Budget 2018

The booming economy has given Labour enough tax revenue to spend up large. Hundreds of initiatives have been funded. However some of the big ticket items are not what people may have expected. DHBs are only getting $549 million a year more and Labour had been insisting they were underfunded by $2 billion or more.

A few promises have been delayed such as cheaper GP visits, winter energy payments and Police numbers.

What is interesting is almost a total absence of media releases or initiatives on growing the economy, unless you count Shane Jones provincial grants or Winston giving more tax breaks for racing.

The key economic and fiscal data for 2019 is:

  • Economic growth of 3.3% forecast
  • Unemployment projected to be 4.4%
  • Inflation 1.4%
  • Core crown expenses 28.5% of GDP (well under the 30% cap)
  • OBEGAL of $3.7 billion

The increase between 2017/18 expenditure (largely based on National’s 2017 Budget) and 2018/19 increase for key votes is:

  • Security and Welfare – up 3.2% in 2017/18 and up 10.9% in 2018/19
  • Health – up 5.9% in 2017/18 and up 5.2% in 2018/19
  • Education – up 4.9% in 2017/18 and up 5.2% in 2018/19
  • Law & Order – up 10.1% in 2017/18 and up 3.3% in 2018/19
  • Defence up 5.5% in 2017/18 and up 4.9% in 2018/19
  • Environmental protection up 47.8% in 2017/18 and down 17.8% in 2018/19
  • Core crown expenses up 7.0% in 2017/18 and up 6.1% in 2018/19

So the increases in health and are actually much the same as in this current year. The big increase is in welfare.

Also of interest is Treasury are forecasting a drop of 900 tertiary students from 2018 to 2019. So they’re spending $2.8 billion on free tertiary fees and the projected impact is 900 fewer students. This must be the most wasteful policy ever.

Overall the Budget is reasonably solid in terms of fiscal indicators. But that was always going to be the case for the 2018 Budget. The more challenging ones are likely to be in 2019 or 2020 as the impact of public sector pay rounds will have flowed through by then.

One pleasing initiative is that the Government has taken up the policy to have an independent entity cost political party policies, so that voters know the likely cost of what is being promised.

The most ridiculous policy is Winston forcing the Government to make horse purchases tax deductible if the horse is good looking.

No I’m not making it up. That really is the policy. A horse can be deemed tax deductible “by virtue of its bloodlines, looks and racing potential”. IRD is going to need a new division that can assess how good looking a horse is, and hence whether it can be tax deductible.

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