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Budget 2015: At a Glance

21 May 2015

Budget 2015: At a Glance

Budget 2015 delivers careful management of public spending, hand in hand with investment in public services.

(All figures for four years to 2018/19 unless otherwise stated).

Looking ahead to the results of responsible economic management

• Economic growth forecast to average 2.8 per cent over the next four years.

• Average wages expected to rise by $7,000 to $63,000 a year by mid-2019.

• Unemployment forecast to fall below 5 per cent in 2016.

• In line with the allowance set in December, Budget 2015 has a net operating cost of $1 billion per year. This is made up of $6.1 billion of new operating spending over the next four years, of which $2 billion is funded through reprioritisation and increased revenue.

• Deficit of $684 million forecast for 2014/15, moving to a surplus of $176 million in 2015/16 and growing to $3.6 billion in 2018/19.

• Net core Crown debt is forecast to peak at 26.3 per cent of GDP in 2015/16, and then fall to 19.7 per cent of GDP in 2020/21.

• Government remains committed to $1 billion new operating allowance in Budget 2016, increasing to $2.5 billion in Budget 2017 to allow for modest tax cuts before returning to $1.5 billion a year in Budget 2018 and growing thereafter at 2 per cent per Budget.

• Core Crown expenses have fallen from 34.1 per cent of GDP in 2008/09 to an expected 30 per cent in 2015/16 and are expected to continue to fall.

• Provision for annual ACC levy cuts of $375 million in 2016 and a further $120 million in 2017, depending on the outcome of public consultation.

Child hardship package

A $790 million package to reduce hardship among children in New Zealand’s poorest families includes:

• Most sole parents, and partners of beneficiaries, will have to be available for part-time work once their youngest child turns three, rather than five as now.

• All beneficiaries with part-time work obligations will be expected to find work for 20 hours a week, rather than 15 hours as now.

• Benefit rates for families with children will rise by $25 a week after tax, which is first time since 1972 that core benefit rates have been increased by more than inflation.

• Student Allowance rates for families with children will also increase by $25 a week.

• Beneficiaries receiving Sole Parent Support will have to reapply for their benefit every year – as people receiving Jobseeker Support already do.

• Low-income working families earning $36,350 or less a year, before tax, will get $12.50 extra a week from Working For Families (WFF), and some very low-income families will get $24.50 extra.

• Working families earning more than $36,350 will get extra from WFF, but it will be less than $12.50 a week, with the exact amount dependent on their family income.

• Families earning more than $88,000 a year will get slightly lower WFF payments, with the average reduction being around $3 a week.

• The Childcare Assistance rate for low-income families will increase from $4 an hour to $5 an hour for up to 50 hours of childcare a week per child.

• The exact impact of the child hardship package on any given family will depend on their individual circumstances, including the types of supplementary assistance they receive.

Vulnerable children

In addition to the child hardship package, the Budget also includes:

• $36 million to support the Children’s Action Plan, including funding for new and existing Children’s Teams.

• $23 million to bolster the work of Child, Youth and Family.

• $8 million to help vulnerable students participate more in education or training, and lift achievement.


Early childhood education and schools

Total spending of $10.8 billion in 2015/16 on early childhood, primary and secondary education. New operating spending of $442.9 million includes:

• $74.9 million for early childhood education to enable more children to attend early childhood education from an earlier age, and for more hours.

• $62.9 million over four years for special education.

• Schools’ operation grants will be boosted by 1 per cent, at a cost of $42.3 million.

• 300 extra Trades Academies places will be added to support students to achieve NCEA Level 2.

In addition, the Budget provides $244 million from the Future Investment Fund to build seven new schools and kura kaupapa, expand four existing schools and build an additional 241 classrooms at existing schools.


Tertiary Education

Budget 2015 provides a $112.3 million operating and $1 million of capital to invest in tertiary education. This includes:

• $85.8 million for targeted increases in tuition rates at degree level and above.

• $11.4 million for more engineering places and for activities to raise the profile of engineering.

• An $8.4 million contingency to grow Māori and Pasifika Trades Training (up to 500 new learners per annum from 2016).

• $5.9 million to support an increase in Trainee Medical Intern Grants.

• $900,000 in operating funding and $1 million of reprioritised capital to expand the Youth Literacy and Numeracy Assessment Tool.


Welfare

In addition to the $790 million for the child hardship, new measures include:

• $8.5 million to help reduce long-term welfare dependency - providing up to 10,000 extra places for intensive case management, prioritised for people with health conditions and disabilities, and an extension of the 3K to Christchurch scheme.

• $15.4 million will be invested in the Limited Services Volunteer programme, run by the New Zealand Defence Force.

• $8.6 million over the next four years, and $1.5 million in 2014/15, for the OSCAR subsidy for out-of-school care and school holiday programmes.


Health

An additional $1.7 billion for New Zealand’s public health services over the next four years, increasing the Government’s total health investment to $15.9 billion in 2015/16.

• $320 million per year for DHBs ($1.3 billion over four years) for extra services and to help meet cost pressures and population changes.

• $98 million to provide more New Zealanders with timely elective surgery, and to improve the prevention and treatment of orthopaedic conditions.

• $12.4 million to extend the bowel cancer screening pilot.

• $76.1 million to help hospices expand palliative care services.


Rebuilding Christchurch

An additional $107.8 million in operational funding for Canterbury’s earthquake recovery takes the Government’s total contribution to the Canterbury rebuild to $16.5 billion.

This will support land clearances to make way for Anchor Projects and preparation of land before those constructions begin. It also covers the operational cost of owning and developing assets that have been purchased by the Crown, and the cost of preparing these assets for future sale or vesting.


Housing

The Government is taking extra steps to bolster and enforce the tax rules on property. Subject to consultation, from 1 October this year:

• All non-residents and New Zealanders buying and selling any property other than their main home must provide a New Zealand IRD number.

• All non-resident buyers and sellers must provide their tax identification number from their home country, along with current identification requirements such as a passport.

• To ensure our full anti-money laundering rules apply to non-residents before they buy a property, non-residents must have a New Zealand bank account before they can get a New Zealand IRD number.

• A new “bright line” test will be introduced for non-residents and New Zealanders buying residential property. Under this new test, gains from residential property purchased on or after 1 October and sold within two years will be taxed unless the property is the seller’s main home, inherited from a deceased estate or sold as part of a relationship property settlement.

The Government will also investigate introducing a withholding tax for non-residents selling residential property, to be introduced mid-2016 sfter consultation.

The Budget provides Inland Revenue with a further $74 million for additional enforcement of tax obligations, including $29 million for property tax compliance.

Budget 2015 also includes the additional housing initiatives:

• $52 million capital contingency fund to facilitate housing development on Crown-owned land in Auckland.

• $35 million for social housing, plus around $30 million previously earmarked for capital grants through the Social Housing Fund.

• $35.3 million to improve housing outcomes for whānau Māori.

• $12.8 million for the new Te Ture Whenua Māori Network which will help Māori land owners improve the productivity of their land.


Law and order

• $164 million over four years for Police to continue delivering more effective frontline policing and crime prevention.

• $8 million for the Serious Fraud Office.

• $6.5 million for programmes to reduce reoffending, funded from the Justice Sector Fund.

• $40 million for other Justice and Courts initiatives, including the Investing in Justice programme, the Harmful Digital Communications Bill and helping build the Christchurch Justice and Emergency Services Precinct.


KiwiSaver

• People enrolling into KiwiSaver no longer receive a $1,000 kick-start payment, saving the Government more than $500 million.

• Contributing KiwiSaver members aged 18 or over or under 65 will continue to receive an annual ‘member tax credit’ from the Government of up to $521.

• In 2015/16, the Government is forecast to spend $705 million on the KiwiSaver Member Tax Credit plus $12.3 billion on New Zealand Superannuation.


Business innovation

• $12.1 million for the New Zealand Business Number, providing a unique identifier for businesses to use when interacting with government.

• Up to $25 million over three years to support the establishment of new,privately-led Regional Research Institutes.

• $80 million extra for R&D growth grants. This will bring the Government’s total investment in science and innovation to over $1.5 billion in 2015/16.


Immigration and border security

• A new border clearance levy to fund passenger-related biosecurity and customs activities at the border is expected to take effect from 1 January 2016. Subject to consultation, it will be around $16 for arriving passengers and around $6 for departing passengers. It is expected to raise around $100 million per year once fully implemented.

• At the same time, the Budget expands some border activities, including an additional $25 million for more x-ray machines and detector dogs and $33 million for more immigration staff, including border officers.


Future Investment Fund

The Government’s share offer programme has provided almost $4.7 billion for investing in new public assets such as schools and hospitals. Of this total, $939 million is allocated in Budget 2015, including:

• Up to $210 million to extend the roll out of Ultra-Fast Broadband.

• Education receives $244 million for new schools, kura kaupapa and new classrooms.

• In tertiary education, up to $100 million has been set aside for Lincoln University to rebuild its science facilities as part of the Lincoln Hub development.

• KiwiRail receives $210 million in 2015/16 and a further $190 million as a pre-commitment against Budget 2016.

• As announced previously, Budget 2015 also provides $97 million for regional highways, as well as $40 million for urban cycleways.

• Up to $52 million in contingency to replace the Waitangi Wharf on the Chatham Islands.

• $40 million of investments into Te Papa for capital works on its Wellington buildings.


Other initiatives

• $49.8 million to continue funding Whānau Ora navigators to help families tackle problems together, develop whānau plans and access a range of services.

• $37.2 million to provide greater national direction and support to councils as the implement the Government’s resource management and freshwater reforms.

• $264 million to allow the Defence Force to meet its domestic and international humanitarian, aid and military commitments.

• The Security Intelligence Service and the Government Communications Security Bureau each receive additional funding of $20 million.


SUMMARY OF BUDGET ECONOMIC AND FISCAL FORECASTS
2014 2015 2016 2017 2018 2019
Actual Forecast Forecast Forecast Forecast Forecast
Economic (March years, %)
Economic growth1 2.5 3.3 3.1 2.8 2.8 2.4
Unemployment rate2 6.1 5.6 5.1 4.7 4.5 4.5
CPI inflation3 1.5 0.2 1.4 2.1 2.0 2.1
Current account balance4 -2.6 -4.1 -5.6 -4.9 -5.1 -5.3

Fiscal (June years, $ billions)
Core Crown revenue 67.3 71.9 74.9 78.9 83.5 87.4
Core Crown expenses 71.5 73.1 74.9 77.1 80.8 83.4
Total Crown OBEGAL -2.9 -0.7 0.2 1.5 2.0 3.6
Net core Crown debt6 59.9 61.7 65.6 67.1 67.2 65.5

1 Real production GDP, annual average percentage change

2 Percent of labour force, March quarter, seasonally adjusted

3 Consumers Price Index (CPI), annual percentage change

4 % of GDP

5 Total Crown operating balance before gains and losses (OBEGAL)

6 Net core Crown debt excluding the New Zealand Superannuation Fund and advances


BUDGET 2015 NEW OPERATING INITIATIVES
$m 2014/15 2015/16 2016/17 2017/18 2018/19 Total
Child Hardship Package - 71 245 238 237 790
Health - 406 435 417 402 1,660
Education - 111 120 108 104 443
Other Social Sector 7 159 109 110
...


ends

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