News and happenings from the Office of Hon Dr Michael Cullen May 2001

Michael Cullen Finance

News and happenings from the Office of Hon Dr Michael Cullen

May 2001

Budget Special

Building a stronger economy and fairer society

My second budget reinforced the Government's
reputation as a prudent fiscal and economic manager while boosting security and
opportunities for New Zealanders.

The budget reflected our core values, with five distinct features that set it
apart as a Labour - Alliance Government budget.

  1. People first The government moved early in our term to attend to deep
    festering problems with New Zealand's social security system. We front-end
    loaded priority spending: boosting the pension, introducing income related
    rents, easing student debt and more funding for elective surgery and education.
  2. Look to the future Budget 2001 takes a long term view, investing in young
    people, setting the stage for effective tertiary education and putting aside
    money through the New Zealand Superannuation Fund to meet costs that will emerge
    in twenty and thirty years time.
  3. Hands on economic support Instead of leaving everything to the private
    sector, this government has an active programme of skills development, regional
    and economic expansion and support for technological support. Good social
    services and good jobs need a well performing economy.
  4. Core values: opportunity , security The budget emphasises the importance of
    giving individuals and communities the opportunity for personal development and
    self reliance. For example: the equity funding provisions for early childhood
    education, the funding boost for Child, Youth and Family Services and the direct
    resourcing whanau, hapu and iwi initiatives.
  5. Sustainability The budget highlights social, financial and environmental
    sustainablity. By taking a whole of government approach, the budget balances
    competing demands: short term versus long term, resource use versus
    conservation, demands for more spending versus the ability to pay for things.

Tight 1st term budget trio

The budget is vigilant on new spending. Every
initiative had to be justified, and several worthy proposals had to be deferred.

This is the tightest of the three budgets the Labour-Alliance Government will
present this term.

Net new spending has been limited to $692 million. This compares with around
$1.26 billion in Budget 2000 and with the $815 million we are setting aside now
for next year's budget.

The Government was concerned that the spending allocation for Budget 2002
should be realistic. I am satisfied that $815 million is credible although it
will demand continuing firm discipline from Ministers.

The risks the world slow down poses to New Zealand are acknowledged in the
budget documents. But I share the Treasury's view that the economy is
well-placed to absorb the shock and to continue to grow.

Although the Treasury has revised down its growth track since the December
Economic and Fiscal Update [DEFU], it is still projecting growth of 2.9 per cent
on average over the next four years.

Overall the general outlook is good - unemployment remaining low at around 5
per cent, inflation under control and the current account deficit dropping
steadily to 3.3 per cent of gross domestic product by the end of March, 2005.

Driving economic transformation and growth

  • $34.35 million package of initiatives for economic and regional development.
  • $100 million seed capital investment fund in partnership with the private
    sector to assist the development of innovative high-tech businesses and increase
    of $11.6 million in direct research funding.
  • Increase of $1.2 million a year, from $0.6 million to $1.8 million, for the
    business Incubator Support Programme.
  • Additional $56 million over the next four years to create more than 17,000
    extra industry training places.
  • Tertiary Education Commission to be set up to drive improvements in the
    tertiary sector.
  • Increased funding to the tertiary institutions to continue the fees freeze
    through into the 2002 academic year and $40.6 million over four years for a new
    Centres of Research Excellence Fund.
  • $4.4 million over four years to allow the Industrial Supplies Office to
    actively seek out tendering opportunities for large public sector projects both
    here and in Australia.
  • Extra funding for the new embassy in Brazil and for Trade NZ.

Investing in people

Education

  • $30 million over four years for an early childhood education equity funding
    initiatives and $18 million to improve adult literacy.
  • $27.4 million over four years to develop school principals' leadership and
    skills. A variety of other initiatives to improve teacher quality and school
    administration.
  • Increase in school operation funding.

Health

  • $330 million increase in Vote: Health.
    $84 million a year built into
    permanent baselines to maintain gains in reducing waiting times for elective
    services and an additional $7.4 million above the $50 million increase in last
    year's budget for mental health.
  • $3.9 million to improve the cervical screening programme.

Social Services

  • $184.4 million over the next four years for the Department of Child, Youth
    and Family Services to implement Mick Brown's report: Care and Protection is
    about Adult Behaviour.
  • A $44.7 million package to assist beneficiaries make the transition from
    welfare to work.
  • $31.1 million to support "for community, by community" programmes.

Housing

  • Funding to build 125 new community houses and to extend rent relief to
    cash-strapped community housing tenants.
  • Commitment to build an additional 300 new state houses this year and to
    upgrade further 9000.
  • More money into the rural home loans scheme.

Maori Affairs

  • Overview from Maori Affairs Minister Parekura Horomia on policies to
    strengthen Maori communities and advance Maori economically.
  • $10 million a year for Maori television.
  • $15 million over three years to directly resource local Maori initiatives.

Pacific Peoples

  • $500,000 increase to the Pacific Business Trust.
  • $2.8 million for Pacific health providers [contained in the health
    statements.]

Sports and Culture

  • $100 million over the next five years to implement the recommendations of
    the Sport, Fitness and Leisure review.
  • Funding package to support regional museums and galleries

Immigration

  • Near doubling of the budget for refugee resettlement services.

Mediation

  • Additional money to support the new Mediation Service.

Electoral Issues

  • Improvements to electoral services, and to speed up vote counting on
    election night.

Protection and security

Justice and Corrections

  • $22 million over four years to begin implementation of the new sentencing
    and parole regime.
  • $7 million over four years on treating alcohol and substance abuse and on
    programmes aimed at repeat disqualified drivers.
  • $500,000 a year for victim support.
  • Funding to build two new prisons in South Auckland.

Police

  • $165.5 million over four years.

Eco 2001 package, announced 9 May

  • $16 million over three years to improve visitor facilities on Department of
    Conservation land.
  • $10 million over four years to make the one-off conservation awareness
    initiative a permanent feature of DOC's work programme.
  • A new national park on Stewart Island.
  • Funding to control bovine TB, prevent foot and mouth disease from entering
    New Zealand, control the spread of Asian kelp and fund a South Island survey of
    freshwater pest fish.
  • An additional $6 million this year and $2 million next to the Ministry for
    the Environment.
  • Funds to develop Environment Performance Indicators and to improve the
    collection of agriculture and horticulture statistics.
  • Organic farming initiatives.

Defence, announced 8 May

  • Increase in net operating funding of over $300 million in the next five
    years and around $700 million in the next ten years for Vote:Defence Force.
    Additional significant cash injection over the same period.
  • Re-equipment programme for the Army, multi-role vessel with long distance
    and Southern Ocean capabilities to replace HMNZS Canterbury on retirement,
    upgrade of Air Force's Orion, C-130 Hercules and Iroquois fleet.