The Government has published its Budget 2020 ‘Rebuilding Together’ this afternoon, announcing $50 billion to deliver a COVID-19 response and economic recovery plan.
Among several announcements, the Budget includes a $3 billion infrastructure investment and 8,000 public house build programme, and a $400 million targeted Tourism Recovery Fund, alongside the extension of the Wage Subsidy Scheme and a domestic tourism campaign.
The SMC asked experts to comment on the following aspects of today’s announcement:
Dr Anna Matheson, Senior Lecturer in Health Policy, School of Health, Victoria University of Wellington, comments:
“It is stunning to see that some lobby groups have been advocating that the $25 extra a week given to beneficiaries over lockdown should not become a permanent policy. It is heartening, therefore, that this Budget has taken a humane public health approach, steering away from austerity measures and prioritising investment in people and health as a better way to recover in the long-term from this COVID-19 crisis. Significant investment in community groups, Māori and Pacific education, public housing and the food in schools programme illustrates a locally-focused and long-term vision of wellbeing. The expansion of Whānau Ora signifies a recognition that integrated and coordinated approaches to achieving local wellbeing is also what is required.
“The new health system investment of $3.92 billion over the next four years offers potential for real improvement if it is not only used as a band aid for immediate challenges, bolstering the current service paradigm. But instead, helps create a culture-shift in DHBs that supports their re-orientation to having greater connection with preventive action on the social and commercial determinants of health. DHBs are substantial assets to their communities, there is enormous potential for them to provide leadership and support for local collaboration and collective initiatives, as well as role-model effective action to address both inequities within the health system and their own impact on the environment. We know that most of health and illness arises from the circumstances within which we are born, live, work and play. Whilst this Budget goes some way to recognise this, the persistent health inequalities we still have in New Zealand, despite policy and investment, show there is much we need to learn about implementing our intentions effectively.”
No conflict of interest.
Professor Max Abbott, Pro Vice-Chancellor and Dean, Faculty of Health and Environmental Sciences, Auckland University of Technology, comments:
“The unprecedented DHB funding increase will greatly assist in meeting rising service demands including catch-up for planned care and elective surgery that was put on hold during the COVID-19 crisis response. Given substantial DHB deficits this will require locking in lessons learned in recent months, service innovation and increased efficiency.
“Longer term the increase in capital funding will accelerate long overdue hospital replacement and expansion. This, along with many other aspects of the budget will also grow jobs and reduce unemployment.
“Many ‘non-health’ parts of the budget will likely contribute as much or more to health outcomes than what happens in the health sector. This is because unemployment and other economic and social consequences of the response to the COVID-19 challenge generate massive stress. This type of stress increases depression and anxiety, leads to changes in health-related behaviours including smoking, alcohol intake and exercise, and impacts on our neurohormonal and immune systems. These changes contribute to a wide range of physical and mental illnesses.
“It is critical that we do all we can on the prevention front, while at the same time increasing access to health and social services. The budget assists significantly in both respects.”
No conflict of interest declared.
Professor Robin Gauld, Pro-Vice-Chancellor and Dean, Otago Business School, University of Otago, comments:
“The New Zealand Government budget tabled today contained a significant funding injection for health and disability services amounting to around a 9% increase. The Government has noted it is the most substantial increase for the sector in some time. In this regard, the health funding aligns with the government’s commitment to producing a ‘wellbeing budget’ for which it is to be commended.
“The funding provides an additional total sum of NZD4.3 billion over the next four years, including 3.92 billion for the country’s 20 District Health Boards (DHBs), each of which is a local health system responsible for planning and funding services within a geographic area, including public hospitals, disability support services, public health and primary care. The DHB funds are intended to ‘improve financial sustainability and clinical performance’ as well as provide for population ageing and growth, wage increases and inflation. NZD282.5 million over the next three years is to provide around 153,000 elective and planned procedures, delayed through the Covid-19 lockdown, and cater for others on waiting lists – a perpetual problem for DHBs. NZD125 million over four years is for other Covid-19 related cost increases. The funding package also includes, over the next four years, an additional almost 850 million for disability support to relieve growing pressure on the sector and improve access to services such as home-based care.
“The funds are to be welcomed in a sector which has been constrained over the years. Many of the DHBs are in perpetual deficit, meaning that they do not receive enough funding in order to cater for hospital and community health care demands. In this sense, the budget provides a welcome catch up for the health sector. It also patches up the losses in care provision during the lockdown and costs beyond.
“Yet there are questions about this significant sum of money and plans for its expenditure, fine details of which need to be worked through. Firstly, the Minister has noted that DHBs will be held to account for their performance with the new spending. Historically speaking, this means those with deficits will be expected to improve their financial standing. This implies they will be under close government monitoring. Clinical services will similarly be expected to show improvements in volumes of procedures and patient throughput. In this regard, the budget provides more funds for more of the same; hopefully, with improvements in service access for the many patients who languish on waiting lists or miss out on treatment as their condition has not yet deteriorated enough to be treated in the public sector.”
No conflict of interest declared.
Professor Paul Hansen, Head of Economics Department, University of Otago, comments:
“The mythical ‘rainy day’ that Minister of Finance Grant Robertson had prudently been warning against to deflect the various political interest groups advocating for Government spending blowouts in previous Budgets – mostly on social areas – arrived with a terrifying bang. Much more than a gentle pitter-patter, the rain was pissing down, a great flood of almost Biblical proportions. A microscopic coronavirus was a potentially catastrophic health threat that shut the country down for 51 days.
“So, it is no surprise that a sizeable chunk of the $50 billion ‘Covid-19 Response and Recovery Fund’ announced in the Budget is directed at the health sector.
“Over four years, $5.6 billion is to be spent on health services and $755 million on health-sector capital expenditure. This spending includes $160 million for PHARMAC to buy more pharmaceuticals and $3.9 billion for the 20 District Health Boards to spend on health services. A lot of this $3.9 billion will be covering the DHBs’ ongoing deficits – made worse by the Covid-19 crisis – and so it can be argued to be ‘catch up’. And a lot will be spent catching up on the delivery of elective services that went on hold when New Zealand went into lockdown.
“So far ‘only’ $30 billion of the above-mentioned $50 billion R&R Fund has been allocated for specific policies, leaving a $20 billion war chest for other as-yet unspecified uses – which is pretty sensible, given how uncertain things are. It seems likely that some of this war chest will be spent on health programmes, additional to the ones announced in the Budget.
“Conspicuously absent from the Budget’s policy discussion of NZ’s health and disability system – its functioning and funding – is the much-awaited review led by Heather Simpson. The review has been completed but has been relegated to the Covid-19 waiting room because the attention of the Minister of Health and his staff is understandably focussed on the present emergency. (By the way, it has been reported that the review cost $9.5 million. Can this be true? How can it have cost the equivalent of 95 staff on $100,000 each, including overheads, working for a year. Really?)
“Presumably – hopefully? – the Simpson review will improve the efficiency of NZ’s health system, including public health. If there is one thing the Covid-19 crisis has shown us, it is that our health system is fundamentally important: to our health per se, but also to our economy. Yes, and to our overall well-being. Remember last year’s much-touted and faddish “first Wellbeing Budget for New Zealand”? No? Doesn’t seem so important now, does it?”
No conflict of interest
Professor Iain White, Environmental Planning Programme, University of Waikato, comments:
“The country was in a fortunate position going into the pandemic. Its debt was low and it had the experience of the GFC to fall back on. You can see how the budget reflects both these aspects.
“The first takeaway is the size and scale. It is gratifying to see the government significantly increasing state spending to offset the contraction in private sector investment and lower consumer confidence that we know is happening. Those countries that did this in the wake of the previous economic crisis had a shorter and less severe recession than those who used the false analogy of household spending and cut spending as income dropped. Even if we were more isolated than most countries from the effects of the GFC, it is clear we have learned the lessons. This is the rainy day.
“Turning to specifics associated with the recovery, the COVID Response and Recovery Fund to invest in infrastructure seems much lower than many may have suspected. It is an initial $3bn, but the total of the ‘shovel-ready’ projects submitted was $136bn. There are going to be many disappointed people, and, if it is spread around the nation as previously indicated, that figure will not go very far at all.
“That said, this decision might not be a bad thing. It feels more like an attempt to keep some powder dry and a desire to get infrastructure investment right rather than about limiting the total sums that will flow into this area.
“This leads to the other issue I’d like to flag up as a feature of the budget: flexibility. The economic forecasts and numbers associated with budgets tend to sound accurate, but in reality I suspect the government have realised that this time round they are very, very soft. All projections are right now. We simply do not know what the effects will be and how long it will last. So the language peppered throughout of ‘phases’, ‘steps’, or trailing future interventions, appears to be a realistic way to reflect the specific nature of this crisis. In contrast to previous budgets, this feels more like a start of a long haul of state spending that will unfold throughout the year and beyond, rather than a one-off annual event.”
No conflict of interest.
Belinda Storey, Managing Director, Climate Sigma, comments:
“In this budget, the biggest questions are about the long-term $20b for COVID-19 response that is as yet unallocated. Given the continuing uncertainty of the length and severity of the pandemic and the resulting economic crisis, I support the government holding such a large sum in reserve and signalling to international debt markets the amount we may need to borrow. The process by which this is allocated however, must be transparent and provide benefit to all New Zealanders, not just the loudest voices behind closed doors.
“As a country we have begun talking about the legislative impacts of the recently applied emergency powers of the Ministry of Health and the Police. As a society however, we haven’t established limits on emergency finance powers, even when those decisions result in debts that create inter-generational obligations.
“For example, we, like many developed countries, have under-invested in our infrastructure for decades. As a result, much of our infrastructure fails to meet current needs, and definitely will not have the resilience to withstand future stresses such as extreme climate change events.
“I welcome the level of investment in infrastructure, however the speed of expenditure is concentrating power in a handful of industry experts – for example the Infrastructure Industry Reference Group (which is looking at shovel ready projects for development in the wake of COVID-19). The very nature of this group’s expertise will bias their allocation of infrastructure spend on old-fashioned concrete and steel. I recommend the government fund an intergenerational audit of the portfolio of infrastructure investments recommended by this group to ensure it meets the needs of all New Zealand and not just industry representatives.
“Since we should continue expect nasty health and economic COVID-19 surprises over the next couple of years, we need to spend on reducing the range of risks our citizens face. It is good to see a decent chunk of change strengthening our social safety net. I’m very glad to see the focus on child poverty, housing, and domestic violence.
“We should also be seeking better understand emerging risks. Long term funding for the Crown Research Institutes (such as NIWA, GNS Science) has remained constant for 13 years. The budget addresses this with just $15m a year over the next four years. Yet on the very next page of the budget, there is $14m allocated to help clean up after a single extreme event (this year’s Southland Floods) – an example of the extreme events these scientists could help New Zealand better prepare for.
“On a disaster resilience note, it is good to see a significant investment of almost $900m for replacing our Hercules Fleet. As we face more and more extreme weather events we will need these to help both ourselves and our Pasifika neighbours as the climate changes. For the same reasons it’s good to see the allocation of $48m for improving the ageing communications technology of our emergency services.
“I fully support the $2m for helping local government improve three waters in New Zealand – oh wait, that doesn’t say $2b. Well, that’s a drop in the bucket (pun intended).
“I am also concerned that with recent strip mining of public consultation provisions of the RMA. The budget signals support for expanding agricultural water storage which, rather than improving resilience to future droughts, instead can encourage intensification of unsustainable farming practices in our most stressed landscapes.”
No conflict of interst declared.
Professor Michael Hall, Department of Management, University of Canterbury, comments:
“The budget initiatives demonstrate positive short and longer-term initiatives to help tourism and New Zealand as an attractive destination.
“Investment into funding a domestic tourism campaign is essential. While for the year ending November 2019 there were 3.89 million international visitors, in that same time period there were 3.08 million trips abroad by New Zealanders. Encouraging them to travel within New Zealand will help combat the loss of international arrivals this year. It doesn’t entirely close the gap but it is a good start.
“Domestic tourism already was the mainstay of many tourism businesses. For example, for the year ending December 2019, regional domestic tourism spend was $300 million more than international. Only in the gateway of Auckland and in Otago, because of the significance of Queenstown, was international spending higher.
“Extension of the wage subsidy scheme and other support for the sector should help many tourism and hospitality businesses to keep going until both the domestic tourism campaign begins to take effect.
“Trade training will help people retrain people who have lost jobs in the sector as well as potentially improve skills in some areas of the sector as well.
“Longer-term initiatives that will serve to help New Zealand become more of a sustainable tourism destination including the environmental jobs and projects schemes. Obviously these will have positive effects for other sectors but will help provide a stronger basis for protecting New Zealand’s branding and positioning as a destination, especially in light of climate change.
“However, also critical will be how the infrastructure support is put into sustainable transport and mobility initiatives.
“The tourism and hospitality sector is one that has always been marked by high rates of business birth and death. Clearly, the government wishes to try and support those attractions and businesses that are core to the country’s tourism strategy as well as those in the best position to survive.
“Nevertheless, in the re-imagining of New Zealand tourism there is going to be a real challenge to get the tourism industry to focus more on sustainability. This has always been an issue for international tourism to the country.
“In many ways COVID-19 provide a first glimpse of elements of what a low-carbon tourism transition for New Zealand might look like. Greater encouragement of domestic travel, less reliance on international.
“This will require new ways of thinking about tourism – not only by the industry but by consumers as well. And this will possibly be one of the greatest challenges as this is not about being cheap but by focusing on value.
“The government and tourism industry’s immediate task is to provide people with a sense of security with respect to their wellbeing when they travel.
“For promoting New Zealand to the domestic market, it is about creating a sense of value – both financial as well in terms of cherishing the things we have. We have attractions that people come from the world over to see. It is now time to encourage New Zealanders to visit them.”
No conflict of interest.
Anthony Scott, Chief Executive, Science New Zealand, comments:
“We’re very pleased to see the commitment to the increase in the Strategic Science Investment Fund, both in the programs and in the infrastructure side – which includes the Nationally Significant Databases and Collections. We have previously had some increases of a kind in the Strategic Investment Fund, but this is the first major significant increase since the fund was established. That’s great because this is the fund that will help build the capability New Zealand needs to play our role in the COVID-19 recovery and rebuild.
“The Endeavour Fund increase is also great to see. That increase was previously signalled but to have it continue when we’re obviously facing a very constrained future as a nation is also a really good signal from the government about the importance of innovation, science, and research in the COVID-19 recovery and rebuild.”
No conflict of interest.
Associate Professor Nicola Gaston, Co-director, MacDiarmid Institute for Advanced Materials and Nanotechnology, comments:
“Under normal conditions, I might describe this as a disappointing budget for science. There is a tiny bit of cash put aside to increase Strategic Science Investment Fund Platforms programme funding for Crown research institutes, acknowledging attrition of funding; there is a small capital injection of $15 million into ESR – and that appears to be it. There is $150 million for business loans to support R&D – that number appears to be what Treasury pointed out last year was needed to move government spending towards its stated 2% target, so is not accidental – but this, while a welcome complement to the science sector, does not replace investment in the development of skills and capacity in research. That said, the increase of the per student subsidy for tertiary education is welcome though overdue, though it is a relatively small scale investment alongside the money put into trades to encourage people to retrain in selected industries.
“More than an increase in specific numbers, I would have liked to see a more holistic approach taken to recognise how the research ecosystem can support recovery and develop the resilience of the New Zealand economy over the medium to long term. Under COVID-19 conditions, the budget was never going to be what it would have been prior – and I would never suggest that Research, Science, and Innovation should be higher priorities than Social Services, Health, and Education right now – but it would have been reassuring to see budget signals designed to create activity in the science system in the right places. The biggest threat to the long term stability and success of our research and innovation ecosystem right now is that we lose capacity as people disengage, fail to complete their studies or research programmes due to economic impacts, and that these losses are compounded by disrupted career paths and lost opportunities due to closed borders over the next year or even longer time frames. We are going to need to be agile and proactive in order to retain talent – and in the short term, I would have liked to see more emphasis on immediate retention strategies, rather than retraining alone. It is always possible, of course, that some of these outcomes will be able to be achieved by work being done within the sector and within MBIE – for example, by re-prioritising Catalyst Fund expenditure to support International Research Relationships, to support postdocs based in New Zealand – but I do think the time is ripe – or in fact, now urgent – for a well-designed postdoctoral fellowship scheme that would retain and develop talent within New Zealand to support our high impact, low footprint industries in sustainable innovation and green tech.
“So what is most disappointing to me, in fact, is to see yet again that this opportunity has been missed. But if we are to discuss what is missing in this budget, the leading contender would be our Zero Carbon goals: they appear to be missing not merely in action, but in aspiration. This cannot and must not become our new normal.”
No conflict of interest.
Professor Travis Glare, Director, Bio-Protection Research Centre, Lincoln University, comments:
“It was perhaps inevitable that research would not feature highly in the budget this year despite the demonstration of the importance of having available highly trained scientists covering multiple disciplines throughout the ongoing COVID-19 response. The Government had a lot to balance in terms of immediate needs, but among all the areas that will be hit by the economic downturn, science is at risk as industry funding is likely to reduce and universities struggle. The Government has recognised the importance of training through free courses for those who have lost their jobs through COVID-19 impacts. But, notably, science also provides opportunities for prosperity through new technologies and approaches, especially considering the opportunities around developing more sustainable industries.
“There were some areas which received increased funding. The CRIs get an increase to their baseline funding, ESR will receive funding for new buildings, greenhouse gas research is scheduled for some increase as part of the Global Alliance for Greenhouse Gases and, importantly, the Nationally Significant Collections and Databases fund gets a much-needed top-up.
“There is a significant green package for pest and weed (including pines and wallabies) control and increasing native planting. The importance of excellent biosecurity has been recognised by the Government with increases in MPI funding for biosecurity activities and the increasing capability for Post-Entry Quarantine and Laboratory. However, there is no corresponding increase in research funding in these areas, where the new ideas for tackling the issues will come from. Similarly, the EPA gets an extra $1 million towards expanding the chemical reassessment programme, which is likely to result in fewer available pesticides.
“An expected budget but perhaps some opportunity has been missed to drive a science-led recovery. “
No conflict of interest.
Associate Professor Janet Stephenson, Director, Centre for Sustainability, University of Otago, comments:
“Over the past few weeks, countless opinion pieces have appeared in the media from many sectors – business, Māori, social, ecumenical, academic – with the same mantra: we’re facing a challenging time but this is our big chance to kick-start a shift to a sustainable future.
“Does the 2020 budget help us get there?
“It is a big challenge to simultaneously rebuild New Zealand’s economic vitality and social wellbeing over the short term, while at the same time laying the tracks for a sustainable future for the long term. Priorities for the long term include radically reducing greenhouse gas emissions, restoring the vitality of natural systems, reducing disadvantage, improving health, and building innovative and sustainable businesses. The budget certainly delivers for the short term in spades, but what about after that?
“Some of Budget 2020 is spot on. Investments that will pay big dividends for the long term include improving housing quality, and the enhancement of rail and ferry networks. Putting funding into research and innovation for business, and transitioning the tourism sector will help reposition business for the very different years ahead. Putting funding into Māori organisations, social service agencies and community organisations will help build long-term resilience.
“But I’m more ambivalent about some initiatives. Cleaning up waterways and improving biodiversity is brilliant, but what’s in place to ensure that we don’t continue to pollute and despoil in future? Investing in reducing food waste and redirecting it is all very well, but where is the imperative for business models that deliver a circular, low-waste economy? Investing in training and retraining is essential, but graduates will return us to the 20th century unless they learn how to be the makers of a sustainable, low-carbon future.
“The budget delivers for the short term in spades – for jobs, social wellbeing and environmental restoration. But I hope it doesn’t take its eye off the long term, or we’ll be back in a rainy day again in the not-too-distant future.”
No conflict of interest.
Dr Andrea Byrom, Director, New Zealand’s Biological Heritage National Science Challenge, comments:
“In terms of new investments, it is relatively slim pickings for Research, Science & Innovation in Budget ’20. However, I admit to a sense of relief and optimism despite that. COVID made sure that this was a completely unique ‘black swan’ year, unlike any other in modern memory, and anyone can understand why jobs and health needed to take priority this time around. The fact that we have ‘steady as she goes’ and continued commitment to most of Aotearoa’s major research funds is, in my view, a quiet signal that the government sees RD&I as supporting the massive rebuild we need to do as a country.
“The other wild card is the significant $1.1B investment for ‘green’ jobs in the regions. Science and research should be intimately connected to Mana Whenua and our communities – people who will now be planting trees, killing pests and restoring wetlands. Now more than ever, a sense of unity and commitment will be needed – inspiring new partnerships between scientists in research organisations, mātauranga knowledge holders, and citizen scientists. So perhaps this year, the opportunities lie not so much in new funding but in building the relationships that will be needed to create a better future for Aotearoa.”
No conflict of interest.
Professor Troy Baisden, University of Waikato, President of the New Zealand Association of Scientists, comments:
“Budget 2020 projects that overall spending in the Minister of Research, Science and Innovation’s portfolios will top $1.5 billion for the first time next year. That’s an increase of more than 80% over five years, and substantial progress toward the goal of lifting research and development (R&D) to the goal of 2% of GDP. That target would place us in line with comparable nations’ efforts to improve our productivity and technology that leads to future growth as well as social and environmental well being.
“A big chunk of the total increase comes from business R&D, and that will be uncertain as bottom lines take a hit from the crisis. Because business could have trouble making use of the R&D tax incentive scheme, $150 million in loans for business R&D was announced.
“For scientists in institutes and universities there are some limited increases, such as a $20 million or 8% increase for next year’s Endeavour Fund, the main applied research funding scheme. Spending on National Science Challenges is projected to increase. The high profile Marsden fund gets no increase, but had a substantial increase recently.
“Health Research Council funding is on track to hit $131 million, which is an overspend of $14 million – hardly unsurprising. What is surprising is a near doubling of the Catalyst fund to $35 million, showing strong support for international collaborations at a time when travel will be difficult.
“The New Zealand Association of Scientists is more disappointed to see no new funding targeted to support early career fellowships, at a time when the usual path for many of our recent PhDs overseas is cut off. That’s one small area that could have made a big difference to those graduating or starting their careers at an uncertain time, or today’s students considering whether careers in science will be stable jobs of the future.”
No conflict of interest
Professor Richard Blaikie, FRSNZ, FOSAm Deputy Vice-Chancellor (research and enterprise), University of Otago, comments:
“Budget 2020 has not seen any significant new initiatives or increased investments for Research, Science and Innovation. Previously-budgeted investment increases, such as an additional $25 million per annum for the Endeavour Fund, have been maintained. Other core funds supporting the range of basic and applied research, as well as support for technology transfer, have also been maintained.
“Some new funding has been provided to support work the research community has made, and will continue to make, to help fighting COVID-19. The impact of research on policy, health, testing, tracing and community wellbeing is already evident in the strength and coordination of our national response.
“Central to this COVID-response budget is the scale of future investment that is signalled. With $20 billion to invest, in addition to immediate-response commitments, attention can move to recovery and long-term transformation of our social, environmental and economic settings. As well as using a research-led approach to managing the next stages of our health response, increased research investments will be vital to help transform tourism, border controls, primary industries, as well as the increasing role our ‘weightless’ technology and services sectors will play in our economy.
“Importantly, as we reset many aspects of our society and economy, there is a unique opportunity to address other critical challenges we face. The state of our climate, environment and embedded inequalities are clear issues in front of us. Research is vital to understanding the complex and varied issues required to address these challenges, and our research sector is primed to respond.”
No conflict of interest
Dr Jeff Seadon, Programme Director of Postgraduate Programmes in Built Environment Engineering, Auckland University of Technology, comments:
“Job creation in this budget has focussed on short term and low-waged opportunities. Construction jobs provide short term employment – when the building is finished, the job ceases. The tourism and hospitality industries are low waged, continuing the cycle of poverty.
“Over 22,000 long term jobs throughout the country can be created if we reuse or recycle our waste that we send to landfill each year. International experience has shown that these jobs pay above the national average.
“Initiatives in the waste sector will require building onshore processing facilities (creating extra short term employment for the building sector) and developing internal markets for the goods we now discard. The results will be reduced imports, less pillaging of the earth’s scarce resources and skills development for low- to non-skilled people employed in this area. That is a strategy to build a more resilient economy by not relying on globalisation to succeed.”
No conflict of interest.
Dr Diane Ruwhiu, Senior lecturer, Department of Management, University of Otago, comments:
“Rebuilding Aotearoa New Zealand’s economy will require a bold and resilient response. In relation to the more than $900 million targeted to Māori business, employment and community, it will support significant elements of Māori social and economic development. However, given the proven power of the Māori economic engine in Aotearoa New Zealand, stronger investment in our Māori economy is warranted. The past decade has seen evidence of a fast-growing and lucrative economic landscape driven by the commercial successes of our iwi, hapū and Māori businesses more generally. Within and beyond our traditional land-based activities, we were seeing Māori driven productivity, employment, innovation and investment. Government and industry commentators recognise the Māori economy as a vital constituent of the economy at large.
“Herein lies the opportunity for a bold and resilient response to the rebuilding of the Aotearoa New Zealand economy. Reigniting the engine of the Māori economy will be a critical component of reinvigorating the economy at large. To do so, in keeping with the unique value proposition that Te Ao Māori, the Māori world, brings to economic thinking is paramount. Such a perspective prioritises an understanding of growth and development beyond the economic to include the wellbeing of our people, our communities and our natural environment. The Māori voice has been somewhat obscured during COVID-19. Now is the time, in the bicultural spirit of our nation that we have the potential to consider the impact the budget could have. To reimagine a people-centred and values-based way of thinking about economic development. To draw from our traditional wisdoms and our contemporary experiences, to work together to best achieve our social and economic (re)development goals and meet the needs and aspirations of all of our people.”
No conflict of interest.
Professor Adrian Sawyer, UC Business School, University of Canterbury, comments:
“Budget 2020 is without precedent in recent times. Arguably it has close links to the First Labour Government’s budget and approach to New Zealand’s recovery after the Great Depression. It is a budget in the tradition of Keynes, such that to get NZ out of difficult times, the government spends well beyond its means, necessitating substantial borrowing.
“The good news is that New Zealand is well placed to be able to borrow, with very low Government debt as a percentage of GDP prior to COVID-19. The bad news is that in the months and years to come, government debt will have increased by more than $150 billion.
“Much of what has been announced by the Government for new spending cannot be faulted in terms of what is needed to rebuild the economy. What may be questioned is whether all decisions should be made by the government, or that more opportunity be given to New Zealanders (especially NZ businesses) to make decisions and advise where support is most needed.
“My main interest is taxation, and Budget 2020, like Budget 2019, contains almost no specific measures that are tax related, although many of the initiatives will require Inland Revenue to administer them. Prior to Budget 2020, the Government announced a number of COVID-19 tax-related measures, including the wage subsidy (to be extended in a targeted manner as per Budget 2020), tax cashflow enhancement through changes to allow loss carrybacks, reinstating depreciation on commercial buildings, and a number of other initiatives. All of these changes were enacted under urgency without the normal public consultation that is a hallmark of NZ’s tax policy process (which incidentally led to the wrong version of legislation being enacted – another story).
“The big unanswered question from Budget 2020 is tax-related – how will NZ repay the debt that the Government, has, and will, be incurring, on behalf of New Zealanders (estimated to grow to be $80,000 per household)? This, unfortunately is left to determination in the future, importantly after the 2020 general election. Assuming Budget 2020 is passed by Parliament, the gap to be made up through increased government revenue should in part come from economic growth leading to an increased tax take. This will be far too little to bridge the gap, so the future for NZ must be increased taxes. The mix of these tax changes and associated variations in tax burdens, including potentially the introduction of new taxes (such as a capital gains tax or some form of wealth tax), is yet to be revealed. The future, from a tax perspective, like COVID-19, will be unprecedented in NZ’s (recent) history.”
No conflict of interest.
Professor Ananish Chaudhuri, Department of Economics, University of Auckland, comments:
“The budget presented by Grant Robertson was along expected lines. There are good things and some not so good. It is not always clear as to what a reasonable response to a budget should be. Should the boost by $60 billion as opposed to $50b? Should the wage subsidy be higher or lower? It is easy to nitpick some of these things since there are never clear answers to some of these and most outsiders are not privy to the advice or information available to Cabinet.
“Clearly, the government realises that the economy has taken a big hit and they have tried to do their best to address some of this. In response, they have decided on a massive program of deficit spending to minimise the downturn and job losses. This is reasonably straight-forward Keynesian policies. Reasonable people can disagree on the details. So, rather than second-guessing the Finance Minister, I am going to confine my thoughts to some of the features of the budget that stand out for me.
“First, the prediction that nominal GDP is poised to fall by 4.6 per cent this year and more the following year before starting to grow again. Unemployment is tipped to grow to nearly 10 per cent. These are pretty dramatic. This is worse than the recession that followed the Global Financial Crisis, when real GDP declined by 2.2% and the unemployment rate peaked at 6.9%.
“What is even more striking is the prediction that by 2023 debt will be more than 50% of GDP. I am assuming that this is public debt and does not account for private debt. I am by no means a deficit hawk, but this level of debt-to-GDP ratio poses risks for most nations; let alone a small island nation that is very much dependent on global economic trends.
“This level of borrowing will certainly put upward pressure on real interest and exchange rates and counter-act to an extent RBNZ’s quantitative easing efforts. The net effect is anyone’s guess since a lot of it will also depend on what is happening to rates in other countries.
“We should expect to see current account deficits in the near future and I expect the export sector to take a hit in the foreseeable future.
“The idea of extending the wage subsidy is good and was probably inevitable. But the wage subsidy will only be available to businesses whose revenue have fallen by at least 50%. It is not clear what recourse is available to businesses that went bankrupt.
“In that sense, I expected to see some targeted transfers in the budget, but these did not materialize except for the increased support for school lunches. Many of the policy instruments proposed are rather blunt ones and their efficacy is ambiguous. More could have been done to directly target those who have lost their livelihoods. This includes out of job migrant workers.
“Overall, much as expected but with some significant red flags in terms of the steeply increasing debt-to-GDP ratio.”
No conflict of interest
Dr Lucy Telfar Barnard, Senior Research Fellow, He Kainga Oranga/Housing and Health Research Programme, Department of Public Health, School of Medicine & Health Sciences, University of Otago, Wellington, comments:
“It’s great to see this extra investment in increasing public housing, as well as income-related rent funding to go with it.
“Our homes are where we spend most of our time, even when we’re not in lockdown. It’s hard to stay healthy when our rent takes up too much of our income; we struggle to stay warm and dry; and we’re worried we might have to move. Building new public housing is a good way to address all three of these problems, since new public housing is a higher standard and more affordable than cheap private rentals, and tenants know their tenure is safe. That makes investment in public housing a health investment as well as a social investment, targeted at those who need it most.
“Along with the government’s increased spending on retrofitting insulation under the Warmer Kiwi Homes programme, this budget allocation is another step towards warmer, drier, safer homes for all New Zealanders. The allocation for urban papakāinga and other Māori housing initiatives is particularly welcome.
“However, there will be challenges. As with KiwiBuild, there’s the question of where to find land, or how to free up existing public housing land without disruption to current tenants.
“There’s also a clear gap in the spending allocation: new public housing will mean those who get to the top of the public housing list have warm, dry, secure homes. Additional spending in the Warmer Kiwi Homes programme will help people insulate if they own their own homes. But I don’t see anything in this budget to help improve the standard of people in poor quality rental homes, where our most vulnerable households live, and where new healthy housing legislation can only do so much.”
No conflict of interest.
Distinguished Professor Philippa Howden-Chapman, Department of Public Health, University of Otago, Wellington, comments:
“This is certainly the most ambitious budget in my lifetime. It sets out how a wellbeing approach seriously considers what is needed to improve and maintain the public’s health, create and maintain jobs, increase sustainability and help reduce carbon emissions, at a time of economic crisis.
“The Minister of Finance’s language was of response, recovery and rebuilding. From my perspective, one of the boldest announcements was literally the commitment to rebuilding public housing, which also entails dealing with the deficit in the neglected underground services – essential water, sewerage, stormwater and other infrastructure – from the underground up. The additional $5 billion allocated to public and transitional housing over four to five years will fund 8,000 public houses in addition to the 6,000 already being built, appropriate given the challenge of the public housing waiting list.
“There is also an explicit focus on job creation, trade training and apprenticeships, as well as ring-fencing money for Māori and Pacific trade training and housing. This is recognition that the residential civil and residential construction sectors are some of the most important drivers not only of the economy, but of whānau wellbeing.
“For existing homes in the private sector, the decision has been taken to increase the proportion of costs – from 67% to 90% – that low-income owner-occupied households will need to pay to retrofit their homes. While this will provide an estimated 9,000 additional retrofits, this does not address the full scale of the problem. We estimate there are still about 600,000 inadequately-insulated homes. Moreover, the award-winning programme, the Healthy Homes Initiative, which links community groups and district health boards, does not appear to have received any further funding. The Minister indicated this is one of a tranche of government investments, designed to support partnerships between central and local government and communities. I look forward to seeing some of these gaps filled.”
Conflict of interest statement: “The views expressed here are her own and not necessarily the views of the Board of Kāinga Ora – Homes and communities.”