This is a return to a more conventional Labour Government Budget with some big spending initiatives to reflect the Government’s agenda, the focus of which is wellbeing. Treasury forecasts suggest things are looking up, and the economy is recovering quicker than expected following COVID-19.
The Government has struck a careful balance between keeping debt under control and additional spending. The focus of the spending has been on increasing welfare payments, infrastructure investment and funding their reform agenda across health, education, three waters and climate change. It is less clear how this Budget will help businesses to continue their recovery in a COVID-19 world.
Infrastructure
Infrastructure is a big winner in Budget 2021. Investment includes $1.3 billion across several rail projects, including the Future of Rail initiative, as well as considerable investment in the Three Waters Reform Programme with $296 million for the establishment of multi-regional water service entities. The Minister of Finance has signalled further announcements will be made for Three Waters so watch this space.
Health
The health sector also benefits, including $2.7 billion of new funding for DHBs to address cost and volume pressures and $700 million for capital projects. Budget 2021 also responds to the Health and Disability System Review with $486 million for health system reform, including dedicated funding for both the Health Transition Unit and the new Māori Health Authority. This is a considerable programme of work and in light of COVID-19 it has never been more important to have a comprehensive and fit-for-purpose health system.
Housing
It is positive to see the Government taking further action to reduce the housing crisis, particularly for Māori, and shows the Government’s focus on addressing housing inequities for our most vulnerable populations. An investment of $380 million will deliver around 1,000 new homes for Māori, as well as an additional $350 million from the Housing Acceleration Fund.
Sustainability and climate change
With a focus on improving our natural environment, Budget 2021 invests in several sustainability and climate change initiatives. A total of $300 million has been committed to recapitalising New Zealand Green Investment Finance which will focus on sustainability measures for public transport, waste and plastics. The Government is also walking the walk by ensuring agencies focus on their emissions reduction with a goal to be carbon neutral by 2025. Notably there is a commitment to recycle future Emissions Trading Scheme (ETS) revenue to achieve more emissions reduction from Budget 2022.
Welfare
There is also plenty of good news for low income earners with significant investment in the welfare sector in response to recommendations from the Government’s Welfare Expert Advisory Group. Benefits are set to increase between $32 and $55 per adult by 1 April 2022 with an expectation that up to 33,000 additional children will be lifted out of poverty. The targets set by the Government are ambitious and it will be interesting to see how these numbers evolve during the coming years.
Although there are positive signs for the economy, there are still questions to be raised about the ongoing impact for businesses. The Government is committing to providing digital skills training for up to 60,000 small businesses, but it is unlikely this will be enough to help businesses recover from the true cost of COVID-19 and ongoing economic impacts.
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