2016 Budget Summary

On 26 May 2016 the New Zealand Government announced its 2016 Budget.

This communication highlights and summarises the key announcements and provides a commentary from AMP New Zealand’s Chief Economist, Bevan Graham.

Key Announcement Summary

Prime Minister John Key and Finance Minister Bill English believe that through Budget 2016, the National-led Government will:

  • Return a $700 million surplus next year and a surplus of $2.5 billion in 2018/19 and a surplus of $6.7 billion in 2020/21.

  • Reduce government debt to 25.6 per cent of GDP in 2017/18 and 19.3 per cent of GDP by 2020/21 when they can resume contributions to the NZ Super Fund.

  • Reduce government borrowing by $2.0 billion in 2016/17 and $7billion in the 2017/18; and repay $9.2 billion of debt by 2020/21.

  • Invest in social housing:

  • Allocate $200 million for at least 750 more places for individuals and families with the most pressing housing needs.

  • Allocate $42 million to support 3,000 emergency housing places each year.

  • Allocate $100 million to free up surplus Crown land for housing developments in Auckland.

  • Invest an additional $2.2 billion in health over the next four years including the funding of District Health Boards $1.7 billion; disability support $169 million; Pharmac $124 million; $96 million for elective surgery and $73 million for GP visits and free prescriptions for under 13’s – bringing the health budget to a record $16.2 billion in 2016/17.

  • Invest $2.16 billion over the next four years in infrastructure, including transport and schools.

  • Boost funding to education by $1.4 billion over the next four years, bringing the spending on early childhood, primary, and secondary education next year to a record $13.5 billion.

  • Create a Social Development package of $652 million over the next 4 years to assist vulnerable New Zealanders.

  • Create an Innovative New Zealand package of $761 million over the next four years to include science and innovation, tertiary education and apprenticeship programmes particularly in science, engineering and agriculture.

Commentary from Bevan Graham, AMP Chief Economist Budget 2016 Conclusion

“Budget 2016 shows a country in good shape with a set of fiscal accounts that must be the envy of most governments around the world. Grumbles aside, the overarching message from the Budget is New Zealand is in good economic and fiscal shape. The Government’s long-term investment-focussed approach, particularly in challenging areas such as social policy, is a lesson for many countries whose governments continue to struggle with developing and articulating credible and sustainable long-term fiscal strategies. Assuming the economic forecasts are met and the fiscal outlook improves, the Government will continue to have choices between spending, investing, repaying debt and tax reductions. If our growth forecasts prove more correct the choices will be there, but somewhat more constrained. We expect to hear more about them in Budget 2017, just a few months before next year’s general election.”

For the full commentary from Bevan, please refer to the following link: http://www.ampcapital.co.nz/news/blog

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