Budget 2018 lays foundations for the future
Tēnā koutou katoa.
When I was asked for my summary of the Budget yesterday, my answer was that it lays foundations for the future.
It strikes a balance between three things:
- Making up the shortfall of investment in essential infrastructure and public services.
- Signalling the priorities of the new government without trying to do everything at once
- And, at the same time, operating with the constraints we set for ourselves through our fiscal strategy.
This Budget’s putting serious investment into health at $3.2 billion of operating expenditure. And another $850 million in capital spending.
There’s $1.6 billion going into operating expenditure for early childhood education and schools, with $334 million for capital spending.
That’s investment in new schools, and expansions in existing schools, with prioritisation for the Christchurch Schools rebuild.
There’s $2.6 billion more in operational funding for post-secondary school education and training.
That kind of investment’s aimed at producing more and better skilled job-seekers for employers.
And there’s the $1 billion a year over the next three years for regional economic development.
That adds up to more than $15 billion in operating and capital expenditure over the next four years to help lay the foundations for transformation which will position New Zealand to compete in a changing world.
Now, there are a couple of points I want to make clear.
We are embarking on change over a generation.
We have to face it, realities like climate change are happening now.
And if we start the transition to adapt now, we give ourselves at least 30 years to put in place the reforms we need – not just to cope, but to thrive.
Because if we don’t.
If we keep doing what we’re doing, until we are confronted with greater problems down the line, our choices will be way more limited and way more expensive.
R & D is a critical component to this transition.
Which is why this Budget is investing $1.1 billion to finance a tax incentive over four years to giver R & D a major boost in this country.
We want to lower the cost of research and development for business, reduce your risk and give you the incentive to do more to build a more resilient economy.
A lot of New Zealanders are getting it.
The agricultural sector is one example. And there is some amazing work farmers are doing to adapt to more sustainable practices, and reduce their environmental impact.
And industry too, is seeing the need to reset.
They are seeing the opportunities in the challenges we face.
And the Government’s Budget wants to support that.
It will do it within the limits we’ve set under the Budget Responsibility Rules to ensure we balance spending with the need to maintain surpluses for future, unforeseen events.
Now, some of you will have a differing opinion on how we’re applying the Budget Responsibility Rules.
I know the Government’s been criticised in some quarters for holding onto surpluses and adhering to our Budget Responsibility Rules.
Some of that criticism is coming from parts of the business community who can see that we’ve really failed over the past four years to keep up with the marginal cost of growth.
I’ll be honest with you. They’re partly in place because we wanted to show New Zealanders we understand the need to operate in a fiscally grown up way.
And, as I just said, we also understand that New Zealand is subject to unforeseen events – domestically and internationally – and we need to have headroom to cope.
No one knows that more than you here in Christchurch.
But look, conditions change and our plan has always been to review the rules in the context of the circumstances we face in the years to come.
So we think it’s wise to see how economic conditions play out over the next 12 to 18 months, while keeping a financial buffer in reserve, particularly while we’re waiting for find out how much the mycoplasma bovis liability is going to be.
$85 million is being made available in this budget.
Now you might have picked up on news coverage over the last 24 hours saying this Budget came up short on Green policy.
Some in the media crunched the basic headline numbers and said the Greens didn’t get as much money as NZ First.
In fact, it doesn’t take much arithmetic to work that out.
But here’s how I see it.
Take the Budget in its totality, from a Government that may be made up of three parties but which has a common purpose – to provide the best foundation on which all New Zealanders can benefit.
For instance, I celebrate the Provincial Growth Fund as a win for all of us in the form of jobs and economic activity in the regions, and as a key part of meeting our 2050 net zero emissions target.
I celebrate the $14 billion going into mass transit transport options and cycleways and walkways.
1 billion for cycleways and pedestrians.
$5 billion for mass rapid transit. And I know there’s been a lot of talk about Auckland’s light rail because it’s coming on line the soonest.
But there are also plans for Wellington and Christchurch too.
And there’s $7 billion for public transport.
And I celebrate my coalition colleagues’ vision to support a Green Investment Fund with $100 million initial capital to establish an financial vehicle comparable with similar funds elsewhere in the world, particularly the UK and Australia.
I don’t think anyone cares a great deal about which political party is responsible for each of these.
This is about the Government of New Zealand.
Some of the greatest investment growth happening globally now is in clean, low emissions technologies and business activity.
With a Green Investment Fund, we’re showing the Government’s putting skin in the game to attract the kind of private investment that will bring high-value, high-productivity, high-income jobs here to New Zealand.
What we’re setting up with the Green Investment Fund, and the Zero Carbon Act, and emission trading scheme changes, are part of this Government’s work to put in place the policies that will guide us down the path towards more resilient economic activity.
We’ve been hearing talk about a weakening Kiwi dollar, forecast US interest rate increases that are likely to surpass our OCR for the first time in nearly 20 years, and oil prices heading back over $100 or $150 a barrel.
I read the New Zealand Herald’s Business Editor, Liam Dann, at the weekend warning that we might need to think about bracing for petrol prices of $3 a litre in the not too distant future.
Put together all those factors and the possibility of $3 dollars isn’t that far-fetched.
Now, in that reality, building an economy that, in the words of Gwenyth Paltrow, “consciously uncouples” from oil sounds like a very sensible transition, doesn’t it?
The transformation we are beginning with this Budget presents the groundwork for a whole host of opportunities.
Changing business, economic, social, environmental, transportation, housing, energy sources and consumption – you name it – in order to maintain our existence on this Planet has got to be the best investment we can make.
And many, many businesses around New Zealand – big and small – are already moving in a new, more sustainable and resilient direction.
Your Christchurch International Airport is a fantastic example.
It’s removed energy costs by not needing air conditioning because it uses the acquifer for cooling.
More sustainable efficiencies reduce input costs - like energy consumption.
And they reduce output costs.
Dairy farmers who are adopting more sustainable practices are finding they can achieve the BETTER levels of profitability.
So Budget 2018’s putting $15 million into boosting the Sustainable Farming Fund over the next four years to quadruple the number of projects that can be financed to find ways to best use our natural resources in environmentally, as well as economically, viable ways.
I see this Budget encouraging those kinds of transformations for New Zealanders to prosper in the many ways they choose to do so.