Key Provisions of the 2023 NZ Budget
This month Grant Robertson delivered his sixth Government Budget. The Government announced that Budget 2023 would prioritise addressing the cost of living and aim for a ‘no frills’ budget without unexpected tax changes.
The challenge is how to decrease Government expenditure to mitigate inflationary effects, while simultaneously ensuring economic stability for New Zealanders during an unpredictable period and also effectively managing issues like health, housing, and climate change.
Below is a summary of some of the key points.
Cost of living
The primary concern confronting New Zealanders is the cost of living with inflation is high for the year to March at 6.7% and the official cash rate (OCR) stands at 5.25%.
In this budget one of the key areas of investment is in early childhood education, with $1.2 billion allocated to expand the 20-hour early childhood education support to cover two-year-olds in addition to three-to-five-year-olds, ultimately making it easier for more Kiwis to return to work. By investing in childcare, the government aims to support families and provide more opportunities for parents to participate in the workforce.
Another significant announcement in the Budget is the allocation of $403 million to improve energy efficiency in Kiwi homes, which is expected to reduce power bills.. The Warmer Kiwi Homes Programme will fund the installation of approximately 100,000 heating and insulation systems, 7,500 hot-water heat pumps, and 5 million LED bulbs.
The government has also taken steps to reduce healthcare costs by the removal of prescription charges, which is expected to benefit many New Zealanders by making essential medicines more accessible. There is a permanent reduction in the cost of transport for many citizens with the budget funding free public transport for children under 13 and permanent half price fares for under 25s.
Tax & The Economy
The trustee tax rate in New Zealand is increasing from 33% to 39% starting April 1, 2024, which may disappoint many with family trusts. The budget claimed no major tax changes, but this affects 400,000 trusts.
Other notable highlights include:
$27 million has been allocated to address the skills shortage in the tech sector workforce. This investment aims to improve the digital skills of the workforce by providing digital skills training programs.
An allocation of $30 million to support the growth of New Zealand’s horticulture technology industry.
The government has committed $18 million to drive positive changes in the tourism and hospitality sectors. This investment aims to create better career opportunities, improve working conditions, and promote innovation within these industries.
Over the next five years, $71 billion will be allocated for infrastructure investment, focusing on schools, hospitals, public housing, rail, and road networks. An additional $6 billion has been allocated to a National Resilience Plan, which primarily focuses on medium and long-term infrastructure investment.
$160 million has been allocated to support the gaming sector through a rebate scheme which is retroactively applicable from April 1,2023. Eligible game development studios will receive a 20% rebate on their expenditures, with a minimum annual spending requirement of $250,000.
A total of $451 million will be used to establish three new research hubs in Wellington to focus on driving innovation, collaboration, and export potential in areas such as health and wellbeing, oceans, climate, hazards, and advanced manufacturing, biotech, and energy. This funding includes research fellowships and applied doctoral training for 260 individuals..
Climate change
A substantial funding package aimed at assisting the regions and communities that have been heavily impacted by Cyclone Gabrielle was announced with a total of $804 million allocated towards the repair and restoration of infrastructure in these areas. Additionally, a separate fund of $120 million has been established to safeguard communities against future climate-related events. Out of this amount, $100 million will be specifically dedicated to enhancing flood resilience measures.
Other investments and initiatives to promote sustainability and combat climate change include allocating $120 million for the development of electric vehicle charging infrastructure, aiming to support the transition towards electric transportation and, $30 million for clean heavy vehicle grants, specifically targeting trucks.
To accelerate private investment in low-emission activities, the government has committed $300 million. This funding aims to attract and promote investment in projects and initiatives that contribute to reducing greenhouse gas emissions. Furthermore, there will be a $50 million investment in renewable energy solutions, with a focus on improving energy access, affordability, and security in remote, low-income, and energy-insecure communities.
$38 million has been committed to design and implement a new regulatory regime for the New Zealand Emissions Trading Scheme (NZ ETS) and the Chatham Islands will receive $10.7 million to reduce diesel generation and establish a renewable energy system
Health
The Government announced over $1 billion of funding to increase pay rates and boost staff numbers, including $63 million for progressive safe staffing, which the they calculate will allow for an additional 500 new nurses.
$118 million allocated to reduce waiting lists by freeing up inpatient hospital beds, and $20 million to enhance health equity for Māori and Pacific communities, aiming to address the existing disparities in healthcare. Additionally, a significant amount of $863.6 million has been dedicated to supporting tāngata whaikaha Māori (Māori with disabilities) and disabled individuals along with their families. This funding aims to provide necessary assistance and resources to ensure their well-being and inclusion within society. Furthermore, an additional $20 million has been allocated specifically for COVID-19 immunization and screening coverage for Māori and Pacific communities.
To remediate historical non-compliance with the holidays act $2.2 billion has been allocated, remediating current staff by 30 June 2024.
Construction
In the housing sector $3.1 billion in capital and $465 million in operating funds has been allocated.. This aims to create an additional 3,000 public housing places by June 2025.
In education a total operating budget of $77.1 million has been allocated, with $17.1 million of that being new funding for the Apprenticeship Boost scheme. This initiative is expected to provide support for approximately 30,000 apprentices, enabling them to either start or continue their training.
Infrastructure development is another key focus, with an allocation of $71 billion over the next five years. A new National Resilience Plan has been established, with an initial investment of $6 billion. This plan will prioritise rebuilding infrastructure affected by recent weather events and address the infrastructure deficit through long-term strategic planning.
Additionally, $369.2 million in operating funds will be used to restore a resilient and reliable national rail service, facilitating projected growth in rail usage. The Auckland City Rail Link project will receive $197 million in capital and $9.4 million in operating funds to address cost increases..
Lastly, $707 million in operating funds and $3.6 billion in capital will be allocated to cover cost increases in the existing build program funded through the 2020 budget, while $147 million will be used for upgrading school buildings.
Māori and Pacific
A substantial portion of the funding allocated in this year’s Budget is directed towards the Māori recovery efforts in the aftermath of Cyclone Gabrielle. The cyclone has had a profound impact on Māori communities, prompting the Government to announce a $15 million investment aimed at expediting the recovery process in the regions affected by the cyclone.
Addressing housing concerns is another significant focus for Māori communities, and the Government has committed $233 million to enhance housing outcomes. This funding includes $200 million specifically allocated to augment the availability of Māori housing and facilitate the repair of Māori properties.
The Government has allocated $143 million to provide support for Māori and Pacific culture and language revitalization programs.
Agribusiness
New Zealand’s innovative horticulture technology industry is set to receive a $30 million investment. This funding aims to scale up the industry, fostering increased productivity while prioritising environmentally sustainable practices.
Additionally, in response to health and safety as well as animal welfare challenges faced by primary sector and rural communities impacted by Cyclone Gabrielle, a dedicated allocation of $30 million has been committed.