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A plan that’s working
Hon Bill English, Minister of Finance
21 May 2015
2015
A responsible Budget
• Falling unemployment - below 5% in 2016
More jobs – another 150,000 expected by mid-2019
• Increasing wages - average wages to grow to $63,000 by mid-2019
• Reducing hardship among children in New Zealand’s poorest families
$790m child hardship package is at the heart of the Budget
Targets around 160,000 families (with 300,000 children) earning less than $36,350 a year
Outlook for solid economic growth
-1
0
1
2
3
4
NZ Australia UK Canada US Euro Japan
Real GDP ForecastsCalendar years
2014 2015 2016
% change
Wages up, unemployment down
0
1
2
3
4
5
6
7
8
9
50,000
52,000
54,000
56,000
58,000
60,000
62,000
64,000
2012 2013 2014 2015 2016 2017 2018 2019
Average annual wages Unemployment rate (RHS)
$ %
Current account deficit has improved
- 10
- 9
- 8
- 7
- 6
- 5
- 4
- 3
- 2
- 1
0
2006 2008 2010 2012 2014 2016 2018
Current Account Balance
Budget 2010 Budget 2012 Budget 2014 Budget 2015
% of GDP (annual)
Lower-than-expected inflation
0
1
2
3
2011 2012 2013 2014 2015 2016 2017 2018
Consumers Price Index
Budget 2014 Budget 2015
Forecasts
Annual % change
Responsible government spending
-1
0
1
2
3
4
5
6
7
8
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Budget operating allowances $ billions
Budgets (final forecast year impact)
$176m surplus forecast in 2015/16
-18,396
-9,240
-4,414-2,933
-684
176 1,476 1,9953,624
-20,000
-15,000
-10,000
-5,000
0
5,000
10,000
2011 2012 2013 2014 2015 2016 2017 2018 2019
Total Crown operating balance before gains and losses (OBEGAL)
$ millions
Net debt 20 per cent of GDP by 2020
0
10
20
30
40
50
60
70
2007 2009 2011 2013 2015 2017 2019 2021 2023
Budget 2015 Pre-Budget 2009
% of GDP Net core Crown debt
Strong fiscal position internationally
-16
-12
-8
-4
0
4
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
% o
f GD
P
General government fiscal balance
Australia
NZ
UK
US
Euro
0
20
40
60
80
100
120
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
General government gross debt
$790m child hardship package
• Greater work obligations for beneficiary parents, including most sole parents looking for work when their youngest child turns three
• A $25 a week after tax rise in benefit rates for families with children
• Up to $12.50 a week more in WFF for lower-income families not on a benefit
For very low-income working families, an extra $12 on top of that, making an increase of $24.50 a week
• An increase in Childcare Assistance for low-income families, from $4 to $5 an hour, for up to 50 hours of childcare a week per child
$790m child hardship package
Family CategoryChange to entitlement (per week)
Number of families impacted
Beneficiary families $25 increase to benefit 110,000 families
Working families
(less than $27,000)
$24.50 increase to WFF
4,000 families
Working families
($27,000 - $36,350)
$12.50 increase to WFF
50,000 families
Delivering better public services
• $1.7b health package, total health spend $15.9b
$1.3b for DHBs for extra services, cost pressures and population
New support for elective surgeries, palliative care, bowel cancer screening
• Over $680m education package, taking the ECE and schools budget to $10.8b
$75m for ECE and $42m to boost schools’ operating grants
$63m to continue teacher aide support for 1,500 additional students
$244m for new schools and classrooms from the FIF
Investing in a growing economy
• $80m for research and development growth grants and $25m to establish Regional Research Institutes to undertake scientific research
• $113m for New Zealand’s higher education system, including $86m for targeted increases in tuition rates
• Further ACC levy cuts of around $375m in 2016/17 and $120m in 2017/18, subject to consultation
• $210m from the FIF for the extension of Ultra-Fast Broadband
• $210m from the FIF for KiwiRail to maintain the national rail network
• $100m from the FIF for Lincoln University to rebuild its science facilities
Improving housing affordability
• Making better use of Crown-owned land in Auckland
Redevelopment of HNZ estate including $200m loan for Tamaki Accelerating development of Crown-owned land with $52m fund
• Increasing investment in social housing
$35m to implement social housing reform, and $35m for Maori housing
Tendering the first 300 of 3,000 additional social housing places
• Cutting red tape
• Extra steps to bolster and enforce the tax rules on property, subject to consultation, from 1 October this year
KiwiSaver kick-start and border levy
• KiwiSaver now has 2.5m members but has cost $2.5b in kick-start payments since 2007
• Removing $1,000 kick-start payment saves more than $500m
This change does not affect existing members
Annual ‘member tax credit’ and employer contributions unaffected
• New levy for passenger biosecurity and customs activities at our border, raising around $100m a year
It is fairer that these costs fall on travellers rather than the taxpayer
Christchurch support reaches $16.5b
Net earthquake-related expenses
$16.5b
Local infrastructure$1.8b
Crown assets$2.2b
Land zoning$1.1b
Christchurch central rebuild
$1.2b
Other$2.3b
EQC and other Crown entities
$7.9b
A focus on social investment
1 per cent of five year olds:
• are known to CYFS, and
• have been supported by benefits for more than 40 months, and
• have a parent who has had contact with Corrections
This 1 per cent is around 600 children per year, but over 20 years creates a pipeline of 12,000 at high risk
A focus on social investment
On average, each child in this group will cost taxpayers $320,000 by age 35 – some over $1m
At age five… By twenty one…
…four will have been on a benefit long-term (40%)
At thirty five…
…a quarter will have been in prison (24%)
After high school…
…seven would not have NCEA2 (74.6%)
… a group of ten of these high-risk children
Looking ahead – our approach
• New Zealand is well placed – but there’s more to do.
• We will:
Relentlessly focus on a strong economy and jobs
Continue investing to support families in need
Responsibly manage spending and revenue
Increase resilience to global risks
We’ll build on a plan that’s working
A plan that’s working
Hon Bill English, Minister of Finance
21 May 2015
2015