Budget 2013

Have been in the Budget lock up since 10.30 am. Some key details of the 2013 Budget are:

Surplus

• The 2014/15 surplus projection remains razor thing – $75m, but projected to increase to $2.6 billion in 2016/17.
• The deficit was $18.4 billion in 2010/11, will be around $6.3 billion for the current year and projected to be just $2.0 billion next year.
• Over five budgets a total of $15 billion of spending has been reprioritised (eg cuts in one areas to allow new initiatives to be funded)

Expenditure

• Core crown expenses to increase by $5.5 billion over four years but dropping from 35% of GDP to below 31%.
• This is a key strategy – that expenditure growth is less than economic growth. Expenditure grew at 6.1% annually from 2003 to 2012, but will only grow 2.7% annually over next four years.

Debt

• Net debt projected to peak at 29% of GDP in 2014/15
• Net debt projected to be 18% by 2010 2020, compared to 60% which was the 2009 projection before policy changes
• Contributions to NZ Super Fund will not resume until net crown debt is below 20% of GDP

Research & Development

• An extra $100m a year for internationally-focused growth opportunities in research & development, tourism and education marketing
• Research and development funding to increase to $1.36 billion in 2013/14, 28% higher than four years ago

ACC

• Projected ACC levy reductions of $300m in 2014/15 and $1 billion the following year, resulting in levies being 40% lower than in 2011
• Both households and businesses will benefit from lower ACC levies. A $1 billion reduction is around $500 per household, but no details yet on exact changes to employee and employer levies.

Asset Sales

• Total Crown Assets forecast to grow from $250 billion to $273 billion
• $1.5 billion of spending from the partial asset sales including $426m to redevelop Christchurch hospitals, $94 million for Kiwirail, $80 million for irrigation, $50 million for school networks
• Meridian Energy to be floated later this year, probably October

Housing

• $100m over three years for home insulations for low-income of high health needs households which should cover 46,000 homes on top of 230,000 homes already done
• $27m over four years to extend income-related rents to community housing providers
• Special housing areas as agreed by Government and Councils will have streamlined (faster) consenting under a new law
• Reviewable tenancies will be extended to all social housing tenants, to ensure those in the most need can get into social housing. Will actually increase government spending as rents by tenants to Housing NZ will on average be lower
• MSD not Housing NZ to assess housing needs, so Housing NZ can focus on being an excellent social housing provider
• Housing Warrant of Fitness to be developed and trialled, starting with state houses

Health

• $1.6 billion over four years for frontline health services

Education

• $900 million more for education including $173 million over four years for early childhood education.
• ECE spending now $1.5 billion compared to $860 million in 2007/08
• Education spending now 7.2% of GDP, compared to OECD average of 5.8%

Christchurch

• An extra $2.1 billion for Christchurch increasing Crown contribution to $15.2 billion
• Total cost of Christchurch rebuild now estimated to be 20% of annual GDP

General

• $189m over four years for welfare reforms and helping people into work
• Economic growth over next three years projected to be higher than US, Canada, UK, the Euro zone and Japan
• The 11% earning over $80,000 will contribute 49% of all personal income tax collected

I’ve got an article in the Dominion Post tomorrow where I do a more detailed commentary. My overall take is that it is a good Budget for 2013 – still on track for a surplus, a big drop in ACC levies and significant extra spending in priority areas.

But next year’s Budget will need to be the one which spells out the vision, post getting back to surplus.