The Ardern government has unveiled the 2021 Wellbeing Budget, outlining major policy shifts that are expected to affect a range of industries across New Zealand. According to the budget forecast, GDP growth is expected to rise from 2.9% this year, to 4.4% in 2023. Meanwhile, the unemployment rate is anticipated to peak at 5.3% later this year. An extra 221,000 extra people are expected to be employed over the next four years, with unemployment forecast to drop to 4.2% by 2025. For the financial year, a budget deficit of $15.1 billion is expected, down from the $21.5 billion deficit forecast in December 2020. Crown debt as a share of national GDP is expected to reach 34.0% in the current year, up from 26.3% in 2019-20. Debt as a share of GDP is forecast to peak at 48.0% in 2022-23.
Benefits
The centrepiece of the budget is a significant increase in welfare benefits, with the weekly rate for adults rising by between $32.0 and $55.0. This increase is in line with a key recommendation from the Welfare Expert Advisory Group and will deliver an additional $175.0 per week to 109,000 families. As a result of the initiative, between 19,000 and 33,000 children are expected to be lifted out poverty by 2022-23.
Climate investment
The New Zealand Green Investment Finance, a publicly-owned investment bank tasked with accelerating investment in low-carbon initiatives, will receive a $300 million capital injection. This will increase total funding to $400 million, and be used to decarbonise a range of industries. These industries include transport, process heat, distributed renewable energy, the built environment, agriculture, waste and plastics. Particular focus will be placed on the decarbonisation of public transport.
Infrastructure construction
Total spending on infrastructure over the next four years has been increased to $57.3 billion, up from $42.0 billion. In particular, $1.3 billion has been earmarked for initiatives in the Rail Transport industry, including expenditure on 60 new locomotives and 1,900 new wagons. Funding for the National Land Transport Fund has also been increased to provide upgrades across the rail network for core freight, tourism and property functions. The House Construction industry has been a particular focus, receiving $3.8 billion in the budget to drive up housing supply via the Housing Acceleration Fund. This fund is intended to deliver affordable homes for low- to moderate-income households by unlocking new developments on vacant or underutilised Crown-owned land. Revenue across the House Construction industry is expected to contract by 19.7% during 2021-22, as the level of new detached dwelling consents falls to about 14,900 dwelling units.
Health
The health sector in New Zealand will receive $4.7 billion in funding, including $200 million for PHARMAC, and $2.7 billion over four years to increase funding for District Health Boards. Close to $486 million has also been allocated to begin the government’s planned health reforms, which would see a shift from the twenty distributed District Health Boards to a single central NZ Health agency. A Maori Health Authority will also be created to improve health outcomes. Greater health infrastructure has been funded, at a cost of $516.6 million, including a national health information platform so patient records can be read by approved health professionals anywhere in the country. In addition, close to $700 million has been earmarked for capital projects, including hospital buildings.
Tourism
Close to $200 million has been allocated to support the Tourism sector amid the ongoing limitations on international travel related to the COVID-19 pandemic. This funding supports five communities that are particularly reliant on international tourism, including Kaikōura, Mackenzie District, Queenstown Lakes, Fiordland and South Westland. The funding will be used to provide mental health support, business advisory services, investment grants and a kick-start fund to accelerate the return to normal operating conditions when borders re-open.
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