Finance Minister Grant Robertson has outlined how his first “wellbeing” budget, to be delivered in 2019, will shake up the way the public sector works.
Delivering his Budget Policy Statement, Robertson explains all ministries and agencies will be collectively responsible for delivering the Government’s priorities.
For the first time, they’ll have to make budget bids through the lens of the Government’s priorities.
They will have to work together, across portfolios, on initiatives that will deliver set outcomes.
Robertson has announced his priorities are:
- Creating opportunities for productive businesses, regions, iwi and others to transition to a sustainable and low-emissions economy
- Supporting a thriving nation in the digital age through innovation, social and economic opportunities
- Lifting Māori and Pacific incomes, skills and opportunities
- Reducing child poverty and improving child wellbeing, including addressing family violence
- Supporting mental wellbeing for all New Zealanders, with a special focus on under 24-year-olds
$6.1 billion in new spending
While the Government's spending allowances were increased in May at Budget 2018, they haven't been been upped again in light of Robertson announcing his priorities for Budget 2019.
An allowance of $2.4 billion a year over four years has been allocated for operational spending, meaning the Government will have $2.4 billion at its disposal for new spending in 2019. A year ago, the projection was for it to have $1.9 billion.
An allowance of $3.7 billion has been allocated for capital spending in 2019. A year ago this was projected to be $3.4 billion.
ASB chief economist Nick Tuffley is "somewhat surprised" these allowances haven't been lifted. He says there is room for "modest" increases in spending, but notes Robertson's caution in light of his Budget Responsibility Rules and risks in the global economy.
ANZ economists, Miles Workman and Sharon Zollner, say: "We still feel there’s a case to loosen the purse strings and address New Zealand’s infrastructure deficit faster.
"The key caveat is that it doesn’t significantly crowd out/compete with private investment – and that’s a tricky nut to crack, with demand for private investment not a particularly easy thing to accurately anticipate."
Spending pushed out into 2019
The Budget 2019 priorities haven’t had a major effect on what Treasury expects the Government's tax take versus expenses will look like.
The Crown posted a larger than expected operating balance before gains and losses (OBEGAL) of $5.5 billion in the year to June, as capacity constraints essentially meant it couldn’t spend its money as quickly as it planned.
Treasury, in its Half Year Economic and Fiscal Update (HYEFU) released today, forecasts the OBEGAL will fall to $1.7 billion in 2019, as the Government plays catch up and spends the money it had planned to spend in the previous year.
The OBEGAL is expected to pick back up, reaching $7.6 billion by 2022. While this is higher than what was forecast in Treasury's May Budget Economic and Fiscal Update (BEFU), the surpluses for the two years prior are expected to be lower.
Debt track looking good for now
Robertson hasn’t showed any signs of ditching his Budget Responsibility Rules, which include the goal of reducing net core Crown debt to 20% of GDP by 2022.
It is already hovering at this level, and is expected to pick up slightly to 20.9% in 2019. Treasury expects it to fall to 19.0% in 2022 and 17.4% in 2023.
Workman and Zollner say: "While our own central economic outlook is a little softer than the Treasury’s, we also see the Government’s books improving over time.
"That said, if the economy evolves as we expect it could take a little longer for the Government to reach its debt target, and/or it could result in the Government having to find cost savings further down the line – or loosen its debt targets."
Treasury hasn't changed its projections since BEFU when it comes to the portion of off balance sheet debt it expects the Government to take out.
It expects debt taken out by Crown entities and state-owned enterprises to account for just over 20% of total government borrowing over the next four years. This portion is larger than under the previous government.
Treasury has confirmed the Government isn't planning to issue any more or less bonds than it said it would in Budget 2018. It will issue $8 billion worth in 2019.