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With Finance Minister Bill English set to deliver his sixth budget for the country, newzealandinc.com looks at five key themes to consider for the upcoming year’s financial framework.
1. Surplus – It’s been six years in the making and English will finally get to confirm this afternoon that the nation’s books are set to get out of the red. It seemed like a distant goal back when it was first proposed in 2009, but consecutive years of strong economic performance brought the target forward for this budget back in 2011. The surplus isn’t going to be huge and the notion of impending tax cuts is premature, but it’s a positive indicator for New Zealand and should open up funding to start to address areas of need. How the Government intends to use those funds could be an important issue at the election this year.
2. Middle-class welfare – The Prime Minister sent the media in a moderate frenzy yesterday evening when he dangled the possibility of middle-class tax cuts as a policy platform for the impending election. For Key, it was a good opportunity to get something in the headlines other than cash for clout or misbehaving ministers. Assistance for specific segments is certainly possible, but wholesale tax changes with an impact across the board is pie in the sky thinking. Extensions to paid parental leave and modest increases to social welfare would be reasonable to expect, but in an election year – boring isn’t sexy.
3. Plan – Getting New Zealand back to surplus has been a long term goal for English, and undoubtedly a trend he’ll be looking to see continue. As a nation, we’re well positioned to enter a period of strong economic growth. How that projects to affect the surplus in coming years and what can be done to create added value for the country will be an important element of the budget – particularly as inflationary pressures increase. With a surplus achieved, the secondary phase of English’s long term fiscal plan will get a bump in priority as the gradual reduction of national debt moves to the forefront.
4. Debt – With the country’s coffers a better picture of health, the second part of the long-term economic plan will start to come into effect as the government looks to pay down national debts. With a target to reduce total debts to 20 per cent of GDP, expect to see a decent chunk of any predicted surplus both now and in the future contributing towards that goal.
5. Kiwisaver – With Labour’s plan to implement wholesale changes to Kiwisaver and the role it plays in our financial system, it will be interesting to see if National chooses to respond with any reforms of their own. I’d say it’s unlikely – it’s easier for the Government to write the proposal off as infeasible and unrealistic – but a surprise from English could make for some great politicking in the lead-up to September.