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THE BUDGET – WHO GETS WHAT AND WHAT’S WHAT?
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The Finance Minister has unveiled his second budget and arguably, for this Coalition, his most important one yesterday. As expected, the focus was on addressing key social concerns like mental health and child poverty, as well as infrastructure and innovative sustainability.

There is a lot to consider in this budget and Hon Grant Robertson said in his budget address that the Government’s focus is on measuring what matters. However, as Hayden Wilson, Partner at Kensington Swan has noted “we won’t know whether they have really delivered on their promise until the results of that measurement are in, and that will not be next year, or the year after but only in the years to come.”

Right now we can only analyse the Budget against the Budget Policy Statement, the promises that have been made and the actions to come from the Coalition Government.

Despite the political shenanigans surrounding the "leak" of budget information, and the fumbled response to that story, this is a budget with some real substance. In our view it is that substance that should be the focus.

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First, infrastructure. The Minister of Finance has assured that the coalition Government is “balancing the need for fiscal sustainability for future generations and making long term infrastructure investments”.

The Government has taken a new approach to the budget – with a rolling four-year funding envelope based on the fiscal headroom for the next four budgets. Previous budgets were set with a single-year allowance. Our message to this Government has been that business values certainty and this move provides the Government more space to plan, procure and prepare for longer-term, better investment decisions. This should in turn benefit businesses, with more certainty, better insights and early involvement in Government projects.

$51.3m has been put towards establishing the new Infrastructure Commission, Te Waihanga. (See our Newsflash earlier this year on the Infrastructure Commission).

Hon Shane Jones explained “The New Zealand Infrastructure Commission, Te Waihanga, will provide expert advice, assistance with planning and strategy, support the delivery of major infrastructure projects across the country and act as the golden thread between the various pieces of work this Government is undertaking with regards to major capital projects.”

To front foot this new long-term perspective for the Government, the Minister for Infrastructure has already announced a pipeline which includes five capital intensive agencies; Education, Health, New Zealand Transport Agency, New Zealand Defence Force and the Department of Corrections.

The Government says that these large investments in infrastructure are being done “while maintaining a sustainable fiscal outlook”, and with the intention to help New Zealanders plan for a better future.

Our hope is that agencies will firmly buy in to these changes and commit to better planning, procuring and preparing of major infrastructure projects.

Rail – infrastructure

Rail appears to be the way of the future for the Coalition Government with a $1b boost to the redevelopment of KiwiRail and $405.5m to the Auckland City Rail Link project. Hon Minister Phil Twyford stating this budget will be the “first step to rebuilding rail as the backbone of a sustainable 21st century transport network”.

The Coalition Government hopes improved rail infrastructure will unlock regional economics, reduce emissions and traffic congestion and prevent road deaths and injuries.

Education – infrastructure

A huge part of the infrastructure conversation has been around schools and the Government has committed itself to a 10-year School Property Programme, with $268.8m allocated to the first wave of investments under this programme.

Two other large education investments are $20.7m operating to improve education infrastructure for students in Christchurch after the 2011 earthquake, and $61m operating to maintain the Ministry of Education’s current level of service in managing the school property portfolio.

Health care – infrastructure

The Budget 2019 includes two years of capital funding for health: $850 million for 2019/20 and a further $850 million for 2020/21. The Government’s intention is that this cash injection will help DHBs put in place improvements and new initiatives for their staff and patients.

The long debated Dunedin Hospital rebuild is also noted in the Budget – with funding being put aside in a contingency for when the business case is completed. If and when completed the new Dunedin Hospital may be the Coalition’s primary example of the benefits of long-term infrastructure investment.

Other major investments into New Zealand infrastructure:

  • $84.3 million to keep the Christchurch Rebuild programme on track for completion
  • Provincial Growth Fund has now been fully allocated, including $855 million to capital investment
  • $273.8m operating and $1.7b capital on future air surveillance capability, with the purchase of four P8 patrol aircraft to replace the aging P3 planes
  • $300m capital in water and roading infrastructure
  • $1.7b capital in health infrastructure, such as building hospitals
  • $31.5m operating to support the delivery of the Strategic Defence Policy Statement
  • $20m operating supporting DHB capital projects
  • $50m operating investment in Te Papa Tongarewa
  • $18.7m operating and $16.4m capital to preserve our country’s archival and library materials

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“The focus of this budget is always going to be in New Zealand's most vulnerable and in that they delivered” Linda Clark, Partner at Kensington Swan. “Improved national wellbeing is important, not just for individuals but for businesses as well. Every business employs people and business is more successful when those employees and their families are mentally and physically healthy.”

Below is a summary of how the Coalition Government has planned to tackle each of the five Wellbeing Budget priorities.

1. Supporting mental wellbeing of all New Zealander’s,
with a special focus on under 24-year-olds.

In response to He Ara Oranga – Report of the Government Inquiry into Mental Health and Addiction, the Coalition Government has promised the following;

  • New frontline service for mental health with a $455m programme providing access for 325,000 people by 2023/2024
  • Tackling homelessness with 1,044 new places with $356m operating and $134m capital
  • Suicide prevention services to get a $40m boost
  • $58m operating on treating drug and alcohol addiction
  • $131m operating and $4m capital on Hapaitia te Oranga Tangata (the Ministry of Justice) 

2. Reducing child poverty and improving child wellbeing,
including addressing family violence.

The Coalition Government have focused their efforts on breaking the cycle of abuse, sexual abuse, suicide and youth offending. Put forward to support this priority:

  • Specialist services as part of a $320m package to address family and sexual violence
  • Taking financial pressure off parents by increasing funding to decile 1-7 schools so they don’t need to ask for donations
  • Lifting incomes by indexing main benefits and removing punitive sanctions
  • $1.1b operating and $187m capital on breaking the cycle for children in state care, including helping 3,000 young people into independent living
  • $535m operating on improving incomes and addressing the cost of living
  • $650m operating and $96m capital taking financial pressure off parents

3. Lifting Maori and Pacific incomes, skills and opportunities.

In collaboration with Maori and Pacific communities and stakeholders, the initiatives the Government has put its money towards are:

  • $81m boost to Whanau Ora, including a focus on health and reducing reoffending
  • Ensuring Te Reo Maori and Pacific languages survive and thrive
  • An additional 2,200 young people in the Pacific Employment Support Service
  • $12m programme targeting rheumatic fever
  • $208m operating and $2m capital supporting Te Reo Maori and communities
  • $113m operating valuing the contribution and ensuring the wellbeing of Pacific communities
  • $95m operating and $3m capital on Kaupapa Maori approach to tackling reoffending

4. Supporting a thriving nation in the digital age through
innovation, social and economic opportunities.

With the hope of supporting people adapt to technology, the Coalition Government has put forward:

  • $300m to support start-ups and bridge the venture capital gap
  • $106m operating and $51m capital funding for research and innovation to help New Zealand transition to a low-carbon future
  • $197m operating on the reform of vocational education reforms to boost apprenticeships and trade training
  • Opportunities for apprenticeships for nearly 2,000 young people through Mana in Mahi

5. Create opportunities for productive businesses, regions, iwi and
others to transition to a sustainable and low-emissions economy.

Hon Grant Robertson has stated that this transition will take time and the Budget will be an important step. So, has the budget solidified this priority for New Zealanders?

  • Over $1b boost in funding for KiwiRail
  • Helping famers with the climate change challenge by investing in scientific research
  • Encouraging sustainable land use with a $229m package
  • A freshwater focus improving water quality in at-risk catchments
  • $8.5 million in 2019/20 in the Global Research Alliance on Agricultural Greenhouse Gases (GRA)
  • $3.2 million will go into the Agricultural Climate Change Research Platform

Embedding the principle of Wellbeing

The Coalition Government has listed four actions it intends to take to embed the concept of wellbeing into New Zealand politics. 

Amend the Public Finance Act 1989 to ensure that broader framing is used in the development of the Budget. Going forward, the Government will be required to set out wellbeing objectives as well as fiscal objectives.

Treasury will be required to report on current and future wellbeing outcomes at least every four years.

Re-write the State Sector Act 1998 to make it easier for the Public Service to mobilise quickly around the priorities of any Government to improve the wellbeing of New Zealanders.

Change the way Agencies report on performance to incorporate:

  • taking a longer-term, intergenerational view
  • thinking broadly about impacts, both positive and negative
  • working collectively towards shared outcomes, and
  • recognising and building on existing frameworks, strategies or indicators.

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From an ambitious promise, the Coalition Government has made real efforts to balance the needs of people, communities, the environment and businesses with this budget. Is it transformational? Probably not in and of itself. But with strong budget surplus headroom forecast in the out years, this budget does provide a solid foundation on which this Government will look to build. We will watch with interest whether they are able to do so as they move into an election year.

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