A plan that’s working

Hon Bill English, Minister of Finance

21 May 2015

2015

A responsible Budget

• Falling unemployment - below 5% in 2016

More jobs – another 150,000 expected by mid-2019

• Increasing wages - average wages to grow to $63,000 by mid-2019

• Reducing hardship among children in New Zealand’s poorest families

$790m child hardship package is at the heart of the Budget

Targets around 160,000 families (with 300,000 children) earning less than $36,350 a year

Outlook for solid economic growth

-1

0

1

2

3

4

NZ Australia UK Canada US Euro Japan

Real GDP ForecastsCalendar years

2014 2015 2016

% change

Wages up, unemployment down

0

1

2

3

4

5

6

7

8

9

50,000

52,000

54,000

56,000

58,000

60,000

62,000

64,000

2012 2013 2014 2015 2016 2017 2018 2019

Average annual wages Unemployment rate (RHS)

$ %

Current account deficit has improved

- 10

- 9

- 8

- 7

- 6

- 5

- 4

- 3

- 2

- 1

0

2006 2008 2010 2012 2014 2016 2018

Current Account Balance

Budget 2010 Budget 2012 Budget 2014 Budget 2015

% of GDP (annual)

Lower-than-expected inflation

0

1

2

3

2011 2012 2013 2014 2015 2016 2017 2018

Consumers Price Index

Budget 2014 Budget 2015

Forecasts

Annual % change

Responsible government spending

-1

0

1

2

3

4

5

6

7

8

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Budget operating allowances $ billions

Budgets (final forecast year impact)

$176m surplus forecast in 2015/16

-18,396

-9,240

-4,414-2,933

-684

176 1,476 1,9953,624

-20,000

-15,000

-10,000

-5,000

0

5,000

10,000

2011 2012 2013 2014 2015 2016 2017 2018 2019

Total Crown operating balance before gains and losses (OBEGAL)

$ millions

Net debt 20 per cent of GDP by 2020

0

10

20

30

40

50

60

70

2007 2009 2011 2013 2015 2017 2019 2021 2023

Budget 2015 Pre-Budget 2009

% of GDP Net core Crown debt

Strong fiscal position internationally

-16

-12

-8

-4

0

4

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

% o

f GD

P

General government fiscal balance

Australia

NZ

UK

US

Euro

0

20

40

60

80

100

120

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

General government gross debt

$790m child hardship package

• Greater work obligations for beneficiary parents, including most sole parents looking for work when their youngest child turns three

• A $25 a week after tax rise in benefit rates for families with children

• Up to $12.50 a week more in WFF for lower-income families not on a benefit

For very low-income working families, an extra $12 on top of that, making an increase of $24.50 a week

• An increase in Childcare Assistance for low-income families, from $4 to $5 an hour, for up to 50 hours of childcare a week per child

$790m child hardship package

Family CategoryChange to entitlement (per week)

Number of families impacted

Beneficiary families $25 increase to benefit 110,000 families

Working families

(less than $27,000)

$24.50 increase to WFF

4,000 families

Working families

($27,000 - $36,350)

$12.50 increase to WFF

50,000 families

Delivering better public services

• $1.7b health package, total health spend $15.9b

$1.3b for DHBs for extra services, cost pressures and population

New support for elective surgeries, palliative care, bowel cancer screening

• Over $680m education package, taking the ECE and schools budget to $10.8b

$75m for ECE and $42m to boost schools’ operating grants

$63m to continue teacher aide support for 1,500 additional students

$244m for new schools and classrooms from the FIF

Investing in a growing economy

• $80m for research and development growth grants and $25m to establish Regional Research Institutes to undertake scientific research

• $113m for New Zealand’s higher education system, including $86m for targeted increases in tuition rates

• Further ACC levy cuts of around $375m in 2016/17 and $120m in 2017/18, subject to consultation

• $210m from the FIF for the extension of Ultra-Fast Broadband

• $210m from the FIF for KiwiRail to maintain the national rail network

• $100m from the FIF for Lincoln University to rebuild its science facilities

Improving housing affordability

• Making better use of Crown-owned land in Auckland

Redevelopment of HNZ estate including $200m loan for Tamaki Accelerating development of Crown-owned land with $52m fund

• Increasing investment in social housing

$35m to implement social housing reform, and $35m for Maori housing

Tendering the first 300 of 3,000 additional social housing places

• Cutting red tape

• Extra steps to bolster and enforce the tax rules on property, subject to consultation, from 1 October this year

KiwiSaver kick-start and border levy

• KiwiSaver now has 2.5m members but has cost $2.5b in kick-start payments since 2007

• Removing $1,000 kick-start payment saves more than $500m

This change does not affect existing members

Annual ‘member tax credit’ and employer contributions unaffected

• New levy for passenger biosecurity and customs activities at our border, raising around $100m a year

It is fairer that these costs fall on travellers rather than the taxpayer

Christchurch support reaches $16.5b

Net earthquake-related expenses

$16.5b

Local infrastructure$1.8b

Crown assets$2.2b

Land zoning$1.1b

Christchurch central rebuild

$1.2b

Other$2.3b

EQC and other Crown entities

$7.9b

A focus on social investment

1 per cent of five year olds:

• are known to CYFS, and

• have been supported by benefits for more than 40 months, and

• have a parent who has had contact with Corrections

This 1 per cent is around 600 children per year, but over 20 years creates a pipeline of 12,000 at high risk

A focus on social investment

On average, each child in this group will cost taxpayers $320,000 by age 35 – some over $1m

At age five… By twenty one…

…four will have been on a benefit long-term (40%)

At thirty five…

…a quarter will have been in prison (24%)

After high school…

…seven would not have NCEA2 (74.6%)

… a group of ten of these high-risk children

Looking ahead – our approach

• New Zealand is well placed – but there’s more to do.

• We will:

Relentlessly focus on a strong economy and jobs

Continue investing to support families in need

Responsibly manage spending and revenue

Increase resilience to global risks

 

We’ll build on a plan that’s working

A plan that’s working

Hon Bill English, Minister of Finance

21 May 2015

2015