Budget 2020: Rebuilding Together
- $50bn fund to deliver COVID response and economic recovery plan at centre of jobs budget
- $4bn business support package, including targeted $3.2bn wage subsidy extension
- $3bn infrastructure investment and 8,000 public house build programme to boost productivity and create jobs
- $1.4bn for trades and apprenticeships training package
- $1bn environmental jobs package
- $3.3bn new funding to strengthen core services including health and education
Finance Minister Grant Robertson this afternoon delivered his budget for the 2021 financial year.
Declaring “this budget is about jobs” he delivered one that is heavy on spending aimed to recover the economy from the Covid-19 crisis, with some $50 Billion earmarked to fight the economic devastation caused by the pandemic.
The $50b will focus upon job and apprenticeship training, particularly in the trades, and creation of shovel-ready infrastructure.
The employer’s wage subsidy will be extended for an additional eight weeks.
Robertson says the government expects unemployment to peak at 9.8 percent in September, and expects the provisions allowed by the budget to save 140,000 jobs.
He also promised to deliver 8000 new homes over the fiscal year.
Robertson says the $50 billion fund announced today will grow jobs and support New Zealanders and the economy through the effects of Covid-19 and the global recession.
At this Budget, the Covid Response and Recovery Fund will invest in a targeted wage subsidy extension, free training and apprenticeships, an 8000 state and transitional house build programme, $3bn for infrastructure development, job-rich environmental projects and support for SMEs, exporters and entrepreneurs to grow the economy.
“Today is about jobs. It’s about creating new jobs and it’s about preparing people for new jobs,” Robertson said.
New Treasury forecasts incorporating the fiscal stimulus announced today show:
- Up to 140,000 jobs saved over the next two years, and employment growth of 370,000 supported over four years.
- Unemployment can be reduced from a peak of 9.6% in June 2020 to the current 4.2% rate within two years
- The economy could start growing again in the year beginning 1 July 2020
- The Government is planning a similar return-to-surplus track to the previous Government following the GFC and Canterbury earthquakes
“We are doing what it takes to cushion the blow, support businesses and workers, and position the economy for recovery. We’re answering calls for significant new investment as we face up this 1-in-100 year global shock and rebuild together,” he said.
“We can do this because we went hard and early with our health response. Due to the amazing work of all 5 million New Zealanders during lockdown, our economic recovery is getting a head start.”
Investments totalling $13.9 billion have already been made from the fund to fight the virus and cushion the blow. Cabinet has agreed a further $15.9 billion of investments to continue the immediate response and kickstart the economy, leaving $20.2 billion remaining for future investment.
Careful economic management means this is affordable, with New Zealand remaining with one of the lowest debt positions among advanced economies. The Budget also sets out a path back to surplus similar to the previous Government following the GFC and Canterbury earthquakes.
Significant investments from the Fund are being announced today alongside $3.3 billion in the Budget to ensure essential public services like health, education and domestic violence services continue to receive the funding they need to meet pressures like population growth.
“Strong public services have underpinned our success in controlling Covid-19. We need our health and education systems more now than ever as we recover and rebuild.”
Fiscal outlook – supporting the economy and a path back to surplus
The Government has decided to go hard against the economic impact of Covid-19 by using its strong balance sheet to cushion the blow for households and businesses. This is possible because of our careful economic management before Covid-19, Grant Robertson said.
OBEGAL (operating balance before gains and losses) deficits will average 9.3 per cent of GDP, or $28 billion, from 2020 to 2022 as the Government injects funding into households and the private sector to support businesses and jobs. Careful economic management will see the deficit reduced to 1.3 per cent of GDP, or $4.9 billion by June 2024.
“It is then possible that the Government books return to surplus from 2024/25,” Grant Robertson said. Treasury projections show a deficit of just 0.7% of GDP in 2024/25, moderating to 0.2 per cent and 0.1 per cent in 2026 and 2027, before a surplus of 0.1 per cent of GDP in 2028.
“We know from the previous Government’s experience with six years of deficits and a small surplus in the seventh year following the GFC and Canterbury earthquakes, that these projections are sensitive. We are targeting a surplus in a similar period of time as we respond to a 1-in-100 year shock.”
Running operating deficits to support households and businesses means core Crown expenses peak at 38.7 per cent of GDP in 2020, before falling back to 30.2 per cent in 2024. The Government has decided to keep tax revenue steady at just under 30 per cent of GDP.
This means investments to grow the economy will be funded through long-term borrowing. The Treasury forecasts net core Crown debt to rise to a peak of 53.6 per cent in 2023 and 2024 before the growing economy then allows the Government to start funding repayments.
“New Zealand is in one of the best positions in the world to cushion the blow of Covid-19 through long-term borrowing at historically low interest rates – we can currently lock-in ten year bonds at an annual rate of below 1 per cent. Importantly, interest costs will stay low at only 1.2 per cent of GDP when net debt peaks – the same as last year when net debt was 19 per cent of GDP,” Grant Robertson said.
“At its peak, net debt will be 30 percentage points below the average for advanced economies pre-Covid. It is forecast to remain lower than New Zealand’s most recent peak of 54.8 per cent of GDP in 1992.
“Governments around the world are responding the same way. Analysts expect Australia’s net debt to also rise to between 50 per cent and 60 per cent of GDP, while the UK Government forecasts it staying over 90 per cent.
“That shows what a good position our economy is in to be able to go hard against Covid-19, position for recovery and rebuild together.”
BUDGET HIGHLIGHTS
Budget 2020: Rebuilding Together
- $50 billion fund to deliver Covid-19 response and economic recovery plan at centre of jobs budget
- $4bn business support package, including targeted $3.2bn wage subsidy extension
- $3bn infrastructure investment and 8000 public house build programme to boost productivity and create jobs
- $1.4bn for trades and apprenticeships training package
- $1bn environmental jobs package
- $3.3bn new funding to strengthen core services including health and education
Funding boost for Defence
Budget 2020 provides a boost of $1.77 billion in operating and capital funding to enable Defence to continue to deliver on the tasks expected of it.
Disability support gets biggest-ever funding boost
- $833 million to take pressure off disability support services and ensure access
- $12 million to assess innovations that empower people with disabilities
- $4.4 million to pay for in-between travel costs for disability carers
Budget lifts investment in rail to a record $4.6 billion
State Owned Enterprises Minister Winston Peters says Budget 2020 is another milestone in securing the future of our rail system, and another step towards economic recovery.
Postal services maintained for Kiwis
The Coalition Government is supporting New Zealand Post to continue to deliver a postal service in the face of challenges presented by a changing mail environment and the Covid-19 pandemic.
Funding of $130 million from Budget 2020 will allow New Zealand Post to maintain service levels as it positions itself for the future of mail, while an equity injection of $150 million will also be provided from the Government’s Covid Response and Recovery Fund.
Aid spending boost in Budget 2020
Foreign Affairs Minister Winston Peters has today announced an increase to aid funding as the world grapples with the impacts of the Covid-19 pandemic.
Budget 2020 will deliver $55.6 million in additional funding for Vote Official Development Assistance, bolstering the New Zealand Aid Programme’s ability to help those most in need and bringing New Zealand’s overall ODA spend to almost .33 percent of forecasted Gross National Income in 2021.
Supporting Pacific Peoples through a Covid-19 recovery plan
The Minister for Pacific Peoples Aupito William Sio says the Government is backing Pacific Peoples with a $195 million Pacific package to support the recovery and rebuild of Pacific communities from the Covid-19 pandemic.
More than $900 million to support Maori as we rebuild together
The Government will invest over $900 million in response to Covid-19 to support our whanau, tamariki and all Maori so we can rebuild together, Maori ministers announced today.
Major investment in infrastructure projects
The Covid-19 Response and Recovery Fund has set aside $3 billion to fund infrastructure projects across the country. This is in addition to the Government’s $12b New Zealand Upgrade Programme and Provincial Growth Fund infrastructure investments.
‘Supporting our people as we rebuild the economy’
- $79 million boost to social service providers
- $36 million in grants for community groups
- $22 million for family violence services
- $20 million to ease impacts of Covid-19 on rural and fishing communities
- $20 million tertiary student hardship fund for 2020
- $15 million boost to Fruit in Schools and digital sales platforms for food producers
More warmer Kiwi homes
The Covid-19 Response and Recovery Fund ensures an estimated 9000 additional New Zealand houses will be Warmer Kiwi Homes with a $56 million boost to the Government’s insulation and heating programme, the Energy and Resources Minister Megan Woods said.
“Insulation and heating helps to prevent respiratory illness, and the Warmer Kiwi Homes programme protects the most vulnerable people in our communities.”
8000 more public houses to be delivered
The Government will deliver an extra 8000 new public and transitional homes through Budget 2020, in a move that will stimulate the residential construction sector, create jobs and reduce the housing shortage.
The additional housing places will be delivered by Kainga Ora, Community Housing Providers and transitional housing providers. Kainga Ora will finance its proportion of the additional 8000 places by increasing its borrowing over the next 4-5 years, anticipated to be about $5 billion. Budget 2020 delivers $570m of Income Related Rent Subsidy funding to support this build programme.
$1.1 billion investment to create 11,000 environment jobs in our regions
- $433 million for new jobs in regional environmental projects
- $315 million biosecurity, including weed and pest control.
- $200 million for DOCs Jobs for Nature Fund
- $154 million for new jobs enhancing biodiversity on public and private land
Budget 2020 will create almost 11,000 new jobs in regional New Zealand to restore our environment.
Rebuilding tourism together
A $400 million targeted Tourism Recovery Fund, alongside the extension of the Wage Subsidy Scheme and a domestic tourism campaign, assist the industry to recover and restart, Tourism Minister Kelvin Davis announced today.
Free trades training to support New Zealanders into work
- $1.6 billion Trades and Apprenticeships Training Package
- $400 million in MSD Employment Support
- $121 million for He Poutama Rangatahi
- $19.3 million to place 10,000 people into primary sector jobs
Major expansion of school lunch programme
A major expansion of the free and healthy school lunch programme, funded through the Covid-19 Response and Recovery Fund, will see around 200,000 more New Zealand children get a free lunch every school day and create an estimated 2000 more jobs.
“The programme will expand over the next year, from feeding nearly 8000 students currently to around 200,000 students by Terms 2-3 in 2021. It will target students in schools with the highest disadvantage.
Education Minister Chris Hipkins says $216.7 million in operating and $3.9 million in capital expenditure has been allocated over the next two years to fund the expansion.
Targeted extension to the Wage Subsidy Scheme
Budget 2020 provides for further assistance for businesses and their staff who have been affected by the Covid-19 pandemic.
Finance Minister Grant Robertson says the Wage Subsidy Scheme has been enormously successful, paying out more than $10 billion to support New Zealand businesses and jobs.
“Many New Zealanders will be back at work now, but we know there will be some businesses that are still struggling, particularly in the tourism, hospitality and retail sector. This is why we are extending the Wage Subsidy Scheme,” Robertson said.
“From June 10, businesses that have suffered, or expect to suffer, revenue loss of at least 50 per cent for the 30-day period prior to the application date versus the nearest comparable period last year will be eligible for the extension of the scheme.”
Budget 2020: Focus on jobs – Kiwi businesses supported to respond, recover and rebuild
- On-the-ground support for Kiwi exporters in key markets to boost trade
- $230 million to encourage entrepreneurship and risk-taking to kickstart growth
- Giving SMEs a leg-up to increase sales through e-commerce
- Protecting small businesses and consumers by sharpening the Commerce Commission’s teeth
Budget 2020 – Rebuilding Together – will create jobs and grow the economy by backing Kiwi exporters, encouraging entrepreneurship, and helping SMEs thrive in the digital economy.
