Budget 2020 announced the biggest spending package in New
Zealand's history. The overall sentiment appears to be that
this was a good Budget given the fallout from Covid-19. It is
clear the Government is letting New Zealander's know the money is
there to get us through this crisis - $50bn (yes that's billion) is
currently on offer, but the big question is, will this be
enough? Is the funding (as big as it is) actually targeted to
things that will make a big enough impact to take the country
forward? Is there a defined strategy? Are there
specific outcomes they are looking for and how will this
significant spend be measured and monitored? Once spent, how
does the Government plan to pay back what it will borrow to get us
through? Will it take New Zealand more than 60 years like it
took Britain to pay off its WWII debt? Only time will
tell.
Minister Robertson described this Budget as a "once in a
generation Budget" and it is no mean feat for a Government to steer
us through this rough patch. As history has shown us, after
the dark days comes the good days, it's just that we are not there
yet. With all the uncertainty around us, one thing is for
sure, all things shall pass and there will be a brighter future, so
we should look on this time as the end of the beginning.
The Government's $50bn Covid-19 Response and Recovery Fund is to
rebuild New Zealand's economy and society. Minister Robertson
was quick to say this was not a target spend, rather it provides
the flexibility to respond as needed, now and in the future.
Covid-19 has already seen the Government commit $13.9bn of this
fund to earlier Covid support measures, and with Budget 2020 they
are committing a further $15.9bn on key areas that they hope will
kick-start the economic recovery, create sustainable jobs, and set
out the framework to rebuild.
No tax measures have been announced in the Budget primarily
because the economic future is too uncertain to try and
revenue-raise out of businesses, and there will be no 'helicopter'
payments to all, rather the focus is on targeted support.
With the election still scheduled for September, it would be a
brave Government who proposes tax increases before then. But
watch and see what comes in Budget 2021 as Minister Robertson has
stated "we will grow our economy sustainably to pay back our debt,
we will fairly share that burden, and above all we will do it
together."
Let's look at what the Budget had in store.
Health
Not surprisingly the largest recipient of the pie was to our
Health sector with $5.6bn going towards, primarily, DHB services,
and $755m towards capital investment.
Housing
This was followed by a further $5bn for housing mostly to create
8,000 public or transitional housing places over the next 4 to 5
years. Given the success of Kiwibuild, perhaps this should be
1,000 over 10 years.
There was mention of $670m in the form of support and services
to tenants which will improve affordability by increasing the
supply of houses, we are however yet to see what form this will
take.
Speaking of Kiwibuild, no support was announced for housing
development and construction in the private residential market,
although Minister Robertson did say it was his intention that this
will be the subject of further investment in the next phases of the
recovery fund.
Business
The business sector comes in third, with a support package of
$4bn (in addition to what has already been provided to the sector
through recent Covid-19 business support) to help keep people in
work and position businesses for recovery and growth.
The Wage Subsidy Scheme is being extended for a further eight
weeks to targeted businesses, being those who have suffered a 50%
reduction in turnover over the 30 days prior to application
compared to last year. The application period is open for 12
weeks.
There will be increased support for R&D in the form of a
$150m one-off short-term temporary loan scheme administered by
Callaghan Innovation to incentivise businesses to continue R&D
programmes that may be at risk due to COVID-19. There are
numerous R&D incentive schemes. I wonder if it was a missed
opportunity to bring them all under one umbrella.
There will be a $216m boost to NZT&E to assist with support
provided to exporting businesses, including increasing activity for
businesses in priority markets and expanding the digital services
available for businesses. And a further $10m has been
earmarked for small businesses to encourage and improve their
e-commerce service offerings.
Jobs
Our Prime Minister heralded that the Budget would be all about
jobs, jobs, jobs - and it was to some degree. It is great to
see trades being elevated with $1.6bn to be spent on trades
training to encourage businesses to retain apprentices, the
provision of free apprenticeships and training in critical
industries, and funding increased enrolments in tertiary education
and training.
$1bn is set aside for an environment jobs package that claims to
create thousands of jobs that will support habitat protection, pest
control and biodiversity on public lands across New Zealand,
including restoring wetlands, stabilising riverbanks and removing
sediment. While it is laudable to be creating jobs, while
protecting and enhancing our environment, one has to question if
this has the taste of vote pulling rather than the perfect
ingredient for recovery from COVID-19.
Transport and Infrastructure
I'm sure the majority of kiwis will rejoice in the $1bn set
aside to improve transport across the country, $400m of which will
be to replace the ageing Interislander ferries. While a
bigger slice of the pie goes towards infrastructure, $3bn, we will
however have to wait to see exactly what this has been earmarked
for in the coming weeks and months. No doubt some will find
its way to the Provincial Growth Fund projects.
The desire is to unclog our cities, to connect our towns, and to
support sustainable development by bringing New Zealand's
infrastructure into the 21st century and at the same time meet our
climate change goals. A very big ask.
Tourism and Hospitality
If there are any losers in the Budget, that booby prize would
have to go to the hospitality sector. No funding has been
specifically ear-marked for them. They will have to rely on
the Wage Subsidy and other business support measures to get them
through.
The tourism sector has managed a little better with a $400m
recovery fund which will include a transitions programme to support
businesses to plan for the next steps, a fund to ensure key tourism
assets survive, a domestic tourism marketing campaign and a
public/private taskforce to shape the future of the industry.
Tenants and Landlords
There was no mention in the Budget of any specific assistance to
be provided to commercial tenants and landlords. That's not
to say some won't be announced down the track as there is still
$20bn of the $50bn not yet ear-marked. Apparently,
discussions are underway to develop a support package for these
taxpayers. Just what that will look like, we do not know, and
will it be too little too late?
Students and Education
An initial $20m student hardship fund has been announced, with
further support for students to come. A $1bn education
package has also been announced to support the core provision of
education services across all levels of education.
Community wellbeing
The Budget will see financial assistance being provided to
caregivers in the form of an increase in the current rates of the
Foster Care Allowance, Orphan's Benefit and Unsupported
Child's Benefit by $25 per week per child, with further
support to be announced by the Minister for Children in the coming
days.
The Free and Healthy School Lunch programme will be extended to
200,000 students from Term 4 at a cost of $217m targeted at schools
with the highest disadvantage. A further $32m will go towards
increasing support for foodbanks, food rescue and other community
food services to leverage surplus donated food from producers,
manufacturers and suppliers that would otherwise go to
landfill.
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While it could be said there were elements of the Budget that
were out to score votes, overall, it appears the Government has put
funding where it is needed most at this time. The decisions
the Government have had to make over the past three months have
been huge, and I wouldn't want to wish their job on anyone. I
believe they have done the best they can. Although if you are
in the hospitality sector you may disagree with me.
It is apt to close with words from Minister Robertson "It is
just the end of the beginning, the next chapters are ours to
write."