The New Zealand government has revealed its annual budget, with a focus on lifting welfare benefit rates and promising billions of dollars of extra funding towards addressing rising inequality.
- New Zealand announced a “wellbeing budget” focusing on economic recovery and social equality
- Budget papers say NZ’s economy has “rebounded with robust growth” from the peak of COVID-19
- PM Jacinda Ardern says she’s “proud” of the budget that will “leave a legacy for the next generation”
The budget for the 2021 fiscal year allocated funds towards housing, healthcare, education and infrastructure, while also targeting child poverty, climate change and Maori welfare.
Weekly benefit rates are set to rise by up to $NZ55 (about $51) per adult as part of the “wellbeing budget”, which the government said was the largest increase in a generation, intended to both reduce inequality and child poverty and to stimulate the economy through its COVID-19 recovery process.
“Previous economic downturns have made inequality worse,” Ms Ardern said in a statement.
“We’re taking a different approach.
New Zealand’s economy has seen a rapid rebound from the COVID-19 pandemic, but ample fiscal and monetary stimulus in 2020 has exacerbated long-standing issues of inequality.
The Treasury predicted a budget deficit of $NZ15.127 billion for the fiscal year ending June, compared with the $NZ21.576 billion seen in its half-year fiscal update in December.
Key NZ budget inclusions:
- Raising weekly main benefit rates by $NZ32-$55 per adult
- Committing $NZ300 million to recapitalise New Zealand Green Investment Finance
- Investing $NZ57.3 billion into infrastructure over the next five years
- Allocating almost $NZ1.5 billion for the COVID-19 Vaccine and Immunisation Program
- Investing $NZ4.7 billion in health, including establishing a Maori Health Authority
The deficit is now expected to peak at 5.3 per cent of gross domestic product (GDP) in June 2022 before declining to 0.6 per cent of GDP by June 2025.
Finance Minister Grant Robertson said New Zealand’s work to recover from the economic impacts of the pandemic wasn’t finished yet.
“This is no time to be complacent,” Mr Robertson said in his budget speech.
“We have the opportunity to build off our head start and we will not waste it.
“Our approach will continue to be a balanced one. Investing where it is needed the most, while keeping a careful hand on the books to keep a lid on debt and look out for future generations.”
Ratings firm S&P Global said the budget met its expectations and the country was recovering quicker than most advanced economies, though warned debt levels would remain elevated for some time.
“Given the pace of recovery, we believe the government’s credit metrics can withstand further negative shocks to the economy and its fiscal position at the current rating level,” S&P said in a statement.
Unemployment expected to fall further
While New Zealand’s economy contracted in the final quarter of last year, recent improvements in business confidence and an unexpected fall in the unemployment rate to 4.7 per cent in the March quarter have pointed to an economic rebound.
Unemployment is forecast to fall back to 4.2 per cent by 2024 from the 5.2 per cent forecast in 2021, with an extra 200,000 people seen entering employment over the next four years.
This recovery was helped by a record $NZ50 billion COVID fund released in the budget last year, backed by the central bank’s massive $NZ100 billion quantitative easing program and low interest rates.
But these measures, coupled with housing shortages, sent property prices soaring, forcing the government to step and announce cooling measures.
The Treasury said it was now expecting a sharp drop in house price inflation to 0.9 per cent by June next year, from a peak of 17.3 per cent in June 2021.
Opposition National Party leader Judith Collins slammed the budget, saying it did not reassure businesses.
“All New Zealanders are feeling the pinch right now, not just those on job seeker benefits and the minimum wage, so where is the plan to take the entire country back to prosperity?” Collins said.
But the Prime Minister said New Zealand banded together in response to COVID-19 and would continue to do so.
“I am proud of this budget, it will leave a legacy for the next generation and start to undo the harm of the last,” Ms Ardern said in her speech to parliament.