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The Budget 2014
Courtesy of DPF, who has taken one for the team by sitting in the Budget lock-up for three-and-a-half hours, here are some of the key numbers from Bill English's sixth Budget:
Forecasts
The growth projections are positive, and are the most important aspect. Without economic growth, a surplus becomes a deficit. The projected increases in jobs and real wages are also a positive.
- Growth to almost hit 4%
- An extra 170,000 jobs by 2018
- Average annual wages to go up by 14% to $62,330. Inflation projection is 10% over four years so net 4% gain.
- Budget surpluses to grow from $372 million to $1.3 billion in 15/16 and $3.5 billion in 17/18
- Net debt to be under 20% of GDP by 2020
- NZ Super Fund contributions to resume in 2019/20
The net debt to be under 20% by 2020 is a huge turnaround. The last projection in 2008 had it ever increasing to 70% or so.
However the surplus is still fragile. There isn’t any wriggle room in 2014/15, but I believe 2015/16 should have room to consider tax cuts.
Last year
This Year
- 84,000 more jobs
- Average weekly wages up 3.2%
- Inflation has been 1.5%, so real increase in average wages is 1.7%
- New spending of $5.7 billion over four years, including $1.6 billion of reprioritisation ore revenue measures
- Budget surplus projected to be $372 million
- Operating allowance of $1.5 billion a year, growing at 2% a year, Under Labour they ranged from $2 billion to $7 billion, averaging $3.5 billion over last five years – so under half the previous rate
DPF also notes significant areas of new spending and investment:
Families
This is the major focus. The paid parental leave was well signalled. The extending of free GP visits to under 13s was a surprise (and a better policy than merely paying more to parents), as was the extra $1,000 for the parental tax credit.
- $500 million more spending on families
- Additional four weeks paid parental leave (to 18)
- Parental tax credit goes from $150 a week to $220 a week and from eight to ten weeks for $42 million
- $90 million more to extend free GP visits to under 13s
- $156 million more for early childhood education
- $33 million to assist vulnerable children
Education
No extra details on the package announced in January around up to $50,000 per year more for the top principals. Lots of interest in the final package.
- $858 million over four years more spending
- $359 million to pay top teachers and principals more
- $85 million more for school operations
- $11 more for school property
Health
Tony Ryall remains determined not to have Health become an area of weakness for the Government.
- $1.8 billion more over four years
- $110 million more for 4,000 more elective surgery ops
- A new Grey Base Hospital for $200 million a week (??? Our query!)
Bill English is concerned about future Government spending fuelling rises in interest rates, and has followed Treasury advice in capping new spending at $1.5b in 2015, with modest percentage increases in future budgets. This is interesting, and will certainly put pressure on the opposition parties to either not promise outlandish spending, or to provide information on how the risk to interest rates will be mitigated. Mr English is showing his canny Southlander credential!
There's nothing too controversial in Budget 2014, and the wafer-thin surplus that was predicted by many is more the thickness of a slice of toast bread. It is however an achievement of which Bill English can be justifiably proud.
We'll have more reaction later in the day once the party leaders give their verdicts. David Cunliffe will be the first to speak, followed by the Prime Minister and then the minor party leaders. The Budget Debate is always robust, and with this being an election year Budget, the debate will be even more robust than usual. In some ways, the election campaign begins this afternoon.
Stay tuned for more.
