16 May 2013

Budget 2013: At a Glance

Progress in the Government’s programme while on track to surplus

• Provides a suite of measures to build faster economic growth, support more jobs and deliver a more innovative and productive economy.

• Forecasts economic growth to average between 2 and 3 per cent a year over the next four years.

• Includes a $100 million-a-year internationally-focused growth and innovation package to boost investment in science, research and development, and tourism.

• Confirms an additional $1.5 billion of investments from the Future Investment Fund to spend proceeds from the Government’s share offer programme.

• Allows for ACC levy cuts on households and businesses of around $300 million in 2014/15, increasing to around $1 billion in 2015/16.

• Provides significant extra money to help low-income families through a number of targeted initiatives.

• $5.1 billion of new operating spending in the current year and over the next four years for initiatives across areas such as health, education, welfare, and housing.

• Confirms an additional $2.1 billion to help rebuild Christchurch, taking the Government’s total share of the rebuild to around $15 billion.

Budget initiatives at a glance

(All figures for four years to 2016/17 unless otherwise stated).

Responsibly managing the Government’s finances

The Budget confirms the Government remains on track to meet its two key fiscal targets – returning to surplus by 2014/15 and bringing net government debt back down to 20 per cent of GDP by 2020.

• Forecasts show an operating surplus before gains and losses of $75 million in 2014/15 – a remarkable turnaround from the record $18.4 billion deficit in 2010/11.

• Net core Crown debt is forecast to peak at 28.7 per cent of GDP in 2014/15, before falling to 17.6 per cent of GDP by 2020/21.

• Core Crown expenses are expected to drop below 31 per cent of GDP by 2014/15, down from 35 per cent of GDP two years ago.

Budget 2013 confirms decisions to ensure that debt is capped and then reduced:

• The operating allowance is $900 million in Budget 2013, compared with $800 million signalled previously, and $1 billion in Budget 2014, compared with $1.2 billion signalled previously. From 2015 onwards, operating allowances will grow by 2 per cent per Budget.

• The Government intends to delay contributions to the New Zealand Superannuation Fund until net core Crown debt is no higher than 20 per cent of GDP. This is expected in 2020/21.

Building a more productive and competitive economy

Budget 2013 continues the Government’s unwavering focus on increasing longer-term growth, productive investment and exports by investing heavily in measures to help businesses become more competitive.

• A $100 million-a-year internationally-focused growth package to provide extra research and development assistance to businesses, additional funding for the tourism sector, and international education marketing.

• Allowing for ACC levy reductions of around $300 million in 2014/15, increasing to around $1 billion in 2015/16. When combined with the $630 million levy reduction in 2012/13, these changes will amount to around 40 per cent lower ACC levy rates for households and businesses.

• Budget 2013 confirms a further $1.5 billion of new capital investment from the Future Investment Fund, which was established to invest proceeds from the Government’s share offer programme. It includes:

o $426 million for the redevelopment of Christchurch and Burwood Hospitals. As announced previously, this will be the single biggest hospital investment in New Zealand’s history.

o $50 million to speed up the School Network Upgrade Project which enhances the technological capability of schools.

o A further $94 million for the fourth year of KiwiRail’s Turnaround Plan.

o $80 million for irrigation projects, as announced previously.

• Meridian Energy will be the next company prepared for a share offer to New Zealanders, in the second half of 2013.

• Legislation will be introduced to improve housing affordability by delivering flexible regulatory tools to councils under accords between the Government and councils in areas where housing is least affordable.

• A memorandum of understanding with the Reserve Bank Governor confirms a range of measures, if required, to protect the economy from periods of excessive growth in credit and asset prices, and to promote financial system stability.

• A number of revenue measures, including a proposal to allow loss-making start-up companies to claim tax losses on research and development.

Better public services

The Ministerial Committee on Poverty has endorsed a number of important initiatives to help low-income families. They include:

• $100 million over three years for the Warm Up New Zealand: Healthy Homes programme targeting low-income households, particularly those with children or high health needs, for home insulation.

• More than $21 million over the next four years for rheumatic fever prevention.

• An extra $1.5 million for Budgeting Services in 2013/14, in addition to the $8.9 million provided already in 2012/13.

• A whiteware procurement programme to enable beneficiaries to purchase new appliances under warranty using Ministry of Social Development repayable grants.

• A commitment to investigate and pilot a partnership with NGOs and financial institutions to support the provision of low or no interest loans for low-income borrowers.

• The trial on Housing New Zealand properties of a Warrant of Fitness programme for rental housing.

Welfare

$188.6 million over four years for the next stage of welfare reform to help more New Zealanders off benefits and into work. This follows a $287.5 million investment in Budget 2012, and includes:

• 354 extra Work and Income staff to provide intensive help and support.

• People receiving the sole parent support or supported living payments, who go off the benefit and don’t have work expectations to retain some of their benefit in the first few weeks.

• Additional funding to allow Work and Income to contract external providers to deliver case management and wrap-around services for particular groups of beneficiaries.

• Further developing the investment approach to welfare.

• Additional funding to provide for an independent workability assessment by experts to establish a client’s work-readiness.

Health

Over the next four years, $1.6 billion for new health initiatives and to meet cost pressures and population growth. This takes total health spending to $14.7 billion in 2013/14. $1 billion of this extra funding goes to District Health Boards to take account of population changes and inflationary pressures.

Extra health spending over the next four years includes:

• $70 million for aged care and dementia services.

• $35.5 million for diabetes and heart disease.

• $100 million extra to meet population changes and cost pressures in disability support services.

• $48 million for more elective operations such as hip replacements and cataracts.

• $25 million to increase the number of people being screened for diseases, particularly breast cancer.

• More than $21 million to reduce the incidence of rheumatic fever and undertake rheumatic fever vaccine research.

• $18.2 million for a new mothers and babies initiative, with details to be announced shortly.

• $12.8 million for patients with long-term conditions such as diabetes and asthma.

• $7.3 million for 20 additional medical student places.

• $7 million to increase coverage of preventative health tests for four-year olds.

• $4.3 million to improve care and men’s awareness of prostate cancer.

Education

In the current year and over the next four years, around $900 million for education initiatives across early childhood, primary and secondary education. This takes total spending on these sectors to $9.7 billion in 2013/14.

Extra education spending in the current year and over the next four years includes:

• $173 million for early childhood education, including $41 million for equity funding and $39 million for universal subsidies.

• $215 million for schooling, including nearly $80 million for operations grants, $64 million for Positive Behaviour for Learning and $38 million for teaching quality initiatives.

• $92.4 million for Greater Christchurch Education Recovery and Renewal and 21st Century Schools.

• $73.1 million of operating expenditure to support the ongoing maintenance and costs of the school property network.

More than $130 million over four years of new investment and reprioritised funding in tertiary education. It includes:

• $36 million for the expansion of Māori and Pasifika trades training.

• $27 million to boost funding for science and engineering courses.

• Nearly $29 million to equalise funding rates between Private Training Establishments and Tertiary Education Institutions.

• $32 million to support an increase in the proportion of young people with higher-level qualifications.

Law and order

• Police will reprioritise more than $160 million over several years to give frontline officers access to new technology such as smartphones and tablets, which will improve their performance and productivity.

• The Ministry of Justice will receive $4.4 million from the Justice Sector Fund to expand its restorative justice services.

• The Department of Corrections will invest $10 million over two years from the Justice Sector Fund to increase support for offenders after their release, with the goal of reducing reoffending.

Housing

• $26.6 million to extend the income-related rent subsidy scheme to
non-government providers.

• Legislation will allow community housing providers to become registered prior to receiving an income related rent subsidy for new, eligible tenants.

• $46.8 million to extend reviewable tenancies to all Housing Corporation tenants who signed up to their existing properties before 1 July 2011.

• Responsibility for assessing entitlement to social housing support will be shifted from Housing New Zealand to the Ministry of Social Development.

Rebuilding Christchurch

• The total estimated cost of the earthquake damage in our second largest city has been increased to $40 billion from the $30 billion of previous estimates.

• Budget 2013 confirms $2.1 billion of additional government funding to the earthquake recovery, including $900 million of new capital from the Future Investment Fund. This will take the Government’s total share of the rebuild to around $15 billion. This extra funding includes:

o An additional $300 million earmarked for the Central City recovery.

o Funding for final land zoning decisions.

o Work of the Canterbury Earthquake Recovery Authority.

o Redevelopment of the Christchurch and Burwood hospitals, a justice and emergency services precinct, and tertiary education institutions.

SUMMARY OF BUDGET ECONOMIC AND FISCAL FORECASTS
2012 2013 2014 2015 2016 2017
Actual Forecast Forecast Forecast Forecast Forecast
Economic (March years, %)
Economic growth1 1.9 2.5 2.4 3.0 2.6 2.2
Unemployment rate2 6.7 6.9 6.0 5.9 5.5 5.2
CPI inflation3 1.6 0.9 1.9 2.0 2.0 2.2
Current account balance4 -4.4 -4.8 -4.8 -5.2 -5.8 -6.5
- (ex-rebuild)4 -4.2 -4.1 -3.5 -3.5 -4.0 -4.8

Fiscal (June years, $ billions)
Core Crown revenue 60.6 63.8 68.4 72.3 75.8 79.5
Core Crown expenses 69.1 71.6 72.4 73.5 75.2 77.2
Total Crown OBEGAL5 -9.2 -6.3 -2.0 0.1 0.8 2.6
- (ex-earthquake)5 -7.3 -4.9 -2.0 0.3 0.9 2.8
Net core Crown debt6 50.7 57.9 64.8 68.2 69.7 70.3

1 Real production GDP, annual average percentage change

2 Percent of labour force, March quarter, seasonally adjusted

3 Consumers Price Index (CPI), annual percentage change, 2013 actual

4 % of GDP

5 Total Crown operating balance before gains and losses (OBEGAL)

6 Net core Crown debt excluding the New Zealand Superannuation Fund and advances

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