Finance Minister Grant Robertson has made true on his promise to deliver a “rebuilding Budget,” with more than half of all new spending focusing on rebuilding public services.
Of that, 50% will be spent in the health sector.
Budget documents show over the next five years, the Government will spend an extra $6.5 billion on “rebuilding critical public services” including in the education, health and justice sectors.
That makes up 67% of all $9.67 billion of all new spending over the next five years, excluding revenue, savings and reprioritisation.
Robertson says the $3.2 billion investment into the health is the biggest capital injection the sector has seen in a decade.
“We can’t continue to have people doubting the quality of our hospitals and schools,” he said in a speech in the Budget lock-up.
Economic growth expectations are also good, averaging at 2.9% over five years – that’s up 0.5% on projections in the Half Yearly Economic and Fiscal Update (HYEFU).
Cameron Bagrie of Bagrie Economics says these figures look “a bit optimistic,” adding that he expects areas, such as dairy land to remain under pressure.
Treasury has flagged a $7.3 billion surplus by 2021/22.
Other key figures from the Budget documents include an operating allowance of $2.8 billion per year and capital allowance of $3.8 billion over the same period.
Unemployment is expected to fall to 4.1% in late 2019, according to Treasury.
Flexing his fiscal muscles
The Budget shows the Government is forecast to meet its fiscal responsibility rules and then some.
As a percentage of GDP, the Government’s debt position has improved, with debt down every year over the next half decade compared to December forecasts.
By 2022, the Government’s debt position will be 19.1%, down 0.2% on previous estimates and well below Robertson’s target of 20% within five years of taking office.
Asked why the Government doesn’t just borrow the difference – which would be hundreds of millions of dollars – Robertson said it’s important the Government leaves itself with a bit more fiscal headroom.
“There are a number of things on the horizon, cost pressures we’re going to have to face – they tend to be unknown costs.”
He pointed to the spread of the cattle disease Mycoplasma bovis and the impact that could have on the primary sector.
The Budget responsibility rules also state the Government will keep Core Crown spending at roughly 30% of GDP.
Treasury figures show the Government will be below that number by roughly 2% each year.
Robertson’s rationale for keeping this figure below 30% is the same as for not increasing net debt.
“I believe it is the responsible thing to do to leave ourselves with a little bit more room there.”
The ‘rebuilding Budget’
For weeks now, Robertson and Prime Minister Jacinda Ardern have been hinting the Government would unveil a big spending in rebuilding core infrastructure they say was neglected by the previous Government.
“We can’t fix every problem in one Budget,” Robertson said in Parliament on Wednesday.
“But health, education and housing will finally receive the support they deserve under this Government’s plan.”
Ardern has pencilled in a visit to North Shore Hospital tomorrow for a post-budget speech.
District Health Board will receive an extra $2.3 billion over the next four years.
Minister of Health David Clark says this will relieve some of the pressure they’ve been under, and to ensure they can maintain their “standards of care, mental health services and support for older New Zealanders.”
The Government has also set aside a further $100 million next year for additional deficit support.
Figures from the Ministry of Health for the eight months to February show the combined DHB deficit is $190 million.
Other big-ticket spending initiatives in the health sector includes $363 million in new funding for extending free GP visits to under-14 years olds.
The Government will also be making GP visits up to $30 cheaper for people on modest incomes who are eligible for a community services card.
Clark estimates this will give roughly 600,000 New Zealanders “better access to healthcare from December 1, this year.”
Education has received a significant boost in funding as well, getting an extra $1.5 billion over the next five years.
The bulk of that funding, some three-quarters of it, will go into meeting increasing demand in the early childhood sector.