The passing of time is on our mind with Shellock Consulting recently celebrating its sixth anniversary (see our birthday blog here) along with Anne at Shellock’s family heirloom wall clock which been restored back to its former glory in its 100th year, and the chimes are starting to sync with the hands. It made us think of how “time stops for no [one]”, and that we have no control over the events that have had an impact on our economy, our (New Zealand’s) debt and by default our future outlook.
We are 10 years on from the Christchurch earthquakes. The rebuild is ongoing, but there’s still some big gaps. And then Covid-19 slapped us. While last year we had a mind boggling $50 billion “recovery and rebuild” budget, this years’ is focussed on “resilience”, “balance” and “return[ing] our books to a sustainable fiscal position.” If we read between the lines it means, tighten the belts a bit, we’ve got debt to repay.
Grant Roberson (Minister of Finance) has noted the coffers are looking better than anticipated at the Half Year Economic Fiscal Update (HYEFU) in March 2021 which means options for directing operating and capital allowances are broader than anticipated, balanced with “keep[ing] a lid on our higher debt levels”. The priority areas for this government are “continuing to keep New Zealand safe from COVID-19”, “climate change, child wellbeing and housing.” In March the 2021 Wellbeing Objectives (which must underpin budget decisions) were stated as being:
- Just Transition to a Low Carbon Economy
- Future of Work: Lifting Productivity and Innovation
- Lifting Maori and Pacific Incomes and Opportunities
- Reducing Child Poverty and Improving Child Wellbeing
- Improved Mental and Physical Health Outcomes
To see a summary of the announcements, click here. Below is our overview of the highlights of this year’s budget and our commentary.
Where is the spending?
COVID-19 Recovery
There will be continued rollout of the Covid-19 vaccine with the Covid-19 vaccine programme costing $1.4 billion, allocated for two years and covering both vaccines and the vaccination programme with another $333 million being spent on MIQ facilities.
Climate Change
The Government is planning a carbon neutral public sector by 2025 with $67.4 million being directed toward the cause. This budget includes funding for more than 400 electric vehicles and infrastructure across the state sector as well as clean energy upgrades at schools, universities and hospitals.
Child Wellbeing
This is the biggie. Child wellbeing has been assisted through a $3.3 billion boost to benefits with an increase of between $32 and $55 per adult staggered over two years. The first increase will be in July this year followed by another next year. Without having made any announcements prior to the budget, the Prime Minister’s recent report on child poverty highlighted the need for spending in this area. The Ka Ora, Ka Ako Healthy School Lunches programme has been expanded as part of the COVID-19 response. “By the end of 2021, 964 schools and kura, and over 215,000 (25 percent) of Year 1-13 students across New Zealand will be receiving free lunches.” This is in our opinion a fantastic initiative. Some may argue that recent media reports of rejected lunches prove it is a failure. We like to think that as long as that food can be distributed to those in need, then our taxpayer money is not wasted. Feed a child, feed a homeless person, feed a family in need. As we are reminded, it is not “child poverty” we as a nation must address, but family poverty.
Improving housing equally improves child wellbeing. Warm, dry homes will reduce sickness and improve wellbeing for families. But only if those homes are available and accessible.
Housing affordability
While celebrating having just reached the highest number of building consents issued in New Zealand’s history, first home buyers are not celebrating yet. Housing prices continue to soar, and while interest rates are still low, this doesn’t make mortgages accessible. If interest rates go up (which they will eventually), we have to be able to facilitate our large mortgages at those future higher rates.
The Government’s housing package revealed in March is a $3.8 billion fund to increase the housing supply. For first home buyers, they will be hoping the increased supply will help them get their foot in the door. While not convinced the focus should be on getting first home buyers into ownership (it is not a human right to “own” a house) there is a need to increase the total housing supply, and someone who buys frees up a house for someone else to rent. This budget sees a further package of $380 million specifically targeted at Māori housing. Again, focus should be on housing supply and there may be different needs in different parts of the country.
The 2020 budget saw funding for trades / training with all apprenticeships being free until 31 December 2022. Along with the Apprenticeship Boost initiative which supports employers taking on apprentices, the opportunity is there to increase the skill base and have people job ready for the construction of more homes as anticipated with this budget.
Improved health outcomes
We’ve had the announcement that we are to receive a new public health system, replacing the existing 20 District Health Boards. This is an exciting opportunity to overhaul a health system, that has been increasingly under pressure and overstretched. It will hopefully remove disparities between regions, increase the use of digital tools in health, integrate and link services increasing efficiency and effectiveness and ultimately hopefully reform a struggling system.
We know there is a discrepancy in health outcomes for Māori and Pacific people. Steps are being taken towards removing these discrepancies with funding of $98 million for the establishment of the new Māori Health Authority aimed at improving health outcomes for Māori. There is the promise of developing a new national strategy for Pacific health.
Pharmac has been allocated $200 million over the next four years which is a significant increase, however is only one fifth of what campaigners were seeking to improve access to the latest drugs.
More work is to be done addressing disability support issues and apparently we can expect to hear more on that in September.
Infrastructure
Our rail networks had $1 billion investment through Budget 2019, a further $1.2 billion in 2020. This 2021 budget sees a further $1.3 billion for rail including $85 million for a wagon assembly facility in Dunedin. Also, a South Island Mechanical Maintenance Hub will be built in Waltham, Christchurch.
Education
$1.7 billion over the next four years directed at operating funding for schooling and early learning with another $470 million on tertiary education. $684 million has been included in the budget for new classrooms and schools $100 million to support the development of the new curriculum including a new curriculum centre. The budget includes funds for the overhaul of the Education Ministry.
Antarctica
This one is for the Shellock friends and family that have a close association with Antarctica. The 2021 budget also provides a funding for a major redevelopment of Scott Base that will create an estimated 170 additional jobs at the peak of the redevelopment and 700 jobs spread across the six year project (still subject to sign off and approval). The intention is that New Zealand’s presence in Antarctica and the Southern Ocean is safeguarded and we can continue to contribute to world-leading scientific research. Nice one.
Commentary
We knew it was not going to be an extravagant budget, as it was clear the focus would be faster debt reduction “balanced” with spending on the Government’s focus areas. Moving forward towards achieving New Zealand’s neutral carbon emission goals is noble and important. We are the keepers of our planet. And every change we make that reduces the negative impact we are having on our planet is worthwhile. But have we got the balance right?
We are doing a lot right. Our successful Covid response is a demonstration of this along with our relatively positive economic outlook. However, there are some areas crying out for improvement. Should the Government be spending money on more than 400 electric vehicles when children’s ICU beds are at a critical shortage, some life-saving cancer treatments are not funded, our ambulance service is partially funded by donations, lengthy wait times for public health services, mental health services are under strain and we have one of the highest youth suicide rates in the world?
Our only dedicated children’s intensive care unit in New Zealand is at “critical capacity every 48 hours” and needs more beds. Funding is being sought through donations to expand Starship’s ICU which is the only dedicated children’s intensive care unit in New Zealand. We think lifesaving treatment providers should be a primary focus for Government funding.
Last week, Helen from Shellock called an ambulance and sat with an elderly lady who had been knocked unconscious after falling on an escalator. Emergency services were unable to provide an ETA on when an ambulance would arrive. In the end it was nearly an hour. Having been instructed not to move her (to prevent further injury), this elderly lady was stuck on an escalator for nearly an hour until medical help arrived. It was a horribly long time. It seems to defy logic that what should be deemed to be an essential service alongside our police and fire services, relies on donations as a funding model. We are talking about lives. Why are we not prioritising having our emergency response ambulances fully government funded? (Anecdotally the answer may fall somewhere in the mix of the current providers not wanting to lose their independence over budgets and systems). But it seems a logical question to ask, should this not be about what is best for the people? The Māori proverb spoken by Meri Ngāroto could be noted to highlight this: “He aha te mea nui o te ao? He tangata, he tangata, he tangata.” (What is the most important thing in the world? It is the people, it is the people, it is the people).
Conclusion
The 2021 Budget is an attempt to start playing catch up on the debt we incurred to keep us afloat during lockdown, a bit like the old wall clock’s chimes trying to catch up with real time. We hope for stimulus, to promote business, productivity, investment and growth, and we hope for investment where it’s needed, the health system in general (beyond Covid), mental health, reducing poverty and improving education and infrastructure etc. But “balance” is the word of the day. Despite this pandemic, the economy has kept on rolling on – like the wall clock, 100 years from when it was made, restored and chiming proudly (thanks to Grant Hay, the Clock Doc and David Fleck, Form Furniture). The hands of time keep moving (even though they can sometimes get out of kilter).
Sources / Links
https://www.beehive.govt.nz/release/economic-resilience-provides-more-options-budget-2021
https://www.beehive.govt.nz/release/budget-boosts-carbon-neutral-government-commitment
https://www.beehive.govt.nz/release/hundreds-new-electric-cars-state-sector
https://www.beehive.govt.nz/speech/building-new-zealand-health-service-works-all-new-zealanders
https://www.beehive.govt.nz/release/govt-housing-package-backs-first-home-buyers
https://www.rnz.co.nz/news/national/441937/government-lays-out-10-year-plan-for-rail-investment
https://starshipicu.org.nz/home
https://woodenyaknowitfurniture.com/
