Budget ’17 will show the benefits of a return to surplus, predicts KPMG

The 2017 Budget being delivered later this month is expected to “scratch a lot of itches”, according to KPMG’s public sector experts.

“Election year budgets are the ones that Budget analysts wait for,” says Adrian Wimmers, KPMG’s Head of Infrastructure and lead Budget analyst.

“But 2017 will be especially interesting, given the unique combination of factors. We have a third-term National-led Government, with a new Prime Minister and Minister of Finance. The Government is facing growing pressure for action on a number of fronts – such as housing and infrastructure – along with the opportunities and calls for investment arising from the return to surplus.”

Many of the themes KPMG discussed in last year’s Budget coverage remain strongly relevant, says Wimmers.

“New Zealand still has a stable and growing economy – but the growing pains are becoming increasingly obvious. For example, immigration rates, including returning Kiwis, have remained above long-run averages and forecasts made in last year’s Budget. The resulting political pressures the Government is facing across housing, welfare, health, education and infrastructure have only increased in the past 12 months. Given the surplus track forecast, we expect to see a greater level of investment and intervention on these issues than in previous Budgets”.

Analysts will also be watching to see whether the re-shaped Government leadership will bring fresh dynamics to the Budget, says Wimmers. Some are expecting another ‘predictable’ Bill English-style Budget, while others believe Steven Joyce will spice things up in putting his stamp on his first Budget.

Wimmers expects that the centrepieces of the Budget will be a tax and family package, a step up in infrastructure spending, and increased social spending, particularly in areas where the Social Investment approach suggests there will be both individual and fiscal returns.

“Being election year, we also expect there will be a large number of low-cost but headline-targeting initiatives across a broad range of Ministerial portfolios. One to watch out for could be further funding towards the Government’s ‘predator-free’ goal.”

New Zealand’s ballooning tourism sector is also making headlines, with calls for extra investment (or a user-pays model) to respond to the pressures being wrought by its double-digit annual growth.

“Overall, KPMG is predicting this year’s Budget will be one that tries to scratch a lot of itches and keeps the National-led Government square in the centre of politics through a strong focus on middle income earners, infrastructure and social investment.”

Ends.

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