Govt has fiscal room, but surprises unlikely

Health and housing should be front and centre of Finance Minister Bill English's eighth Budget today if the Government wants to stave off growing dissatisfaction with its performance.

Finance Minister Bill English will deliver his eighth Budget today. Photo Getty
Finance Minister Bill English will deliver his eighth Budget today. Photo Getty
Mr English has enough new spending cash to make a real dent in one troublesome area, with enough left over for boosting another area of concern.

Opinions are divided whether he will provide a surprise this afternoon or remain with his recurring theme of "boring Budgets''.

National and Prime Minister John Key still dominate popularity in opinion polls but there is a growing sense of dismay about the state of the country's health and housing systems.

Health Minister Jonathan Coleman and Housing Minister Nick Smith have been making soothing noises and sending out press releases countering Opposition and community claims about growing waiting lists for both operations and houses. Most of those releases talk about meeting Government targets rather than changes to meet concerns in the community.

The Council of Trade Unions estimates the health budget will need to increase by nearly $700million just to maintain current levels of services. Anything less should be regarded as a cut in funding and would result in a cuts to services, CTU economist Bill Rosenberg said.

Mr English has about $900million to $1billion for new spending after previously increasing the size of this year's Budget allocation due to issues associated with immigration and population growth. That gives the Finance Minister plenty of scope to target one main area of community angst.

Health spending is the second-largest government expenditure after social security and welfare spending. In March, the Government spent $11.6billion on health and nearly $18billion on social security and welfare.

Housing spending in March was $452 million, compared with $253million in March last year and housing is the area where the Government is most under fire.

Westpac senior economist Anne Boniface said the Government could well announce further measures which attempt to address concerns about housing affordability, although exactly what form those measures could take was unclear.

Housing-related announcements in last year's Budget included funds for social housing, freeing up Crown land in Auckland and a new "bright-line'' test to tax capital gains from residential property.

"Our inkling is the focus this year is likely to be on the supply side. The Government has become increasingly vocal about the need for the Auckland Council to free up more land for new building.''

However, it seemed difficult to do much more than sabre-rattling before the deadline to the Auckland Unitary Plan being approved in August, she said.

Mr English has already talked about his view of supply being what matters most for housing affordability - particularly land availability, the speed and efficiency of issuing consents and council infrastructure.

He is hinting the Government may be ready to force councils to bend to its will in freeing up land for affordable housing.

The Government already spends more than $2billion a year on housing assistance but in the end, what matters most is the ability to build houses.

There is little extra money can do to solve that problem. What makes building a house so difficult is mainly the planning rules set by councils that restrict, delay and raise the cost of development.

The financial accounts are expected to remain healthy. At March 31, the latest accounts available, the operating balance before gains and losses was running ahead of forecast by about $300million.

If the trend continues, the Budget may signal a reduced deficit to end the financial year on June 30.

ASB chief economist Nick Tuffley said while the Government continued to have fiscal room, it was likely to keep its powder mostly dry in the Budget.

The Government's preference was to pay off debt.

As a result, the recent theme of "boring Budgets'' is likely to continue.''

 


The Budget so far...

•The Government has pre-empted its Budget 2016 by making announcements of funding before the document is presented in Parliament today by Finance Minister Bill English.

•Budget announcements made by the Government so far Include:

•Budget 2016 will provide $14.4million over four years for more apprenticeship training.

•An additional $9.6million over four years will provide for more Maori and Pasifika Trades Training as demand for the programme continues to grow.

•The Budget will invest $46million of operating funding over four years to better support victims and prevent sexual violence.

•Additional funding of $15million over four years for two schemes that speed up the commercialisation of new clever technologies developed by scientists and entrepreneurs around New Zealand will be included in Budget spending.

•Prime Minister and Tourism Minister John Key says Budget 2016 will provide $25million in additional funding over the next four years to ensure the New Zealand Cycle Trail, Nga Haerenga, continues to offer a world-class visitor experience. The investment is part of a $45million tourism package in Budget 2016 to further support tourism's contribution to economic and job growth in regions across New Zealand.

•An extra $20million will be invested over four years to maintain momentum in high-performance sport and boost Drug Free Sport NZ.

•The Government will increase funding for health research by $97million over the next four years. The annual amount available for health research through the Health Research Council will increase by 56% over four years - from $77million in 2015-16 to $120million in 2019/20.

•There will be no tax cuts in the Budget.

 

 


At a glance

 

•Budget 2016 released at 2pm today
•Health and housing should play a big role
•Comment likely on better public services for less money
•Debt and deficit reduction announcements expected

 

 


 

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