What does the 2019 Budget mean for New Zealand business leaders?
Today’s announcement cements our first dedicated ‘Wellbeing’ Budget for New Zealand. This is a budget which reflects the collective need, and desire, to address the inequalities that exist within our society.
Social inequality has shifted from something that people consider and reflect upon in their personal lives, to something that businesses are increasingly thinking about. For if social division becomes greater than it is now, it won’t only have a direct impact on businesses, but on the prosperity of our country as a whole.
We’ve reviewed some of the key themes delivered in this year’s budget, and their significance for the prosperity of New Zealand for all New Zealanders.
This year’s Wellbeing Budget moves beyond the traditional, narrow measures of success such as GDP and fiscal growth, to include success measures based around the four capitals of the Living Standards Framework; natural, social, human and financial and physical. This is in addition to other success measures, such as child wellbeing and poverty indicators, and Statistics New Zealand’s “Indicators Aotearoa New Zealand”.
So, what does this mean for New Zealand business leaders?
There are four key areas for business that stand out to us:
- The focus on infrastructure – both through commitments to projects and changes to the system to bring certainty for business;
- Investment in innovation and skills;
- A continuation of funding flowing to the regions;
- Forecasted economic growth through increased Government spending and increases in social welfare.
The emphasis on a collaborative Government means that, if you work with government agencies you should see a more connected, cohesive approach, making it easier for businesses to have an impact on outcomes, rather than spending energy navigating bureaucracy.
The Budget has announced $1 billion of rail investment, along with $1.7 billion for hospitals, and a 10 year school property programme. Along with this is $51 million allocated to the establishment of the New Zealand Infrastructure Commission to bring long term, integrated planning to New Zealand’s infrastructure needs.
Further spending on innovation, skills and sustainability is intended to help with the transition to a cleaner economy.
An uptick in Provincial Growth Fund (and other funds) applications and approvals means money will continue to flow to the regions – something we’re seeing our clients have real wins with. Read our full coverage on what New Zealand’s first Wellbeing Budget means for businesses here.
One of the five priority areas announced this year is ‘Lifting outcomes for Māori and Pasifika’. The extent to which this will be realised is dependent on the effectiveness of the processes that sit behind it, and the change in the assumptions that a universal approach for both Māori and Pasifika groups will be effective. Turning budget inputs into desired outcomes requires much more than direction from the top. There are embedded mind sets, behaviours and norms that may need to be unlearned to create the space for changes in perception necessary to effecting the outcomes sought. This is alongside consideration on how we truly bring our communities on the journey of creating real solutions together. KPMG Advisory Director Riria Te Kanawa shares her personal opinion on what the 2019 budget means for the wellbeing of Māori, here.
Tax is less of a centrepiece than the Tax Working Group might have suggested. The focus is on business as usual. Funding for the centrepiece spending initiatives is from growth in the economy and existing tax settings. Further, increasing tax revenue, without the big bang change of an initiative like a capital gains tax, is likely to be gradual and dealt with through the tax policy work programme. The indications are that tax changes which increase tax will receive priority, for example, the recent proposal to collect more GST from telecommunications services. By contrast, measures which reduce the tax take are likely to be pushed out. Read our full tax coverage here.
Central to managing a business with multiple units, is ensuring they work together. This is the essence the Government’s challenge. As it seeks a whole of government response to the issues it sees New Zealand facing, ensuring a whole of government and a whole of life focus will be key.
In summary, this year’s budget recognises the equal importance that social and economic priorities have in fuelling the prosperity of New Zealand. We can no longer say that business is just about economics - New Zealand businesses have a vested interest in supporting the response to some of the key issues called out in the Wellbeing Budget.
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