dock, dock to rail, rail to depot, depot to truck, truck to customer. Several days added lag, 2 extra (expensive) handling stages, and a whole lot of extra low localisation infrastructure to maintain. An economic lemon that only appeals to economically ignorant ideologues and vote-buying aspirations of NZF.

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Option C. Stop buying so much $h&#.

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you do know that most of the containers that come off auckland port are railed to onehunga and wiri by the two biggest trucking companies servicing auckland
and they are both owned by the two major ports
so rail is already part of the equation
https://nexuslogistics.nz/news-and-media/article/2019/11/12/mechanical-i...
Tapper now carries over 90,000TEU of imports and exports a year. In addition to trucks Tapper operate, with KiwiRail, a rail shuttle service. This runs twice a day, to and from the Port’s of Auckland and our Hub located within the KiwiRail-MetroPort complex at Southdown

Yeah, it's like people genuinely believe last mile deliveries take place directly from the container at the Port.

Ours do come directly from the port, unless we are at capacity ourselves on the day. Can I not believe myself??

30% of the imports consumed by AKL already come through Tauranga via a version of option B and despite that apparently successfully compete with goods accessing AKL through option A.

part of the spend will also be for a third line through auckland so the trains from auckland port can be increased, as well as imcrease the daily capacity for the trains from Tauranga to metroport. at the moment they cant come though in peak hour and have to sit at sidings when the passenger trains come through

If automation features strongly in the forecast then surely that automation can be brought to bear on the most expensive parts of option B, which will scale more efficiently that clogging the highways with yet more trucks (autonomous or not)?

Kool story Grant .. guess workers will be paying for it? Grant-ed, governments make money when they spend money [Taxation under Modern Monetary Theory].

Here's an idea for ya Grant, tax the landowners who benefit from such infrastructure! Let's NOT tax workers to increase property values for a select segment of society.

Chur.

"It expects net Crown debt to total $344.6b..." - surely not, this figure can't be right?

Cm not say where exactly the money will be spent = we haven't got a clue but we are running arround looking for anything.
A multiple lane motorway to Wanaka so they can sell their Kiwi build disasters there???

How about spending a few million on training the managenment/leadership caste of this country about modern productivity techniques? The hidebound methodologies of businesses in this country hold us back something terrible.

How about taking a knife to the public service that lets business cases for vital infrastructure languish ?

Here are some suggestions:
Put a road tunnel through the Rimutakas from Upper Hutt to Featherston
Four lane highway all the way from Cambridge to Paraparumu
Fast track road from Albany to Whangaparoa
Tunnell from St Marys Bay to Northcote

..why....so we can drive to A and B and back again?
Ask ..why the need for all this travel??
We insist on the separation of work place,schools and suburbs. That seem to be rather stupid - how about mixing it up a bit..buy a house near to your workplace and school. Cycle or walk to and from. About time we actually thought about the madness of our how we plan.

Probably because people can't afford to live near where they work? Do you think people choose hours long commutes because they like it? SMDH at the tone-deafness of this argument.

Oh jeez rastus, you can't have "thoughts" . What we do is what we do which is what we do, ok.
I never cease to be amazed just how conservative people can be. There's always a better way.
People don't want to sit two hours plus in their car getting to work, but they do it. Over and over and over again. I'm not sure why. Perhaps I bought my kids up wrong cause non of them do, they flatly refused those jobs.

I've told you why. Finding the kind of work they need to pay a mortgage within any easy commute isn't easy and it's not something that's realistic for most people. I'm sorry if your sample size of your own children might have yielded assumptions that can't be extrapolated over an entire regional population, but that's the reality most people face.

As to why people live where they live: schools, parks, other community facilities, you know the stuff that reflects the reality that people shouldn't have to organise their entire lives and the lives of their children around where they work.

The simplest thing would be for the government to actually provide people with other ways of getting to and from those jobs using some of the tax they take from them for having those jobs, rather than uprooting your entire family and life every time someone switched jobs.

Disappointing. Not stated what will be spent on.
Cannot see when it will get spent either. Treasury gdp forecasts will soon be seen as usual rear view mirror stuff. WHY is it forecast to rise in 2021? Usual better next year rubbish

The commentariat on interest dot co sometimes comes across as a pack of old ladies drenched in tight-fisted Presbyterian values with a coating of Hoskingesque reactionary rhetoric.

Isn't Labour doing what is prescribed as per MMT? Isn't that what all post and peak bubble economies should be doing to keep the party going?

Perhaps the govt has finally realized that the NZ economy is quite possibly deep in the mire. Maybe it doesn't matter about incremental sales of apples to Vietnam or the benefits of beta-casein protein.

And the idea of NZ becoming self sufficient through oil / gas exploration is kind of laughable. Hell, even Australian consumers are paying a 40% premium for their gas compared to the Japanese consumer.

"Perhaps the govt has finally realized that the NZ economy is quite possibly deep in the mire"
All side of politics have known that for quite some time.
2008 was a wake-up call. It's what we chose to do after that that bears scrutiny.
The John Key led Government(s) was elected partially on a platform of "You don't get off of a debt by borrowing more money" Its Leader was elected on a populist policy of 'New Zealand's stupidly high property prices are strangling the economy. That needs to change ' - or words to that effect, and yet when push-came-to political-shove, he/they buckled to bigger forces. Sad. We had our chance and blew it 12 years ago. The Labour led(?!) coalition realised what a task they had on their hands when they assumed office - never really expecting to.
Never mind! It's never too late. But the remedy is going to be far more costly; far more painful than it would have been if John Key had stuck to 'promises'. Perhaps if he'd stayed to see the storm through? We'll never know, because,of course, true to form he jumped-ship when it looked like t was about to run-aground, handing the wheel to Lucky Bill English.

All side of politics has known that for quite some time.

Hmmm....not sure if they do. Possibly Key was doubtful for a while closer to the 2008 s*&t show, but I think he believes his own spiel and the power of the Anglosphere neoliberal / monetarist model. Remember he was indoctrinated by Merrill Lynch (whose cynical employees usually try to leave as soon as they've cashed in. Key was a loyalist so he was of value to be kept around).

That's kind of what I mean.
If ever there was a Leader that knew the process from both sides of The System - it was John Key. I actually voted for him on that basis; stupidly thinking that he not only knew what was best for the country, but he'd actually come out and said as much and would set about sorting our mess out.
But, alas, no. Maybe the metaphorical beating he took behind the global economic woodshed was too much for him to handle ( "Get back and do as we are doing, John, and get that Debt Machine cranked up in NZ, or you know what will happen to you") etc.
I think that was our last shot at a relatively painless solution to what ails us. Now? It's going to be painful, no matter who thinks they know what to do now. It's just a matter of 'Who gets hurt most?"

The way I see it, Key is seen as a poster child for protecting the economic status quo. Despite what many people think, he's nowhere near as gifted and capable as many think he is. Not trying to run him down in any way, but I think he's quite over-rated.

Leadership according to Key:

'At the end of the day....(insert partial truth that benefits self/National)'

REPEAT

Chalk up another broken promise... this time on the Budget Responsibility Rules.

Funny, they're abandoning the debt target and taking on $12b of debt...now where have I heard that number before?

now where have I heard that number before?

Probably from Stephen Joyce who likes to take the public down rabbit holes.

Chalk up another broken promise... this time on the Budget Responsibility Rules.

You've been listening to too much talkback radio. This whole "budget responsibility" is nonsense. Would you care to explain the consequences of the govt spending into the economy? Does it mean the govt is constrained in its spending like a h'hold?

Then why did Robertson adopt them? At some point some of these questions will actually need to be answered.

Exactly... im not arguing the pros and cons of the budget responsibility rules... i'm just pointing that Labour had committed pre the election to adhering to them and now have chosen to break them... hence.. a broken promise.

Wow, a lot of negative comments (like always I guess), I thought allocating more $ to roading and infrastructure was good? Sure it's light on details (like always) and money needs to be spent productively but why not spend when the government can borrow very cheaply?

The Government deserves criticism for their embarrassing back peddling. New roads needed but the funding of them is a back peddle on the roads they cancelled. The money could have been injected into the economy already if they weren't bumbling around indecisively.

They are aware that the economy will be heading into a lot of trouble and they are desperate to spend now which is why so much emphasis is placed on being shovel ready. It's not that the spending is bad, it's the unnecessary delays that are entirely the fault of the Government that are to blame.

The school spending has come online so quickly there's a chaotic scramble to get the work underway. Although it's not so bad for me as projects are already lined up with pricing or contracts in place (my tender reviews are complete).

it's the unnecessary delays that are entirely the fault of the Government that are to blame.

I get your point. Nevertheless, "apparently" the economy was in great shape under the previous govt because of the housing bubble, immigration, and exports (education, tourism, commodities, and some tech). Now how would Joe Public have reacted if the current govt started spending like a drunken sailor in realization that the economic rock star meme was little more than a facade? Talkback radio would have gone into emotional overdrive.

You miss the point that National can do no wrong when it comes to economic matters.

Probably because they were busy gloating about a surplus (not spending money) and have now done a u turn realising they need to spend to appease the masses so its fresh on the mind come election time

I think the problem is that many of us have with this announcement is that we have no confidence this govt can deliver anything they promise on infrastructure. I think now that the doors to spending and borrowing have been thrown open by Robertson quite a few voters will think we might as well have National in charge if we want the roading projects etc carried out successfully.
The perception will be that the Nats, like the Romans, may be cruel taskmasters but they know how to get things done.

Just to clarify for my understanding - will the Labour government and its members actual be the people delivering the infrastructure projects?

Almost no chance of any actual building work before the next election - planning and establishment of projects takes years. This is all sound and fury signifying nothing.

The Romans were great until they weren't:

https://www.history.com/news/8-reasons-why-rome-fell

Might be a few parallels (I also look at the US when I read this...)

Thats what you get when you import over a 1m extra people in 12 years!!!

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