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Rt Hon Helen Clark Budget Speech

Thursday 27 May 2004

Rt Hon Helen Clark

Prime Minister

Budget Speech



3.00 pm

Thursday 27 May 2004

Congratulations to the Minister of Finance for his work in drawing together this budget.

Thank you to all Ministers for their work on the very significant new initiatives the budget provides for.

I am proud of this budget - proud of it because like every budget delivered by this Labour-led government over four and a half years, it delivers to heartland New Zealand - our families, our superannuitants, our workers, and to those who need the care and support of us all.

Mr Speaker, the budget doesn't just deliver by spending on important initiatives. It also delivers by keeping a firm hand on economic management.

What is delivered in this budget today could not happen without economic success.

Under this Labour-led government, economic growth has averaged over three and a half per cent.

Under this Labour-led government unemployment has fallen to its lowest level in sixteen and a half years, and to the fourth lowest in the western world.

The figures on unemployment speak for themselves:

March quarter 1999 under a National government - 7.2 per cent.

March quarter 2004, Labour-led government - 4.3 per cent.

May 1999 under a National government - close to 144,000 people on Unemployment Benefits.

May 2004 under Labour-led government - under 68,000 - well under half.

It is no wonder the National Party doesn't want to talk about the economy!

From the beginning, this Labour-led government has promised to invest the fruits of growth back into meeting the needs of heartland New Zealand and building a stronger economy.

That's what we've done over four and a half years, and that's what this Budget delivers.

In earlier budgets we built the platform for stronger economic performance.

We began making huge investments in education and skills training - including apprenticeships for school leavers.

We boosted public spending in research and development - and today's budget takes the total increase in government R & D spent to 45 per cent over our five budgets.

We developed smart growth strategies, working alongside regions, industries, and companies to boost the economy.

We changed immigration to recruit more migrants who could meet labour market needs.

And as unemployment continued to fall, the Jobs Jolt policies kicked in to get even more people off benefit and into work.

From our earliest budgets, we also began the badly needed reinvestments in public and social services and infrastructure.

And we redistributed to meet the needs of families, superannuitants and workers.

Our budgets have delivered on all our election pledges to:

- lift superannuation,

- bring back income-related rents in state housing,

- make tertiary education more affordable, and

- drop waiting times for treatment in the health system.

As well, we have invested heavily in education overall, in mental health, and primary health care, in state housing, and in core services like the police.

New policies like paid parental leave introduced two years ago helped working parents needing time at home with their new babies.

All along our budgets have struck a careful balance - investing back into growth and back into people and services, while maintaining a solid operating surplus.

And that careful balance continues in today's budget.

We invest back into growth and people and services as much as we can afford - and we invest where it is needed most.

The big focus of this year's budget is on New Zealand's working families.

Our families have been helped in many ways by previous Labour budgets.

But for Budget 2004, it has been our goal to directly improve the household income of low and middle income families.

That isn't best done by across the board tax cuts.

The main beneficiaries of those are always the top income earners.

This budget helps low and middle income families by lifting Family Support, and Family Tax Credit, by changing abatement levels for family income assistance, and by replacing the Child Tax Credit with a large In Work Payment for working families.

In addition, both subsidies for childcare and for accommodation costs increase substantially.

What does this mean for New Zealand families?

It means a substantial redistribution of wealth in their favour, beginning in this financial year and continuing to build over a three year period.

It means a lift for more than 300,000 families - of which more than two thirds are families who are working full time or part time now - and the incentives in this budget are for even more families to move into work because they will be better off.

For families in the $25 - 45,000 bracket, it will deliver an average of around $100 a week over the three years in direct family assistance, and that doesn't include gains they may have from extra Accommodation Supplement and childcare subsidies.

And the budget will have a significant impact on child poverty - reducing it by around 70 per cent if we use the poverty threshold of 50 per cent of median household income, and around 30 per cent if we use a 60 per cent threshold.

Higher incomes and better opportunities offshore have in the past been reasons for New Zealanders to leave this country.

A low income, low skill, low value, low growth economy was a crippling burden on our people's aspirations.

That's what this Labour-led government has set out to change - and we have.

Our economy is growing well - and better than in most western countries.

Our unemployment has dropped substantially - and is lower than in all but four western countries.

Our skill levels are rising and our economy is moving up the value chain.

All this has been achieved because of smart policies.

But the real test of policies is when the benefit is felt in the pockets of our families.

What this budget does is deliver the growth dividend very directly to our low and middle income families.

It makes our families more financially secure.

It means they can look ahead with more confidence.

It means they are better able to meet their commitments.

And it means they can afford some extras for their children.

Under this budget, a family with three kids, living in Auckland; earning $52,000 a year (just above the median income); and paying a mortgage of $385 a week

- will be $100 better off a week by next April

- $140 a week better off by April 2006

- and $170 a week better off by April 2007.

A family in a small town, with 2 children earning $37,500 between the 2 parents, with rent and childcare costs of around $190, can expect to be $82 a week better off by April next year.

- $143 better off by April 2006,

- $163 better off by April 2007.

There's one clear message to New Zeaaland's low and middle income families.

Labour delivers to your family.

Families are better off with Labour.

Families are better off with Labour because Labour runs a strong economy and Labour reinvests in people and basic services.

And our pledge to New Zealand families is that we will keep on delivering so that our families can get ahead.

Making work pay

It's important to emphasise that making work pay is central to this budget.

Yes, families on benefits will gain, but the biggest gains come to those who are in work and those who move into work.

It's long been said that many low income families with children are little or no better off in work than on a benefit - once work-related costs, benefit abatement rates, and tax are taken into account.

National's approach to that was to slash benefits and throw families into poverty.

Labour's approach is to make work pay by lifting the incomes of working families.

The message is clear - you will be better off if you go to work, and we want you to go to work.

With low unemployment and skills shortages, New Zealand needs more workers !

In particular, we need to boost the numbers of women in work.

Our country falls well behind top OECD countries in the percentage of women in the workforce.

But top OECD countries have also long done much more to support working parents.

And our Labour-led government is taking steps to see that New Zealand catches up.

A big step forward was taken with the introduction of Paid Parental Leave - and this budget provides for the scheme to be extended this year and next.

And now this budget makes big improvements to childcare.

The rates of subsidy will increase significantly and many more families will be eligible for the subsidy.

Overall at least 28,000 families with 33,000 children will benefit - with average gains of about $23 a week per child from next year.

This budget also signals another dramatic improvement in early childhood education.

From mid 2007, three and four year olds will be entitled to twenty hours free attendance at community based early childhood services.

This extends the tradition of free early childhood education from kindergartens to other community based centres.

What all families want to know is that their children get good quality early childhood education and care.

This budget invests another $365 million over four years in early childhood education.

By 2008 this Labour-led government will have lifted investment in this area by 79 per cent over that inherited in 1999.

I am proud of what our government is doing for our families, our children and for education.

Taken together, all these changes mean more opportunity, higher living standards, and more New Zealanders in work and paying their way.

There are many other significant initiatives in this year's budget.


Yesterday I announced with Minister of Health a big increase in funding for orthopaedic surgery.

Over the next four years the government plans to double the number of major hip and knee replacement operations done in the public health system.

That will take our rate of these major operations to the same level as in Britain and above that in Australia.

We want our people to enjoy a world class health system.

Over four and a half years, we've got waiting times down in most areas of surgery.

Now orthopaedics can catch up.

This is big news for older New Zealanders.

Bad hips and bad knees are painful.

They destroy quality of life.

They limit mobility and independence.

A hip or knee joint replacement gives a whole new lease of life.

Our senior citizens deserve no less.

The new initiative to double the number of operations has been worked on with the orthopaedic profession and with District Health Boards.

With their support we know we can deliver.

Superannuation Fund

The other good news for our older New Zealanders is this budget's commitment to the New Zealand Superannuation Fund.

This Labour-led government believes in saving now to save New Zealand Superannuation for the future.

This budget invests another $2.1 billion in the Fund.

By 2040, when we have many more senior citizens, the Fund will be able to offset about one third of the cost of New Zealand Superannuation.

This Fund is essential to the future security of income for older New Zealanders, and this Labour-led government is totally committed to that.

Student support

Over four and a half years our government has worked to make tertiary education more affordable.

We froze tertiary fees for three years, and now keep increases capped to low levels.

We stopped interest accruing on loans while students were studying.

And the loan repayment terms are fairer.

For this second term in government we signalled that more students would get student allowances.

This budget delivers on that pledge.

From next year, we will spend another $110 million on student support - benefiting more than 36,000 students.

Almost 12,000 students will move from eligibility for partial allowances to get a full allowance.

28,000 more students will now be eligible for a partial allowance (where they would have been ineligible before).

3,000 students already getting partial allowances will get a higher amount.

The government is also making changes to the allowance system to bring it into line with the Bill of Rights.

That means that under 25 year olds, with no dependants, will be treated equally regardless of whether or not they are, or have been married or in paid employment in the past.

Up to 7,000 students may be affected by that, but changes in other parts of the allowance system mean that they will not automatically lose allowance eligibility.

In the final analysis, the government has decided that it is not fair to advantage students under 25 who marry and have no dependants over those who don't marry.

Mr Speaker - time does not permit me to detail other major budget initiatives.

The budget does provide for close to half a billion dollars over the next four years for strengthening economic performance.

The investments range from spending on skills, to developing our export markets, increasing our R & D spend, attracting quality offshore investment, growing our companies, increasing the value of our industries, and negotiating the best trade rules we can for New Zealand.

This budget will take New Zealand ahead.

It's good for families, and its good for the economy.

It keeps the balance between economic and social investments.

It keeps a strong fiscal position.

It is a budget for growth and opportunity.

It's a budget for getting New Zealanders into work and making work pay.

It's a budget that only a Labour-led government can deliver and it's a budget I'm proud of.


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