Digital Snapshot

by Eva U Wagner

NEW ZEALAND – Budget 2021

Digital Snapshot #14/21

21 May 2021

A potpourri of current affairs topics from Australia, New Zealand and the South Pacific brought to you by KAS Australia and the Pacific. The weekly digital snapshot showcases selected media and think tank articles to provide a panorama view and analysis of the debate in these countries.

Disclaimer: The views expressed in these articles do not necessarily reflect KAS Australia’s position. Rather, they have been selected to present an overview of the various topics and perspectives which have been dominating the public and political debate in Australia and the Pacific region.


The New Zealand Government has released its Budget for the upcoming financial year. In his Budget speech, Finance Minister Grant Robertson from the governing Labour Party said that the Budget was about securing the country’s economic recovery. The NZ Herald tells us 10 things we need to know about it:

Covid: There’s $5.1b left in the $62b Covid response and recovery fund. Treasury forecasts the borders to re-open by 1 January 2022.

Unemployment: Figures are forecast to peak at 5.3% in September this year, and to fall to 4.4% by June 2025.

Economy: Estimated to grow at 2.9% in the upcoming financial year, then to 4.4% for 2023. The better-than-expected operating allowance is $3.8b.

Debt: The Government expects to borrow an extra $100b in the five years to 2025. Net core debt is forecast to peak at 48% of GDP in 2023. The next surplus is expected in 2027 – at 0.1% of GDP.

Infrastructure: An extra $15.1b (bringing the total to $57.3b from 2021 to 2025), including $810m for KiwiRail, $761m for school property, $700m for hospitals and $306m for Scott Base.

Climate change: $19.7m for future response to the Climate Change Commission’s final recommendations. Recycling revenue from the ETS will add $3b over five years.

Health: Labour keeps election promises with an extra $200m for Pharmac, but back-down on free annual GP visit and eye check for Supergold cardholders as it is of “limited benefit”.

Welfare and families: Benefits will increase by between $32 and $55 a week, while student living support will go up $25 a week. This will cost $3.3b over four years.

Housing prices: Annual house price growth is forecast to peak in June (17.3%) this year, stalling at 0.9% next year, then to rise again to 2.5% in 2025.

Maori housing: $380m for 1000 new homes for Māori, repairs for 700 Māori -owned homes; ring-fencing $350m of the $3.8b housing fund announced in March for at least 2700 Māori homes.

The Budget represents the centre-left government’s third “wellbeing” budget in a row, with the largest increase to welfare payments in more than a generation as the centerpiece. In response, National Party and opposition leader Judith Collins pointed out that the costs of living had gone up under the Labour government, which had no confidence in growing the economy, which was why benefits were going up. She made it clear that her party’s focus would have been on creating jobs.

Similar to Australia, New Zealand’s economy is recovering quicker than forecast from the pandemic. While both countries’ Budgets provide for big spending, Jacinda Ardern’s government is said to have refrained from borrowing at Australian-style levels. New Zealand is forecast to run a deficit of $15.1 billion ($A14 billion) compared to Australia’s $A106 billion this year, and to return to the black by 2026/27. The Treasury expects the deficit to peak at 5.3% of GDP in June 2022 before declining to 0.6% of GDP by June 2025.

In the Budget debate, Prime Minister Jacinda Ardern said that Australia’s real GDP was 2.9% compared to New Zealand’s 3.5% on average over the last 4 years. In terms of employment, New Zealand’s unemployment rate [4.7% compared to 5.6% in the March quarter] was currently lower and forecast to be lower by 2024 (4.2% compared to 4.5%) than Australia’s jobless numbers. New Zealand’s operating balance was healthier, and the net debt lower, than that of Australia. Notably, New Zealand’s borders are forecast to re-open six months earlier than Australia’s borders (1 January compared to mid-2022).

The Budget has received mixed reviews. An analyst from The NZ Initiative, for example, concluded that while the Budget provided a few nods in the general direction of productivity, without sustained productivity growth, future budgets would have a harder time covering the costs of this year’s budget. Chartered Accountants Australia New Zealand rated the Budget to be a “tax-light” budget that still needed clarity and certainty in regards to the tax announcements. Auckland Action Against Poverty (AAAP) slammed the Government for “moving too slow”, saying the benefit increase was “weak”. There was also criticism that the Budget did not deliver for middle-income earners. In reply, PM Ardern said that addressing poverty was something “all New Zealanders want[ed] to see”.

The Australian Prime Minister Scott Morrison is scheduled to visit New Zealand in the end of May for an annual leaders meeting. It will be his second overseas trip since the outbreak of the pandemic after he visited Japan in November last year. In turn, Prime Minister Jacinda Ardern is due to visit Australia in July for trade talks. This will be her first overseas trip since the arrival of COVID-19. Thanks to the two-way travel bubble which came into force last month, neither of them will have to quarantine upon arrival in, and return to, their respective country.