New Zealand's first 'Wellbeing' Budget
New Zealand's first 'Wellbeing' Budget
What does it mean for business?
What does a wellbeing budget mean, exactly?
The Wellbeing Budget’s intent is to focus beyond just the normal economic and fiscal measures that a budget would normally be judged against, and to use the Treasury's “Living Standards Framework” to inform the Government's investment priorities and funding decisions. Simply, this is about measuring and reporting against a broader set of indicators to show a more rounded measure of success, rather than just focusing on Gross Domestic Product. The “four capitals” in the Living Standards Framework – natural, social, human, and financial and physical – are central to this new way of measuring.
What does this look like, in practice?
The priorities for the Budget were set in advance through the Government’s Budget Policy Statement. These priorities are designed to deliver against this new broader set of measures. For this Budget, the priorities are:
- Creating opportunities for productive businesses, regions, iwi and others to transition to a sustainable and low-emissions economy;
- Supporting a thriving nation in the digital age through innovation, social and economic opportunities;
- Lifting Māori and Pacific incomes, skills and opportunities;
- Reducing child poverty and improving child wellbeing, including addressing family violence;
- Supporting mental wellbeing for all New Zealanders, with a special focus on under 24-year-olds.
Ministers and government departments were therefore asked to show how their funding bids contributed to these priorities, and funding was allocated on the basis of their impact against achieving those priorities.
So what does that mean for businesses?
There are four main things for businesses, in this budget, most of which flow from the first two Budget priorities listed above:
- Infrastructure – The Government will spend $51.3m to establish the New Zealand Infrastructure Commission, Te Waihanga, which will develop a 30-year strategy for New Zealand’s infrastructure requirements and a pipeline of projects. This is something business has been asking for to improve certainty and help plan investments and workforce. The big infrastructure story is rail. The Budget has funded $1b for rolling stock, two new rail ferries, the previously-announced increase in funding for Auckland’s City Rail Link, and regional upgrades. There are also commitments for:
a. $300m for Crown Infrastructure Partners, the Government-owned company that developed alternative financing for infrastructure, e.g. the Milldale Housing Development
b. Dunedin Hospital, the Government’s biggest vertical infrastructure project, will be fully funded along with $1.7b to upgrade hospitals across the country
c. A ten-year plan for new schools and upgrading schools, with a total of $1.2b funding
d. Resource Management Act reform, although no funding has been allocated to this.
- Investment in innovation and skills:
a. Innovation receives a boost through the establishment of a $300m fund to support early start-up businesses target investment ($60m of existing NZ Venture Investment Fund funding plus $240m that would otherwise have gone to the New Zealand Super Fund) and extra funding for R&D, in the form of $106m in operating funding* and $51m in capital funding.
b. Skills receives investment through the previously announced $197m for the reform of vocational education – that is; changes to the way trade training is delivered in New Zealand.
These investments are less about achieving a dramatic change, and are aimed largely at addressing known structural shortcomings in the New Zealand economy.
- Money will continue to flow to the regions: Much of the money for the regions has already been announced, most notably $1b per year of Provincial Growth Fund (PGF) investment. ($300m of this has been allocated to the infrastructure initiatives). We therefore we expect to see a continuation of the steady flow of funding to the regions. Indeed, that would tally with our experience of a steady number of our clients gaining access to PGF (and other) funding for projects that contribute to fuelling prosperity in the regions.
- An increase in economic activity: This budget has a significant increase in the operating expenditure allowance (raising to $3.8b in this Budget) and there is also an increase in capital expenditure over the four-year horizon. This increase in government spending is expected to translate into an increase in GDP growth of close to 1%, over the period of 2020 – 2023. That increase in economic activity will flow through to businesses throughout the country.
Where to from here?
The increases in operating allowance and the move to a four-year capital appropriation means we should expect to see continued increased spending in future Budgets.
While not cemented in place in this Budget, the use of wellbeing indicators should become law over the course of this Government’s term through proposed changes to both the Public Finance Act and the State Sector Act. These proposed changes in legislation could have a material impact on the long-term path of future Budget investments, no matter who is in Government. We ought to know more about what that will look like by the time we get to next year’s Budget, so for now we must continue to wait to find out what the longer-term, and more-enduring, impacts of the “Wellbeing Budget” will be.
* Note that all operating funding figures are for the four-year planning horizon.
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