The Budget 2024

A no-frills outlook

Although it is clear the economic outlook is somewhat gloomy, in delivering the 2024 Budget, the Minister of Finance, Nicola Willis, said that savings across government have resulted in responsibly-funded tax relief. “Spending is targeted, effective and affordable.”

The government has promised targeted investments in public services, including healthcare, education, and law and order. Front-line services will be increased.

Having said that, the minister has admitted the Budget is “tight but realistic” and she intends to stick closely to these allocations.

Tax relief

The much-promised tax cuts have been delivered.

As previously signalled, the Budget will help what the government calls ‘the New Zealand squeezed middle income earner’. For the first time since 2010, personal tax brackets have been adjusted for New Zealanders earning up to $180,000 pa. Overall, average income households will have up to an extra $102 in their back pockets each fortnight.

Additional FamilyBoost payments will help around 100,000 families manage the costs of early childhood education with up to $150/fortnight.

These tax changes take effect from 31 July this year (a month later than promised) in order for payrolls to accommodate the resettings. Changes to FamilyBoost will apply from 1 July.

The government has reiterated the restoration of tax deductibility for interest on residential investment properties, as well as the adjustment to the bright-line test from 10 years back to two years from 1 July this year.

Health

Frontline health services have received a boost. Emergency departments, primary care, medicines and public health will get $8.15 billion additional operating and capital funding over the next four years:

•         $3.44 billion has been allocated for hospital and specialty services (including $31 million to increase security in emergency departments)

•         An additional $2.12 billion will be available for primary care, community and public health providers including GPs, Māori health services, mental health services and aged care services

•         Free breast screening will be gradually extended for 70–74-year old women (currently only available up to 69 year olds); an extra $31.2 million

•         Pharmac will receive additional funding of $1.77 billion over four years, which is said to just cover ongoing costs for additional medicines, and

•         The mental health initiative, Gumboot Friday, has $24 million to deliver services to young New Zealanders.

On the other side of the coin:

•         Free prescriptions have gone for most New Zealanders. However, free prescriptions will remain for those under 14 years old, people aged 65 and over and for Community Services Card holders, and

•         Promised additional funding for cancer drugs has not materialised. Since the Minister delivered the Budget, she has stated that the government aims to make an announcement on cancer drug funding this year.

Education

There will be increased spending on schools and early childhood education equating to $2.93 billion in extra operating and capital funding, including $440.8 million of reprioritisation. The government is allocating:

•         $1.48 billion to build new schools and classrooms and to maintain and upgrade existing school properties. This includes funding for kōhanga reo, play centres, kindergartens, kura kaupapa Māori, special schools, and intermediate, secondary and charter schools.

•         $516.4 million to support schools and early childhood education providers, plus $153.3 million to establish charter schools

•         $477.6 million to continue the Healthy School Lunches programme for the next two years

•         $67 million to support schools to use the new structured literacy approach when teaching reading, and

•         Funding is switched to allow a fees-free final year of tertiary study, rather than free fees in the first year.

Law and order

The government has reiterated its pledge to crack down on crime and keep communities safe. This includes:

•         Funding of $1.94 billion for more frontline Corrections officers, increased support for offenders to turn away from crime and increased prison capacity, and

•         $651 million allocated to support frontline policing (including increased pay) and for an additional 500 police officers and additional operational support staff.

Public services

$140 million is budgeted for an additional 1,500 social housing places, delivered by community housing providers.

$1.1 billion is allocated to ensure disabled people can access the essential services, equipment or support they need.

Hawke’s Bay and Auckland communities will receive $1 billion-plus for the rebuild and recovery from Cyclone Gabrielle and the Anniversary Day floods. $939.3 million of this is allocated for road repairs.

Infrastructure

The government, as it has previously signalled, is investing heavily in roading – $4.1 billion to accelerate priority roading projects including Roads of National Significance.

$200 million will be invested to support KiwiRail carry out maintenance and renewals on the national rail network.

Climate change

The government wants to support the country’s transition to a low-emissions economy and climate-resilient future. The minister said that around $2.6 billion of climate initiatives funded from the previous government’s Climate Emergency Response Fund will continue.

Later this year the government will consult on plans to deliver emissions reductions over the second emissions budget period. The minister confirmed that the Emissions Trading Scheme will play a vital role in reducing emissions.

In summary

While the Budget could not be considered an austerity plan, it is certainly a ‘no frills’ programme indicating the government will be running a tight financial ship over the next few years.

Treasury expects the economy to pick up later this year, including inflation returning to its target band of 1–3% and a fall in interest rates.

All things being equal, the government expects the country’s operating balance (before gains and losses) to head into surplus in the 2027–28 financial year.

In the meantime, however, we will all need to hold on to our hats and buckle our belts a little tighter over the next few years.

DISCLAIMER: All the information published is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this article. Views expressed are those of individual authors, and do not necessarily reflect the view of this firm. Articles appearing in this newsletter may be reproduced with prior approval from the editor and credit given to the source. Copyright, NZ LAW Limited, 2019. Editor: Adrienne Olsen. E-mail: adrienne@adroite.co.nz. Ph: 029 286 3650 or 04 496 5513