Budget 2017: An ABBA medley

The 2017 Budget resembles an ABBA medley, according to ANZ chief economist Cameron Bagrie (see video below).

I Have a Dream (delivering for New Zealanders); The Name of the Game (it’s growth); Money, Money Money (rising surpluses); Gimme, Gimme, Gimme (health primarily); and Lay all your Love on Me (infrastructure and a family incomes package).

“With the hard yards on fiscal replenishment done, and solid growth and surpluses projected, the Government is in the enviable position of having options,” Mr Bagrie said.

“They’ve chosen to deliver on that via a balanced approach.”

  • Surpluses as far as the eye can see which can be used to fund critical investment. We are paying our way as opposed to borrowing and spending;
  • A strong focus on building resilience and rainy day coffers by paying down debt;
  • A massive investment programme; we’re behind the 8-ball but at least fronting up and not borrowing to do it;
  • The inevitable election lollies; that’s election year reality;
  • Sharing the spoils of growth by a Family Incomes package;
  • The usual injections into key areas (health and education) to keep the wheels turning.

“I can’t think of another country around the globe that can deliver that mix,” Mr Bagrie said.

“The Budget ticks all the right boxes, though the missing link in the Budget is savings. You see semblances of it through the growth strategy, responsible fiscal management, and resumption of Super Fund contributions.

“The economy is entering a juncture where funding a domestic savings shortfall via international capital to meet our investment needs is becoming more challenging.

“More domestic savings is required to meet New Zealand’s investment needs or investment needs to fall.  A more proactive stance towards saving is needed in the future or interest rates will need to move up further than would other be the case to do the job.”

Statement from Federated Farmers on this afternoon’s budget:

Steven Joyce’s first Budget fires the first shot in an election year spend up.

It’s hard to quibble on the Budget’s focus on spending on public services, social investment, and infrastructure. It’s also hard to take exception to tax and spending initiatives targeted at lower and middle income families.

However, Federated Farmers is disappointed there was no movement in the threshold for the top rate of income tax or for the company tax rate. Too many taxpayers will continue suffering the effects of several years of fiscal drag and our company tax rate runs the risk of falling behind those overseas.

In terms of the primary industries, there is additional spending for MPI on biosecurity, irrigation, and trade facilitation. These are all important priorities for farmers.

We welcome an increase in science and innovation spending but would have preferred more emphasis on building our science capability across the country, particularly in biological and environmental sciences, rather than it going to companies for commercialisation.

MFAT gets more funding for trade negotiations and international presence.

Federated Farmers is pleased to see there is also more funding for tourism infrastructure, transport and police – provided rural needs in these sectors are also looked after.

Looking ahead, surpluses are forecast to grow. As was the experience from 2005 to 2008 the temptation to spend more will grow in tandem.

Whoever wins the September election will inherit a healthy set of books but they could easily be squandered if there is a spending spree followed by a shock (as happened in 2008).

The temptation to spend up needs to be guarded against. Better perhaps for the Government to have moved more on taxes so reducing the headroom for even more lavish spending promises!

Statement from ACT leader David Seymour:

“An adjustment of tax brackets is a welcome compensation for the last seven years of bracket creep. ACT has been talking about this for years. But the adjustment is underdone,” says ACT Leader David Seymour.

“The most any taxpayer will save is $20 a week. And it’s ultimately more of a tax reset than a genuine tax cut. Bracket creep will eventually cancel out this tax relief because National refuses to permanently tie brackets to inflation.

“And the Government has bafflingly failed to adjust the top tax bracket, meaning once someone earns $70,000, they start paying 33% of every pay rise in tax. $70,000 used to be a big salary, but now it’s not – especially if you’re paying off a student loan or mortgage.

“By failing to adjust the top bracket, the tax burden has shifted even further onto the 17% of Kiwis earning over $70,000 – who already pay 45% of all income tax.

“Meanwhile, ACT’s plan would cut tax rates for every bracket, and ensure no-one pays more than a 25% tax rate. This would help New Zealanders invest in local businesses, their families, and themselves.”

Statement from Employers and Manufacturers Association:

Today’s Budget 2017 announcement revealed solid steps to support economic growth and maintain surpluses.

In his first budget, Finance Minister, Steven Joyce, predicted continuing growth of GDP of around 3.1 per cent over the next five years, along with surpluses growing from $1.6b in 2016/17 to $7.2b in 2020/21.

“The books are certainly in good order and this allows the government to deliver a budget aimed at building prosperity from both a social and a business perspective,” says Kim Campbell, CEO, EMA.

He said the EMA was pleased to see Auckland’s Central Rail Link receive $4.36m and have an independent company set up to oversee and manage the project, along with a wider investment of $9.17b in state highways.

“These projects are vital for our region and for enabling much needed economic growth and prosperity. We welcome the certainty today’s announcement brings,” says Mr Campbell.

“But we are looking for more direction on governance, sustainable funding and a sense of urgency to further rectify the infrastructure deficit we currently have,” says Mr Campbell.

“We are supportive of the signal of more to come around the use of initiatives such as public-private partnerships, joint ventures and private investment in large scale infrastructure programmes,” says Mr Campbell.

“We’ve long advocated for the need to find practical and proactive ways to enable this investment and to move beyond simply waiting for government handouts,” he says.

Statement from the Green Party:

Aucklanders are the biggest losers in today’s Budget, with nothing new that will fix transport and housing problems in the city, the Green Party said today.

“National is either ignoring Auckland or they’re cynically holding back funding to offer later on as an election bribe,” said Green Party Auckland issues spokesperson Julie Anne Genter.

“There is nothing in this Budget for the thousands of Aucklanders this afternoon on crowded buses and trains, sitting in gridlock, on their way home to the house that swallows up most of their income.

“The Government agreed to fund half the City Rail Link way back in September 2016. The cash in the Budget today is nothing new and it’s still only a third of the Government’s share of the cost for the City Rail Link.

“National has squandered the opportunity to enable Auckland Council to raise revenue with new funding tools for the $4 billion of projects the city desperately needs to keep up with population growth.

“It’ll still be 30 years before Auckland gets decent rail to the airport, and there’s no word today on much-needed trains to the North Shore.

“Rather than the transformative housing plan Auckland needs, National has forecast years of high rents and more homeless people requiring emergency housing.

“The much-needed rise in student accommodation payments is a joke when you look closer. Where in Auckland can a student get a decent place to live for just $60 a week?

“Anyone who thought having a new Finance Minister who is an Aucklander might mean National finally embraces the best solutions for the city will be disappointed today,” Ms Genter said.

Statement from the Salvation Army:

“The Government appears to be listening to the growing voice of social need” is The Salvation Army assessment of the Government’s 2017 Budget.

“Although all the areas identified by the Army have not been addressed Budget 2017 delivers a substantial boost to low income working families” said Ian Hutson the Sallies social policy director.

The most significant boost for low income working families will be achieved by the movement of the $14,000 tax threshold to $22,000. It is pleasing that Government has heard the community pleas for tax reduction to start at the bottom rather than the top of the income scale.

Additionally increases in the Family Tax credit and increases in the accommodation supplement will make things easier for vulnerable working families

For New Zealand’s most vulnerable beneficiary families the gains are not nearly as great. These families will benefit from Accommodation Supplement increases and an extra $350 million of social housing rent subsidy.

“Our concern is that for the Accommodation Supplement gains to be effective, housing supply also needs to increase. The Salvation Army had asked for a commitment of $500 million in capital funding a year for social and affordable housing, but the Government’s commitment in the budget to capital for housing supply is well below this.

Budget Tables show a steady group of  people remain on the benefit..While supporting Governments efforts to move people from benefits to work where possible, for some beneficiaries’ health and childcare means work is not a realistic possibility.  Government must not “drop the ball” in providing adequately for these people..

The imbalance in New Zealand society between the “haves and have nots” has been increasing over the last 5 years.  This budget is a step in the right direction.

Statement from the Auckland Chamber of Commerce:

Michael Barnett, Auckland Chamber of Commerce head, agreed the taxes returned to the pockets of middle New Zealanders was made possible by the hard work and success of business over the past eight years.

“Looking out at the 3 per cent growth in the New Zealand economy for the next five years, peaking at 3.8 per cent in 2019, New Zealand’s prospects will depend on business continuing to invest, export and create more skilled jobs.”  If that’s what New Zealanders want, they will be happy.

But if people were looking at the Budget for an immediate step up in action on building more houses, reducing congestion and attracting more talent into jobs, they may be less happy with this Budget.

Finance Minister Steven Joyce is right to be looking to improve public services, invest in infrastructure and boost family incomes.  But if the Government’s plan is to do this with “an ongoing programme of micro-economic reform” as the Budget put it, there needs a step up in the pace of action and decision-making.

Statement from the New Zealand Police Association:

The Government has today confirmed its commitment to increase the number of police by 880 and the number of non-sworn Police employees by 245, over the next four years.

The Association welcomed the announcement when it was initially made in the February 2 Safer Communities package.

“A $388m increase in Vote Police is a much needed initiative to relieve serious strains on front line policing,” Police Association President Chris Cahill said.

“Ideally we would have liked the officers and support staff on the job immediately, but it is imperative to recruit the right people and train them to the highest standards.  That takes time and considerable effort,” Mr Cahill said.

The roll out of the Government package means every year for the next four years, 220 extra recruits, over and above the 400-500 trained every year, will be needed to meet the target of 880. The first of these intakes enters Police College this July.

Mr Cahill said since the initial announcement Police has provided more details on exactly where the extra police will be stationed.

“High pressure districts such as Northland, Waikato and Eastern have the largest percentage increases at 19 per cent, 16.4 per cent and 16.1 per cent respectively, and indicative planning allocations show the largest numbers will go to these areas in the 2017/2018 financial year,” Mr Cahill said.

“It is also good to note that the 880 officers will all be out in the community, and not adding to Police bureaucracy.”

“Our members are telling us every day of the growth in key crime areas, and the dangerous cycle being fuelled by the methamphetamine “industry” which is always closely linked to gangs,” Mr Cahill said.

“And where there is meth, there are invariably firearms which pose not only a danger to the general public, but to police who are encountering such weapons on a regular basis,” he added.

The Association is mindful of the job ahead in keeping the Government aware of the dangers of a growth in the gap between the New Zealand population and the number of police officers on the front line.

“By the time this year’s Budget package is fully rolled out, our population will have increased significantly.  Unless there is a serious drop in crime, we will again find ourselves caught in this cycle of stressed police and political catch-up remedies.  That is neither good for New Zealanders nor good for our members, so we will be watching it closely,” Mr Cahill said.

Statement from the NZ Union of Students’ Associations:

Accommodation benefit

The New Zealand Union of Students’ Associations (NZUSA) has welcomed an increase to the Accommodation Benefit, but says that it does not go far enough to meet rising housing costs.

The Accommodation Benefit cap for Student Allowance recipients has increased from $40 to $60 per week. Estimated new rates for Student Allowance recipients living in Auckland, Wellington and Christchurch will be $60. Dunedin-based recipients will likely see an $11 per week increase to $51. Only 33% of students have access to the Student Allowance, due to the parental income threshold for eligibility being frozen for five years.

‘More than three quarters of students will see no change to their living situation as a result of this Budget. This contrasts with our recommendation in our Budget wishlist, calling for a housing grant for all students.’

 ‘It also denies the Auckland rent crisis, when the cap of $60 will be mirrored in Christchurch and Wellington. In Auckland, students are paying $70 more on rent than in Christchurch, yet they will get the same level of support through the Accommodation Benefit.’

 ‘When we have raised issues of student poverty, the Government has said that student support is about right. We acknowledge that the Government has accepted it was wrong on that count. However, having made this acknowledgement they really should look to fix the problem, rather than merely paper over the worst excesses of it.’

 Universities and ITPs funding

‘We are still working our way through the details but on the face of it, but it seems that universities and polytechnics will be getting less money in the future while private training establishments experience a significant increase in funding. We are concerned about public money going to private pockets especially in the face of recent concerns about quality in the private training sector.’

What’s missing – locked out of tertiary education

‘It’s also important to acknowledge what’s missing from this Budget. Our Budget wishlist proposed necessary changes to improve access to tertiary education such as a national First in Family Scholarship, restoring postgraduate allowances and ending age discrimination in allowance and loan access. In its Budget the Government is wilfully ignorant in failing to address the needs of those locked out of tertiary education.’