Budget 2016

May 26th, 2016 at 2:00 pm by David Farrar

The surprise in the Budget this year is that there is no surprise!

The last few years there has been a significant surprise such as the increase in welfare benefits or free primary health care for under 13s. There was no surprise this year, just the normal allocation of spending.

There’s nothing in the Budget to get particularly excited about, but also nothing to condemn. Of course that won’t stop the usual suspects condemning it in strident tones, but the reality is that the Government has spent all the money it has, and spent it in the areas you’d expect them to.

What is pleasing is that surpluses of $700 million are projected for this year and next year. That’s a very small surplus, but we are one of the few developed countries around that has managed a surplus. Most of our peers are not forecast to hit surplus until at least 2020.

The Economy

  • Average economic growth of 2.8% projected
  • NZ has been 7th fastest growing economy over last five years, among developed countries
  • Surplus for this year projected to be $700 million and the same for next year. Then in 2018 hits $2.5b and $5.0b in 2019. So unlikely to see tax cuts until 2019.
  • 200,000 more people in work than three years ago and further 170,000 jobs projected
  • Average wage projected to hit $63,000 a year – was $47,000 in 2008
  • Net debt to peak next year at 25.6% of GDP then fall to 19.3%


  • Operating Allowance are around $1.5 billion a year compared to $4.3b a year of last term of Labour
  • Core crown expenses at 29.7% of GDP, down from 34%.


  • $2.2 billion extra for health over four years
  • $1.6b for DHBs
  • $169m for disability support
  • $124m for Pharmac


  • $2.1 billion more for infrastructure being $1.4 capex and $0.7 opex
  • $857m for the new IRD system to replace the 25 year old system
  • $883m for schools funding 480 new classrooms, nine new schools and rebuilding Christchurch schools
  • $115m for regional roads
  • $190m for Kiwirail


  • $761 million for innovation being $411m for science and innovation and $257m for tertiary education.
  • $97m more for health research
  • $95m for regional economic development
  • A 49% increase in funding for the Marsden Fund

Social Investment

  • $640 million for social investment including $200 million for replacing CYF
  • $200 million more for housing for 750 more places for those with most pressing housing needs, $42m for 3,000 emergency housing places, a new emergency housing grant and $36 million to continue home insulation. Also $100m to free up land in Auckland for housing


  • $17m more for Antarctica NZ
  • ETS two for one subsidy to end, saving $356 million
  • $100 million for freshwater improvement
  • Cumulative spending commitments on Christchurch now reaches $17b
  • Tobacco excise tax to continue to increase at 10% a year taking a pack of 20 from $20 to $30. An extra $425m of tax revenue
  • The top 10% of income earners now pay 45% of income tax. The bottom 50% of income earners pay 10% of income tax
  • Those on the top tax rate (earning over $70,000) contribute 60% of income tax revenue

Bill’s Budget Reply

June 4th, 2015 at 3:00 pm by David Farrar

Bill English’s right of reply in the Budget Debate is well worth watching as he eviscerates Labour.

This behind the scenes look at Budget Day may be of interest to some also.

Dim-Post on the left and the Budget

May 22nd, 2015 at 4:45 pm by David Farrar

Danyl McL looks at the Budget and notes:

I’ve been saying for a while that ‘neoliberalism’ – ie a belief in the efficacy of free markets, the distortionary evil of taxes and benefits and the minimalisation of the state – is dead. There are still a few adherents drifting around the fringes of politics that truly believe, but this budget seems like a good time to mark that in National the doctrine is obsolete. National believes in massive intervention in the economy, mostly in favor of their political donors but also in response to signals from their polling and market research, and English has raised or introduced so many taxes I’ve lost count. I don’t know what we’re supposed to call this mode of government, exactly, but it ain’t ‘neoliberal’.

Anyone who calls this Government neo-liberal is profoundly stupid, and thinks it is just a label to apply to anything you don’t like.

Not that I agree with Danyl that National intervenes in the economy to favour political donors. All donors over $15,000 are listed and they’re not the ones who benefit from intervention. The biggest beneficiary of corporate welfare is Kiwirail, followed by all those tech companies that the Callaghan Institute gives money to.

So, on one hand the opposition can put this budget down as a victory. They’ve made a big deal about the housing crisis and child poverty, and the government’s main policy changes have been the introduction of a capital gains tax and an increase in benefits to beneficiaries with families. Forcing your enemies to adopt your rhetoric and policies is a huge win.

Yep, it is a huge win for the left. A National Government has done what not even a Labour Government would do.

On the other hand, the opposition looked like clueless losers yesterday. What kind of left-wing politician opposes the gutting of the KiwiSaver kickstarter – pretty much the definition of middle-class welfare – to tackle child poverty?

Well both Labour and Greens do.

And Little’s speech was just awful. ‘Gene Simmons’? ‘Fiscal gender reassignment’? Why did he think it was a good idea to reference a source of internal division within his own party? What a mess.

It was the worst opposition leader’s budget speech I have seen.

The kids on the social media like to use the phrase ‘hot take’ to describe commentary that is hysterical and uninformed, and that’s what we got from the opposition parties yesterday, gouging their own eyes out with horror at a budget filled with ideas they’ve been demanding for years. Ridiculous.

When I saw the Budget in the lockup and realised how left-wing it was, the one small ray of consolation was that Labour and the Greens would probably be so shocked when they got a copy at 2 pm, they wouldn’t know what to do. Would they look ridiculous, as Danyl says, denouncing they very things they had been demanding, or would they think quickly on their feet.

If I had been the Greens I would have have claimed credit as the only party that had been advocating for an increase in benefit rates, and held the Budget up as an example of why it is important to have the Greens in Parliament – that they can make a difference – even from opposition.

Instead they all routinely denounced it. I guess it was the equivalent of National in 1986 condemning the free market reforms of the then Labour Government.

Budget 2015

May 21st, 2015 at 2:00 pm by David Farrar

This is the most surprising Budget yet from this Government. While I expected the Government to spend a small amount of money on helping low income families, never did I think they would be announcing the first real increase in benefit rates in 43 years as part of an almost $800 million child poverty package.

It will be almost impossible for Labour and Greens to credibly attack this Budget, because it looks a lot like the sort of Budget they would deliver.  I’m impressed with the politics of it, but not impressed with the economics.

The main initiative is the child poverty package. The details are:

  • $25 a week net benefit increase for families with children – 1st increase since 1972. An 8.3% increase in the base benefit rate for most on welfare.
  • To counter against any incentive to remain on welfare due to higher benefit levels, work testing for sole parents to start when youngest child is three, down from five
  • Work testing obligation increases from 15 to 20 hours a week
  • 110,000 beneficiary families with 190,000 children get a net extra $23 a week
  • WFF increases for working families earning under $36,350 a year by $12.50 a week, up to $24.50 a week for very low income
  • Families on WFF who earn over $88,000 a year get a bit less from WFF as abatement rate increases from 21.25c to 22.5c
  • WFF changes benefit 200,000 families and 380,000 children
  • 4,000 very low income working families get a net extra $24.50 a week
  • 50,000 low income working families get a net extra $21.50 a week
  • 150,000 other families get up to $21.50 a week
  • Childcare subsidies for low income families up from $4 to $5 an hour. Families eligible for up to 50 hours a week so worth up to $50 a week.
  • Cost of package $790 million over four years and then $240 million a year

On the overall economic front the main numbers are:

  • Projected GDP growth of 2.8% a year
  • Projected average wage growth from $56,000 to $63,000 by 2019
  • Projected deficit for 2014/15 is $684 million, compared to $2.9 billion in 2013/14
  • 2015/16 projected surplus of just $176 million
  • Operating allowance of $1 billion a year next two years and then $2.5 billion in 2017 (election year) which will include “modest” tax cuts if fiscal and economic conditions permit
  • Core crown expenses down from 34.1% of GDP to 30% next year

The Government is taking a big risk here. They may be forgiven for not making surplus this year, but with a mere $176 surplus projected for 2015/16, there is a real risk they may not even make it next year. This is not good enough.

On the revenue front some good and bad news:

  • ACC levy cuts of $500 million over two years
  • $1,000 kick start for KiwiSaver being removed. Won’t impact existing members who have had $2.5 billion since scheme began. Saves $500 million over four years so funds almost two thirds of the child poverty package
  • New airport tax of $100 million a year being $16 for inbound passengers and $6 for outbound

Quite cunning to mainly fund the child poverty package from the KiwiSaver kick start credit being abolished. It won’t affect the couple of million people already in KiwiSaver, and if you’re a low income family would you rather have $1,000 in 30 years’ time or $25 a week now.

On the expenditure side, the usual mix of announcements:

  • $400 million from the Future Investment Fund for Kiwirail which is the equivalent of throwing four million $100 notes into a paper shredder
  • A further $210 million for fibre roll-out, making a total of $2 billion the UFB and RBI initiatives to have a fast connected country
  • $1.7 billion for health over four years
  • $443 million for education over four years including $63 million for special needs kids
  • $113 million more for tertiary education
  • $164 million for Police
  • $50 million more for Whanau Ora
  • $11 million for to help prevent Kiwi (bird) numbers declining
  • $264 million more for NZ Defence Force
  • $97 million for regional highways and $40 million for urban cycleways
  • SIS and GCSB each get $20 million more
  • Chch rebuild costs now up to $16,5 billion

It is very cunning budget politically.  It is delivering the very thing the left have been demanding – an increase in benefit rates. It will be a fascinating test of which child poverty lobby groups are actually principled, and which are just anti-National shrills. Because the child poverty groups should all be praising the Budget for doing what no Labour Government has done in 43 years – give more money to those on benefits.

But it is not a Budget I support. Where are the tax cuts for hard working Kiwis? Instead of a surplus and likely tax cuts, we get a further deficit and lots of extra spending. The Government had up until now done a good job of fiscal restraint, but not so on this occasion.

This is a Budget that should be praised on The Standard and The Daily Blog. John Key and Bill English have delivered more to families on benefits than Norman Kirk, Bob Tizard, David Lange, Helen Clark and Michael Cullen ever have.

Rodney has a point

May 18th, 2014 at 1:00 pm by David Farrar

Rodney Hide writes in the HoS:

There’s much about politics that’s stupid but nothing beats Budget Day. It’s a day when ordinarily sane people spout nonsense.

Ministers hoot and holler that they are spending more money than ever before. Opposition MPs scream and shout it’s not enough.

We don’t do that at home. We don’t do that at work. To do so would be to be labelled insane and end up poverty-stricken.

Imagine it. “How was your day, dear?” “Great. I spent more on fishing gear than ever before!” “Well done, honey. I bought a dress that cost even more than last year’s.”

In the real world we must economise and judge our spending by what we get not by how much we spend.

Rodney has a good point. Judge on results, not spending.

If you spent what you didn’t have at home and bragged about it, your wife would dump you. If you did it at work, you would be sacked. Do it in politics and we vote for you. It’s nuts.

Spending other people’s money!

Four Budget slides

May 16th, 2014 at 12:00 pm by David Farrar


I’ve grabbed these four slides from the Budget presentation, as I think they show a powerful story. The first is that welfare reforms are working. Benefit costs are around a billion lower than forecast in 2010, and continue to drop.


Labour bang on about the current account deficit a lot. You’ll note how huge it was in 2008. Anyway in 2010 it was projected to hit 7% of GDP. In reality it has improved in the last two years and is still at a historically low level.


This one is very powerful. You see how Labour were ramping up spending massively, and especially in 2008 they basically spent every dollar they could find. And then when the recession hit, we ended up with our structural deficit.

National has imposed considerable fiscal restraint. No, not cutting spending in absolute terms, but having very little extra spending in the first four years, and just modest increases since.



And this is the key one. The settings inherited by National saw a structural deficit and debt ever increasing. In five years, it has been turned around. Labour and Greens complain about the increase in debt, while at the same time they bitched and moaned about every single decision to restrain spending.  This is the essence of their problems – no consistency. They think you can fool people by bitterly opposing spending restraint for five years, and also complaining about increased debt.

Budget 2014 reaction

May 16th, 2014 at 9:00 am by David Farrar

The Herald editorial:

The Budget manages the election-year trick of appearing both fiscally responsible and socially generous. The provision of free medicine and visits to doctors for children under 13 is the main surprise. It is not restricted to families on lower incomes, it will be equally available to those who can easily afford to pay for their children’s medical needs. It is not the most efficient use of funds for health, which absorbs an ever increasing slice of the annual Budget.

By contrast, a parental tax credit is to be increased by $70 a week and extended from eight to 10 weeks but it will be better restricted to low and middle income households. As expected, paid parental leave is to be extended from 14 weeks to 16 next year and 18 the year after. It will also become available to those in seasonal or casual employment or who have recently changed jobs.

Those are the main gifts in a Budget that reflects a good economic outlook. …

The Budget’s best feature is the value Bill English seems to be getting for little extra spending on public services. Departments know the results he wants and seem to be delivering them without complaint from providers or the public.

They have stopped demanding endless increases in funds and he shared the credit with them yesterday for his surplus.

The public sector have done well in providing more, with less.

The ODT editorial:

Budget 2014 was handed down yesterday without much fanfare.

We all knew it was coming, of course, and most believed the pre-Budget hype of a predicted surplus after six years of fiscal restraint.

Many hoped there would be some loosening of the purse strings. Finance Minister Bill English has largely delivered.

This was the Budget that National – right from the time of its re-election in 2011 – would have hoped it could produce leading into this year’s election.

Mr English has not swayed from his path of fiscal restraint. Sure, he has had to borrow heavily during the past six years, but not to the extent the country plunged into recession.

Now, the return to surplus gives options such as paying down debt.

The careful management of the country’s finances by Mr English, and his team of ministers, has helped ensure New Zealand has been mainly immune from the worst of the global decline affecting Europe, parts of Asia, the United States and, latterly, Australia.

Economic growth has been one of the highest in the OECD and, for once, all Treasury indicators are pointing in a positive direction.

Also some interesting comments from Bank economists.

Tony Alexander from BNZ noted:

The return to surplus is a very positive development which stands in contrast with many more years of deficits projected in Australia. Across the ditch taxes have been increased and spending slashed. In the NZ budget it looks like scope exists for some tax cuts down the track and spending has been increased by small amounts in a variety of areas.

In his e-mail newsletter he commented:

The government’s budget this afternoon contained no surprises with a return to surplus predicted for next year and a complete absence of the horror underway across the Tasman where chickens have well and truly come home to roost after years of fiscal laxity. The divergence in the annual budgets with spending slashed in Australia and tax rates rising, versus scope for tax cuts here in NZ down the track will reinforce the massive switch in Trans-Tasman migration flows underway. Before the end of this year it is likely that for the first time since 1991 there will be a net gain to our population from Trans-Tasman flows.

That will be incredible if that happens. Globally, migration is almost always from smaller cities to bigger cities. People migrate from Wanganui to Wellington. From Wellington to Auckland. From Auckland to Sydney. From Sydney to New York or London.

What you don’t generally get is people migrating from Melbourne and Sydney to the smaller Auckland.

The ANZ noted in a newsletter:

The broad policy agenda from today’s Budget hit all the right notes at the macro level. A return to surplus is now within sight and the Government remains focused on the same key priority areas, including managing finances, improving productivity, better public services, and rebuilding Christchurch.

  • The fiscal numbers look good. A return to surplus continues to be pencilled in for 2014/15 ($372m) and rising thereafter, although the projected surplus of 1.3% of GDP in 2018 is marginal and not much of a buffer. Net core crown debt is forecast to fall to 20% of GDP by 2020.
  • While fiscal responsibility rhetoric is strong, an improving fiscal position and better economy have shifted the strategic focus of policy to managing an expanding economy and choices relating to future surpluses.
  • The growth projections look reasonable,which give the fiscal projections a sense of realism.
  • The Budget hits all the usual high notes and we like the emphasis on building the economy’s capacity; and the collection of small initiatives which we view as critical if the current expansion is to endure. 

And also some comments from Alastair Thompson at Scoop:

Six years ago after Lehman Brothers hit the wall this Treasurer set his course. Today the first milestone has been delivered with a return to surplus.

And six years hence the second target is now in sight, a Govt. debt to GDP ratio under 20% by 2020.

Even two years ago in I was a little sceptical about the result being achieved in the time and manner Treasury was forecasting. Back then the Christchurch re-build was failing to thrive. Forecast wage (and income-tax take) growth seemed to be a over-egged. But on the other side of the equation Treasury was forecasting a veritable explosion in trade with China.

Two years later Christchurch’s rebuild is gathering steam, wage inflation was indeed over-stated but the forecast China trade boom delivered and then some. And NZ’s current account deficit problem, the one thing that everybody agreed was our achilles heel, has made a remarkable turnaround.

Looking through this year’s Budget Economic and Fiscal update it is hard to find anything to be concerned about. Whichever way you look at it NZ’s economic outlook is starting to look remarkedly benign.

That may depend on the election outcome!


May 15th, 2014 at 7:42 pm by David Farrar

Very enjoyable rarking up by the PM. To be fair, here’s the Leader of the Opposition also.

A bit of a contrast.

The 2014 Budget

May 15th, 2014 at 2:00 pm by David Farrar


  • Growth to almost hit 4%
  • An extra 170,000 jobs by 2018
  • Average annual wages to go up by 14% to $62,330. Inflation projection is 10% over four years so net 4% gain.
  • Budget surpluses to grow from $372 million to $1.3 billion in 15/16 and $3.5 billion in 17/18
  • Net debt to be under 20% of GDP by 2020
  • NZ Super Fund contributions to resume in 2019/20

The growth projections are positive, and are the most important aspect. Without economic growth, a surplus becomes a deficit. The projected increases in jobs and real wages are also a positive.

The net debt to be under 20% by 2020 is a huge turnaround. The last projection in 2008 had it ever increasing to 70% or so.

However the surplus is still fragile. There isn’t any wriggle room in 2014/15, but I believe 2015/16 should have room to consider tax cuts.

Last year

  • 84,000 more jobs
  • Average weekly wages up 3.2%
  • Inflation has been 1.5%, so real increase in average wages is 1.7%

This Year

  • New spending of $5.7 billion over four years, including $1.6 billion of reprioritisation ore revenue measures
  • Budget surplus projected to be $372 million
  • Operating allowance of $1.5 billion a year, growing at 2% a year, Under Labour they ranged from $2 billion to $7 billion, averaging $3.5 billion over last five years – so under half the previous rate

2008 was the shocker year. A $7 billion increase in annual spending, which meant that when the recession kicked in, we got the projected decade of deficits.

Treasury has released advice that spending increases in excess of $1.5 billion a year will force interest rates to rise more quickly. So political parties promising spending in excess of that will need to explain how they will stop interest rates increasing more quickly.


  • The 6% who earn over $100,000 pay 37% of income tax
  • The 12% who earn over $80,000 pay 51% of income tax
  • The 51% who earn under $30,000 pay 5% of income tax
  • Cheque duty to be abolished, reducing revenue by $4 million a year

Remember when Labour introduced the rich prick tax on those earning over $60,000. Well 23% of New Zealanders now earn over $60,000 and they now pay 69% of all income tax.

The only tax cut in this budget is abolishing cheque duty. Next they’ll be abolishing excise duty on horses and carriages!

Sure tax cuts are not affordable in the 2014/15 year. But they are in the out years, and hopefully all political parties will outline policies to reduce income and other taxes in the lead up to the election.


  • Total spending now $73.1 billion
  • $375 million loan to NZTA for Auckland transport projects
  • $69 million for trade & enterprise
  • $57 million for science
  • $58 million for research and development
  • 6,000 more apprentice places
  • $136 million for tertiary education science and research
  • $100 million more to assist people from welfare into work
  • $536 million for Defence
  • Of $4.7 billion raised from asset sales $200 million for health capital projects, $198 million for Kiwirail, $172 for school property and $40 million for irrigation infrastructure

Nothing too surprising here. As with previous budgets the focus is on science, research & development, schools and hospitals.

I do wish they would stop throwing good money after bad into Kiwirail.


  • $500 million more spending on families
  • Additional four weeks paid parental leave (to 18)
  • Parental tax credit goes from $150 a week to $220 a week and from eight to ten weeks for $42 million
  • $90 million more to extend free GP visits to under 13s
  • $156 million more for early childhood education
  • $33 million to assist vulnerable children

This is the major focus. The paid parental leave was well signalled. The extending of free GP visits to under 13s was a surprise (and a better policy than merely paying more to parents), as was the extra $1,000 for the parental tax credit.


  • $858 million over four years more spending
  • $359 million to pay top teachers and principals more
  • $85 million more for school operations
  • $11 more for school property

No extra details on the package announced in January around up to $50,000 per year more for the top principals. Lots of interest in the final package.


  • $1.8 billion more over four years
  • $110 million more for 4,000 more elective surgery ops
  • A new Grey Base Hospital for $200 million a week

Tony Ryall remains determined not to have Health become an area of weakness for the Government.


Overall I can’t imagine this will go down as a controversial or memorable Budget. It is significant as the first Budget to project a surplus since 2008, and the difficulty of achieving that should not be under-estimated.

The Australian Budget on Tuesday shows what happens, when you don’t have a Government that can’t impose fiscal restraint, as happened with Labor. It also shows the political danger of responding to a huge deficit with a huge slashing of spending (and tax hikes), rather than a gradual reduction in spending increases.

Sometimes slow and steady does win the race, and in New Zealand’s case it looks like it will.

72% against big spending increases

May 15th, 2014 at 9:00 am by David Farrar

Stuff reports on their Ipsos poll that only 21% of adults said the Budget should see a big increase in spending, 51% say the current spending levels should be maintained and 21% say spending should be cut.

So 72% are against increasing spending beyond current levels. That’s excellent for those who believe in fiscal restraint and a rejection of those who propose big tax and spending increases.

The Civilian’s Budget

May 17th, 2013 at 2:00 pm by David Farrar

The Civilian did its own take on the Budget. Some highlights:

  • $1.7 billion to buy back Mighty River Power after Tony Ryall began missing it.
  • $1 billion to build roads that go around Hamilton instead of through it.
  • $64 for Bill English to get his printer fixed.
  • $500 in legal fees for Colin Craig.
  • $800 million to Gore, just to see what happens.
  • $30,000 for production of Air New Zealand safety video starring Maurice Williamson.
  • $170,000 for undercover double agent speech writer for David Shearer.
  • $20,000 to figure out why a McDonald’s deluxe cheeseburger costs less than a regular one.
  • $250 million to make the transformers in the national grid look more like the ones in the movie Transformers.

I especially like the $800 million for Gore, as an experiment.

Budget Data

May 17th, 2013 at 12:00 pm by David Farrar

Those who want Budget data can check out:

  1. Keith Ng has lots of data visualisations
  2. Stuff has interactive data also
  3. Stuff also has a tax-o-meter which shows how much tax you pay every day and what it goes on
  4. Maxim has a tax tracker app which also looks at your tax on an annual basis

Best line of the day

May 16th, 2013 at 5:50 pm by David Farrar

I loved this line:

Credit where credit is due. The Labour Party has finally adopted one of the very sensible policies of the National Government, and that is the Mixed Ownership Model. That’s right, these days the Labour Party is 51% owned by Labour and 49% owned by the Greens


Budget 2013

May 16th, 2013 at 2:00 pm by David Farrar

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


  • 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)


  • 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.


  • 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


  • 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


  • $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


  • $1.6 billion over four years for frontline health services


  • $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%


  • 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


  • $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.

Budget spending

May 14th, 2013 at 9:00 am by David Farrar

Vernon Small at Stuff reports:

Action on child poverty is set to be a surprise package in Bill English’s fifth Budget on Thursday as the Government seeks to make an impact with limited cash to spend.

Last week, Labour leader David Shearer predicted the Budget would be “for the boardroom not the smoko room”.

But early signals suggest it will address some of the recommendations in the report to the children’s commissioner by the advisory group on child poverty.

Oh dear. if correct, Labour will need a new slogan to use.

Never mind the socialist mindset that the board room and the smoko room are contradictory targets.

Yesterday, Prime Minister John Key would not rule in or out a move on food in schools but said National would not back Mana leader Hone Harawira’s “feed the kids” member’s bill.

However, he pointed to his state of the nation speech in 2007 and the Government’s support for KidsCan, Fonterra’s milk in schools programme and an extension to the fruit in schools scheme as signals he backed such moves in partnership with business.

Oh wait is this the same evil business that Labour is targeting?

What will the Budget show?

May 13th, 2013 at 10:00 am by David Farrar

Brian Fallow writes:

The economic forecasts underpinning Thursday’s Budget will need to differ substantially from those the Treasury offered in its half-year update six months ago.

The economy began this year with a lot more momentum than it (or other forecasters) expected. Gross domestic product growth in the December quarter was three times what the Treasury had forecast. But then the drought hit.

The exchange rate is a lot higher than expected, and inflation accordingly lower. Except for house price inflation: house prices are already higher than the Treasury expected them to be in four years’ time.

Unemployment is already down to the levels expected two years from now.

Which is good. However the latest HLFS came out after the Budget forecasts were finalised.

And the estimated cost of rebuilding Christchurch has climbed by a third to $40 billion.

All of these factors will affect the forecast track for revenue, in one direction or the other, and some will affect spending as well.

In March the Treasury estimated the drought would reduce real GDP this year by 0.7 per cent from what it would otherwise have been.

Hence I expect the projected surplus for 2014/15 to remain very slim.

Where your taxes go

May 31st, 2012 at 2:00 pm by David Farrar

Worth checking out Where are my taxes. It details and shows graphically how much money per capita is spent on various activities. Some big items:

  • Superannuation $2,328
  • Primary schools $639
  • Family Tax Credits $480
  • Secondary schools $469
  • Tertiary Education $459
  • Domestic Purpose Benefit $413
  • Land and Transport $401
  • Student Loans $373
  • Early Childhood Education $313
  • Invalid’s Benefit $300
  • Accommodation Assistance $282
  • Unemployment Beneift $200
  • Sickness Benefit $177
  • Student Allowances $137

2012 Budget highlights

May 24th, 2012 at 2:22 pm by David Farrar

Here’s some of the more significant aspects of the 2012 Budget:

  • Household savings rate is positive for the first time in a decade, and is forecast to increase to almost 4% by 2016
  • Unemployment is forecast to drop below 5 per cent by 2015
  • Forecast fiscal surplus in 2014/15 is $197 million
  • Core Crown expenses to fall progressively from 33.5 per cent of GDP in 2011/12, to 30.2 per cent of GDP in 2015/16
  • $385 million of new investment over four years in research, science, and innovation
  • $250m from asset part-sales going towards Kiwirail
  • Deferring the auto-enrolment exercise for KiwiSaver, until surplus is locked in
  • Goals No 2 and 3 of 10 announced – reducing prisoner reoffending by 25% in five years and increasing the rate of participation in early childhood education to 98%, up from 94.7% currently
  • $1.5 billion extra to Vote Health over four years – will include 4,000 more elective ops a year
  • Tobacco excise tax to increase 10% (plus inflation) on 1 Jan 2013 and repeat for the next three years (so a real 40% increase in excise tax)
  • $512 million towards new frontline education initiatives
  • $104m for housing



The 2nd most open budget in the world

May 24th, 2012 at 11:00 am by David Farrar

As it is Budget Day, it is worth celebrating one thing – the quality and openness of the Budget information. This year there is even a smartphone app for the Budget.

The International Budget Partnership collaborates with civil society around the world to analyze and influence public budgets in order to reduce poverty and improve the quality of governance.

They have a league table of how open budgets are and the top ten are:

  1. South Africa 92
  2. New Zealand 90
  3. UK 87
  4. France 87
  5. Norway 83
  6. Sweden 83
  7. US 82
  8. Chile 72
  9. Brazil 71
  10. South Korea 71

The bottom five are Chad, Iraq, Equatorial Guinea, Fiji and Sao Tome E Principe all on zero.

Budget coverage

May 24th, 2012 at 7:00 am by David Farrar

For the first time in many years I won’t be in the Budget lockup today. I was in the Wellington lockup, but then I had to be in Auckland on Thursday afternoon for the debate on Europe starting at 5.30 pm. I tried to swap to one of the two Auckland lockups, but they are both full and selfishly no one from TVNZ or TV3 has died this week freeing up a place for me 🙂

I can’t get to Auckland in time if I do the Wellington lockup as the first flight is at 4 pm after the lockup ends. So I am flying to Auckland in the morning and will be reading furiously come 2 pm.

So any coverage of the Budget won’t be at 2 pm, as normal, but slightly later. I need to write a small article for Fairfax on the budget also which will be my first priority (paid work trumps blogging!), but once that is done hope to have something blogged before 3.30 pm. I’m on the RNZ Panel from 1545 to 1700 also and suspect the Budget may be one of the issues we discuss!

The Budget Quiz

May 20th, 2011 at 9:13 am by David Farrar

Stuff has a Budget Quiz. I got 13.15 after correctly guessing Bill English’s tie colour.

PM’s response to Goff

May 19th, 2011 at 3:56 pm by David Farrar

No words are needed.

Where your taxes go

May 19th, 2011 at 3:50 pm by David Farrar

Mark Hansen has put together a nice wee site called “Where are my taxes“. Click on a pie graph to bring up a vote, and it then also gives you the breakdown per capita of spending in that vote. Did you know we spend $4 per person on weather forecasting?

Mark blogs about his site here. It’s a great wee resource.

UPDATE: Also check out a really cool visulation by Keith Ng at Public Address. It shows trends and all.

Budget Notes

May 19th, 2011 at 2:00 pm by David Farrar

On the fiscal side the news is pretty good. The Government almost returns to surplus in 2013/14 (a modest $700m deficit) and from 2014/15 onwards surpluses are projected. This is a huge turnaround from the fiscal outlook Treasury revealed in December 2008 which was for at least a decade of deficits – in fact for deficits to continue beyond 2023.

This is probably the first time in 70 years that a Government has actually cut spending in election year. They were planning to spend an extra $4 billion or so over the next three years, and instead will be spending around $1 billion less.

The Government is putting $5.5b into a Canterbury Earthquake Recovery Fund, and over the next three years has reduced spending in other areas by $5.6b. The key difference is the spending savings are not one off, but will remain (if the Government does not change).

The Earthquake Fund is in addition to the $3.3 billion EQC is expected to pay out, bringing the total Government contribution to $8.8b. This will go on repairing local and national infrastructure in Canterbury plus welfare support  and a contingency for AMI Insurance.

The changes to KiwiSaver are three-fold.

  1. Employees will get $10 a week instead of $20
  2. The minimum employee contribution rate will increase in 2013 from 2% to 3%
  3. The employer contribution will also rise to 3% in 2013, and from 2012 any employers contributions will be subject to tax at the employees PAYE rate

KiwiSaver funds are projected to still reach $60b in 10 years time.  And someone on the minimum wage who joins KiwiSaver at 18 will have $195,000 when they retire which would provide an additional pension of $11,500.

The changes to WFF are minor – reducing the cost from $2.8b/year to $2.6b a year. Over seven years to 2018, the abatement rate will increase from 20% to 25% for those earning over $35,000 a year. This will produce higher effective marginal tax rates for those on WFF.

I asked the Minister if he was concerned that it lifts the effective marginal tax rate for those of WFF to 58%. He responded that it was a trade off, and that as there have been tax cuts in past years, most WFF recipients will still have a lower EMTR, but acknowledges some may be higher.

I also asked if the savings from the WFF changes were worthwhile, especially as they streatch out to 2018 for full implementation. His reply was that over time they add up to making the scheme more sustainable.

The abatement rates will increase at the same time as WFF payments are inflation adjusted so a family on $40,000 will still get an increase in nominal terms. A solo parent on $90,000 a year with two kids will have his WFF reduced from $19/week to $7/week.  A two income family on $61,000 with two kids will go from $116 a week to $112 a week in April 2012.

Labour says the wealthy are not paying enough, but those deemed “rich pricks” by Labour in its last term of Government (earning over $60,000) are still forecast to pay 61% of gross income tax next financial year. I estimate that probably represents 85% to 90% of net personal income tax.

Part-sales of four SOEs expected to free up to $7b of capital , which will go towards acquiring $35b of new assets in the next five years. This will be a great boost to capital markets.

This budget reminds me of the 2009 budget – both were shaped primarily by external forces. There isn’t a lot you would sensibly do different. The 2010 budget remains for me the bold budget where some risks were taken and big changes made.

The budget is politically astute – it gets NZ back into surplus earlier and minimises the impact on most people. But it has not dealt with many of the issues raised by the Savings Working Group, such as the excellent idea to tax people only on their real returns from investments, not their nominal returns. The Minister said the idea is not yet ruled out, but is complex. Hopefully they might be saving that for their election manifesto.

Cunliffe’s poll

May 19th, 2011 at 8:49 am by David Farrar

Johm Armstrong writes in the Herald:

A case of jumping the Budget gun only to shoot yourself in the foot? David Cunliffe, Labour’s finance spokesman, found himself a laughing stock in Parliament yesterday after a poll asking families whether they were better off or worse off as a result of the Budget appeared on his website.

The poll was an embarrassment for Cunliffe for two reasons. First, the Budget has yet to be delivered. Second – and worse from Labour’s point of view – nearly 90 per cent of those responding said they were better off.

Those respondents must have known something about the Budget that the rest of us won’t until this afternoon.

More likely, National supporters organised enough votes to skew the findings in their party’s favour.

Actually it was fairly spontaneous. I blogged yesterday on Cunliffe’s premature poll, and I think blog readers just decided to have some fun.

Having ensured the poll was taken down from Cunliffe’s website, Labour was insisting the survey was one that appeared on the site after last year’s Budget. A computer glitch had resulted in the poll reappearing.

A computer glitch? Sometimes I have things *not* appear due to a glitch, but I’ve never had something appear by itself with no human involvement.

What was amusing in the House was thet the Speaker was at first reluctant to allow the website poll to be tabled, as he discourages tabling of stuff already in the public domain. However when it was pointed out Labour had removed the poll from the website, that meant it was then okay to table it.