Budget 2012 – Investing In Our Future
24 May 2012
Budget 2012 – Investing In Our Future
Builds a platform for growth, while returning to surplus in 2014/15
• Returns the Budget
to surplus in 2014/15, lifting national savings and reducing
the need for Government borrowing.
• Forecasts economic
growth to average about 3 per cent a year over the next four
years, with 154,000 net new jobs being created – adding to
the 60,000 net new jobs in the past two
years.
• Increases spending on science and innovation
to help build a more productive and competitive
economy.
• Sets up the Future Investment Fund to spend
the proceeds of the Government’s partial share sales on
infrastructure, such as modern schools, transport projects,
and hospital redevelopments.
• Invests $4.42 billion in
new spending initiatives focused on improving frontline
public services and getting better results in areas like
health, education, law and order, and welfare reform. This
spending is paid for by $4.39 billion of savings and new
revenue initiatives.
• Continues to invest in the
Government’s share of rebuilding Christchurch.
Budget
initiatives at a glance
(All figures for four
years to 2015/16 unless otherwise
stated)
Responsibly managing the Government’s finances
The Budget returns the Government’s books to surplus in 2014/15 despite a $1.2 billion deterioration in the forecasts since the Budget Policy Statement in February. It achieves this by close to zero net new spending.
• Total net new Government spending of just
$26.5 million over the next four years, compared with a
planned new operating allowance of $800 million a
year.
• Spends $4.42 billion on improving frontline
services by redirecting savings and new revenue to areas
where it gets the best results.
• Finds $3 billion of
savings in lower-priority spending and raises almost $1.4
billion in new revenue by increasing tobacco excise tax,
greater targeting of tax avoidance, closing tax loopholes,
and ending outdated tax credits.
• The forecast OBEGAL
deficit falls to $7.9 billion in 2012/13, $2 billion in
2013/14, before a $197 million surplus in
2014/15.
• Reduces the forecast peak in government debt
to 28.7 per cent of GDP in 2013/14.
• Confirms new
operating spending allowances of $800 million for Budget
2013 and $1.2 billion for Budget 2014.
Building a more competitive economy
Budget 2012 invests heavily in infrastructure, innovation, and skills to help create a more productive and competitive economy that supports more jobs and higher incomes.
• Increases science and innovation
funding across government to more than $1.3 billion a year
by 2015/16.
• $166 million extra (operating and
capital) to develop the new Advanced Technology
Institute.
• $60 million extra for National Science
Challenges.
• $100 million extra to increase the
Performance-Based Research Fund.
• New disclosure rules
for KiwiSaver so investors can better compare the
performance and fees of KiwiSaver funds.
• A review of
KiwiSaver default providers to ensure they are operating in
the best interests of investors.
Future Investment Fund
Budget 2012 establishes the Future Investment Fund to invest the $5 billion to $7 billion of proceeds of the Government’s partial share sales of four SOEs and Air New Zealand into modern infrastructure. This includes $558.8 million in Budget 2012.
• $33.8 million to fit out
schools for ultra-fast broadband – the first of
$1
billion planned spending on 21st Century
Schools.
• $88.1 million for the health sector, most of
which will go towards hospital redevelopments.
• $250
million for the third year of KiwiRail’s Turnaround
Plan.
Better public services
Budget 2012 focuses spending on areas where it will get better results for New Zealanders. It also sets measurable targets for two more of the 10 areas in which the Government has committed to public targets. The three measurable targets set so far are:
• 85 per cent of 18-year-olds having NCEA Level 2
or equivalent by 2017– up from 68 per
cent.
• Reducing prisoner reoffending by 25 per cent by
2017. Reaching this target would mean 18,500 fewer victims
of crime every year.
• Increasing the rate of
participation in early childhood education to 98 per cent,
from 94.7 per cent currently, by
2016.
Health
• Almost $1.5 billion of extra
funding for health, pushing total health spending to $14.1
billion in 2012/13.
• $32.4 million for better, faster
cancer treatment, including dedicated cancer nurses to
support patients through the course of their
treatment.
• $16 million to speed up diagnostic tests
for patients.
• $48 million for more and faster
elective surgery.
• $20.5 million to strengthen
maternity services and boost PlunketLine and WellChild
services.
• $132.7 million to improve services and
access for people with disabilities.
• Increasing
tobacco excise tax by 10 per cent a year on 1 January in
each of the next four years as part of a wider Government
programme to prevent smoking.
• $1.68 million for more
public health screening.
Education
• $511.9
million of operating funding for new initiatives in
education, pushing total funding for early childhood
education and schooling to $9.6 billion in
2012/13.
• $59.8 million to invest in teacher quality
to support the professional development of teachers and
principals.
• $256.8 million to fund forecast changes
in schooling expenditure, which is almost entirely an
investment to retain a more skilled and qualified teaching
workforce.
• $82.6 million to increase the operations
grant, giving schools the flexibility to provide resources
based on the needs of their learners.
• $33.8 million
capital funding in 2012/13 and $16.8 million operating
funding over the next four years for the expansion of the
School Network Upgrade Project, to upgrade schools’
internal ICT infrastructure.
• $59.4 million over the
next four years, and $391,000 in 2011/12 in operating
funding, along with $1.5 million capital funding in 2012/13,
for further schooling proposals.
• Targeting cost
adjustments for ECE through $47.9 million in new operating
funding.
• $19.1 million to improve access to Māori
immersion ECE services.
• $33 million in operating
funding to accelerate achievement for priority
learners.
Tertiary education
• $59 million
extra to boost funding for science and engineering tertiary
courses.
• $37.7 million more for an additional 3,000
Youth Guarantee places to further improve the transition for
young New Zealanders from school into work or
training.
• $29.5 million operating spending for
Private Training Establishments (PTEs), to create a fairer
funding system that rewards competitive innovation across
the tertiary sector.
Welfare
• $287.5 million
up-front investment in the first phase of the Government’s
welfare reforms to support more long-term beneficiaries into
work. This includes:
o $80 million for early childhood
education childcare and the Guaranteed Childcare Assistance
Payment.
o $55.1 million for 155 dedicated Work and
Income staff to support job seekers and sole parents into
work.
o $1 million for financial assistance to access
long-acting reversible contraception.
o $148.8 million
for youth services including wrap-around support.
Law and Order
• $65 million in operating spending for
new and expanded rehabilitation and reintegration programmes
to help meet the Government’s target of reducing
reoffending by 25 per cent by 2017.
• A new Justice
Sector Fund that will give the justice sector flexibility to
invest in areas that deliver better results for New
Zealanders. Corrections has reprioritised $87 million
towards the Fund.
Housing
• $104 million more
for the Social Housing Fund, which supports community
housing groups to provide affordable housing where it is
most needed.
• $11 million towards insulation for
41,000 more homes as part of the Government’s Warm Up New
Zealand: Heat Smart programme. The boost will bring the
total homes covered by the scheme to
230,000.
Rebuilding Christchurch
• Of the
Government’s $5.5 billion Canterbury Earthquake Recovery
Fund (CERF), almost $1.6 billion was spent in 2010/11, and
most of the remaining funding is expected to be spent by
2014/15.
• $114.9 million extra funding for the
Canterbury Earthquake Recovery Authority (CERA) to oversee
the reconstruction of Christchurch.
• $13 million in
Social Development funding for NGO-led initiatives to
support Cantabrians and assist with the
recovery.
• $800,000 for Land Information New Zealand
to continue re-surveying the Canterbury
region.
• Residential investment is forecast to
increase by 29 per cent in the March 2013 year and 41 per
cent in the following year.
SUMMARY OF BUDGET ECONOMIC AND FISCAL FORECASTS
June Years | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 |
Actual | Forecast | Forecast | Forecast | Forecast | Forecast | |
$ billion | ||||||
Core Crown revenue | 57.6 | 60.0 | 64.2 | 69.2 | 73.6 | 77.9 |
Core Crown expenses | 70.5 | 69.6 | 73.7 | 72.9 | 74.9 | 77.3 |
Total Crown OBEGAL | -18.4 | -8.4 | -7.9 | -2.0 | 0.2 | 2.1 |
Total Crown OBEGAL excl quake expense | -9.3 | -7.1 | -5.9 | -1.7 | 0.4 | 2.2 |
Net core Crown debt | 40.1 | 51.9 | 61.3 | 66.5 | 69.8 | 70.7 |
March Years | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 |
Actual | Forecast | Forecast | Forecast | Forecast | Forecast | |
% | ||||||
Real production GDP | 1.2 | 1.6 | 2.6 | 3.4 | 3.1 | 2.9 |
Unemployment Rate (March quarter s.a.) | 6.6 | 6.3 | 5.7 | 5.2 | 5.0 | 4.7 |
Current account balance (% of GDP) | -3.6 | -4.2 | -4.6 |
ENDS