One Question Quiz
Grant Robertson in front of the Beehive holding the 2023 budget. Speech bubbles overlaid.
Photo: Getty Images; additional design Tina Tiller

OPINIONBusinessMay 18, 2023

Budget 2023: The great Spinoff hot-take roundtable

Grant Robertson in front of the Beehive holding the 2023 budget. Speech bubbles overlaid.
Photo: Getty Images; additional design Tina Tiller

Finance minister Grant Robertson describes his budget as ‘sensible and responsible’. But what do the experts think?

Susan St John: Terrifying rise in food insecurity not addressed

I wonder what the thousands upon thousands of families who must suffer the stigma of asking for food from food banks to allow them to feed their children on a weekly basis feel about this budget?

Yes, cheaper public transport is a good policy with environmental benefits, and yes, some families will gain. Healthier, warmer homes are an improvement for some, no user-pays for prescriptions is also an important step in the right direction. A bright spot is the future funding until 2024 of the successful programme lunch in schools – its funding must be made future-proofed.   

But none of this touches the urgent problem reported by Helen Robinson, CEO at the Auckland City Mission, this week: over the past 10 years, food parcels distributed each year by the ACM have risen from 9,000 to 65,000, representing a terrifying rise in food insecurity.

This budget should have delivered a reformed and effective Working for Families. It is tiresome to hear that allowing low-income families to have sufficient income to feed their families would be inflationary. It would not – in fact, it would make the economy work better.

First, the in-work tax credit (IWTC) should be immediately folded into the Family Tax Credit, to form one simple payment for which all low-income children are eligible. This would be a targeted and very efficient way of reducing child poverty, offering a higher level of support only to those who currently do not get the IWTC. This would cost about $500m per year, and would be highly cost-effective in lifting children out of severe poverty.

Second, middle- and low-income families in paid work face impossible “clawbacks” – for each dollar they earn over a very low threshold, they may receive only a few cents, because income assistance abates (reduces) so quickly in several domains it keeps them in poverty traps. Thresholds must be
raised and rates of abatement cut from 27% to 20%.

Susan St John is an economist and a founding member of the Child Poverty Action Group

Gabrielle Baker: Ending prescription fees was ‘low-hanging fruit’

You attend one government meeting about some complex social issue and I guarantee you’ll be asked to identify some “low-hanging fruit” within the first ten minutes. Eliminating prescription charges has been “low-hanging fruit” for a while now so it is more a relief than it is thrilling to see this finally dealt with in a budget. In the context of an annual health budget, we’re not talking about huge costs. In fact, there will be other savings to the system, with research showing eliminating the small co-payment seems to have an effect of patient risk of hospitalisation. Furthermore, the charges are a significant driver of inequity, with one in five Māori and Pacific peoples reporting not collecting a prescription due to cost. But, if you’re gonna have a “no-frills” budget then you may as well be addressing this kind of “low hanging fruit”. So mostly I am pleasantly surprised with the budget.

That said, the “$20 million in spending to improve health equity for Māori and Pacific peoples” is not even a drop in the ocean. So I’m not handing out medals just yet.

Gabrielle Baker (Ngāpuhi, Ngāti Kuri) is a consultant who has worked in Māori health policy for the past decade

Liam Hehir: Homeowners will feel increasingly squeezed

Budget 2023’s expansion funding for childcare will resonate with many swing voters. Homeowners, on the other hand, will feel increasingly squeezed as they bear the brunt of declining property values. The discontinuation of petrol subsidies will also bite hard.

It should all work out if Treasury’s predictions of rapidly falling inflation and a flourishing economy come to fruition. Those forecasts seem quite optimistic, however.

It is quite brave of the government to promise an addition of 3,000 public homes by 2025. Prior failures to meet housing targets loom large over such pledges. The same thing goes for the government’s resilience and infrastructure plans. Undoubtedly necessary, their effectiveness will depend on execution, which has been a weak spot for Labour.

Meanwhile, the increase in trustee taxes makes a virtue of necessity. The government really had no choice given how much it has raised other income taxes. The trust rate really does need to be aligned with the top personal rate to prevent an increase in tax structuring. The only surprise is that it has taken the government so long to get around to it.

It is uncertain whether this patchwork of measures will provide real or enduring relief for New Zealanders struggling with mounting living costs. As ever, the answer will hinge less on the promises and more on delivery.

Liam Hehir is a political commentator

Terry Baucher: The no-tax-surprise budget

I fully expected the budget’s announcement of an increase in the trustee tax rate to 39%, with effect from April 1, 2024. I concluded such a move was inevitable following last month’s publication of Inland Revenue’s High Wealth Individual Research Project. Minister of Revenue David Parker’s accompanying press release included an eye-catching statistic from Inland Revenue that the top 5% of trusts with taxable income accounted for $13.3 billion or 78% of all trustee income in the 2021 tax year.

The measure is expected to raise $350 million annually and is, in terms of tax policy, coherent and logical. In fact, Inland Revenue and Treasury both recommended the trustee rate should also be increased to 39% when the top personal income tax rate of 39% was introduced in 2021. It was therefore only a matter of time before the trustee rate followed suit, although there is an election between now and April 1, 2024.

What I didn’t expect was that there would be no move on tax thresholds which have not changed since October 2010 and will surely be the focus of debate in the coming election campaign. Budget moves here may have been derailed following the colossal damage caused by the January floods and Cyclone Gabrielle.

Not making any changes to thresholds does mean a handy extra one billion dollars annually from the effect of “fiscal drag” – where wage increases push earners into higher tax brackets. National proposes some changes here but the government’s response will have to wait for the campaign trail, it appears.

Terry Baucher is a tax specialist

Kassie Hartendorp: Skimming the surface of our collective need

This week’s “no-frills” budget delivered a handful of measures that merely skimmed the surface of our collective need. The task of undoing decades of poor economic decisions that gutted our public services and siphoned wealth into the hands of a rich few is clearly for another day.

We don’t need a government with a tight belt. We need decision-makers who use their ability and resources to improve people’s lives as much as they possibly can. Who hold our private sector to account, so that we can rebalance the scales between those who have easy access to wealth, and those who are locked into poverty. We need a government that takes our responsibilities to Te Tiriti o Waitangi seriously, and doesn’t throw Māori under the bus when elections roll around. More than anything, we need good people who have the guts to do what is right even when it inevitably impacts the opinion polls.

If those are frills, then sign me up.

Contrary to what we are told, there is no lack of wealth. Bernard Hickey writes that our country has a net household wealth of $2.25 trillion, which is $450,200 per person. There is enough to go around, but it is not being distributed fairly into our shared pool.

Kassie Hartendorp (Ngāti Raukawa) is director for people-powered organisation ActionStation

Nicola Gaston: We’re still putting the cart before the horse

There’s not a lot in science and research funding that shouts “big announcement” – the minister’s announcements of fellowships, collaborative centres and funding for collaboration with Europe have all been pretty well foreshadowed. I am relieved to see the explicitly renewed commitment to the government’s target that R&D funding get to 2% of GDP: this budget does not move the dial on that massively (there is new money but some of it is reallocated from the expiring National Science Challenges), but I guess we were not expecting it to.

I am very slightly less grumpy than previously about MBIE’s idea that the research sector does not have the capacity to absorb new funding, given that there is a decent bump to tertiary education subsidies announced – although it is worth noting that that is investment from a different ministry. I await the press releases announcing that university redundancy rounds have been cancelled.

More and more I feel that the fundamental mistake that has been made over decades in funding research in New Zealand has been to put the cart before the horse by trying to fund outcomes rather than researchers. So many of the issues that we recognise in our research system – the lack of connectivity, barriers to collaboration, a lack of diversification – are simple consequences of the fact that it is too small. We have a very sparse network of researchers trying to cover a wide range of areas of expertise, which of course makes collaboration and connectivity hard. Get the 2% of GDP into the research system first, and THEN look to fix these issues – science and research are the sail that Aotearoa needs to take us into the future, and we need to build that sail from canvas, not by stitching together tissue paper.

Nicola Gaston is a professor of physics at the University of Auckland and co-director of the MacDiarmid Institute

Robin Gauld: Prescription fee change will help, but what about GP visits?

The health allocation is the usual scattering of money into pressing areas. As always, there are beneficiaries but many areas overlooked. $2.6 billion has been invested over the next two years, to respond to cost and wage pressures. The funding for nursing and investment in other staffing areas, including increasing access to elective procedures, will be welcomed. Five hundred new nurses have been promised, but no funding to ensure pay equity between public hospital and primary care nursing. A new target for people awaiting elective procedures to be seen within 12 months is supported by $118 million. The goal is to improve hospital systems and free up beds, yet orthopaedics is exempt. The target is helpful but in practice 12 months is far too long for most people to be suffering before they are treated in the public sector. And hip and knee joint patients will continue to languish unless they can pay to go privately.

$864 million has been allocated to continue developing the new Ministry for Disability Support, an important component of our health and disability system which should improve outcomes in this area.

Patient co-payments have received attention with $618 million to abolish prescription charges. This is an important initiative and places New Zealand in a positive position by global standards. It will make a difference to many patients who presently do not fill prescriptions owing to the payment barrier. Patients, however, will first require the means to pay to see a GP before filling their free prescription. This element of the healthcare system continues to be problematic and would require a massive budget allocation to resolve. Perhaps next year an emboldened newly elected government will tackle it.

Robin Gauld is the director of the Centre for Health Systems, which spans the University of Otago’s medical and business schools

Rosie Collins: Not enough on tax, welfare or the climate

In this budget, I hoped for, but did not get: a coherent picture on our climate future and bravery on tax.

Without it climate policy has no manoeuvrability. The government have themselves in a corner. No more so than last year when asked by the Climate Change Commission to increase the Emissions Trading Scheme cost cap so the carbon price might actually start to do something.

They found that with the cost of existing suffocating households, they couldn’t palatably do it. The carbon price has since tanked as polluters have realised climate policy is a joke. This makes the budget’s focus on cost-of-living supports good, but too nuclear-family centric. There could have been way more on tax and benefits, the big levers.

At least there was an increase in the trustee tax rate to 39%, so that high-income earners can no longer avoid paying their fair share.

Welcome too was a big step up in infrastructure spending: $77bn. Most of it was to address our gaping $210bn infrastructure deficit. But some was also for cyclone recovery. Funding to replace school libraries, remove woody debris, give psychosocial care to traumatised communities looms a new normal.

Housing remains a festering sore. Another $176m has gone to motels, for sheltering those made homeless. We need to shift money into proven housing first policies, which deal effectively with homelessness, unlike motels. Three thousand public housing places and $200m for Māori housing are welcome efforts, but small. There are 24,000 households on the waitlist for public housing. We should invest more and do it faster, but this is progress, even if not nearly enough.

I liked the focus on infrastructure investment. I didn’t like lack of focus on climate, or braver fixes on housing. There wasn’t enough on tax and welfare – but I hope that will frame our election conversation, not how to tax less, invest less and burn up the climate.

Rosie Collins is an economist with Sense Partners

Claire Achmad: This budget lives up to its no-frills billing

This budget lives up to its “no-frills” billing. Some investments will make a difference to basic everyday needs in the lives of children, rangatahi, families and whānau, but from a child and whānau wellbeing perspective, and through a community-based social services lens, the budget leaves some big gaps unaddressed.

There’s little in this budget that will ease the pressures of our community-based social service providers who do complex, demanding and essential work. Although some cost-pressures funding for Oranga Tamariki partners, the provision of community connector roles, investment in relational social sector commissioning and cyclone recovery social services through the budget will give short-term help, long-term investment is sorely lacking. The community-based social services sector has been inequitably and under-funded for decades. In line with the times we are in, too, where more people are having to turn to social services for help, this budget needed to be the one that finally made a significant commitment to sustainable, long-term funding for community-based social services, and to support social services kaimahi hauora (worker wellbeing). After all, the wellbeing of this sector is intertwined with the wellbeing of our children, rangatahi and whānau. 

Alan Johnson: Focus on wellbeing is based on who votes and who doesn’t

Government budgets are important for the way our democracy works. They are a key way in which we consider and determine our societal choices around the quality of public services and sharing of the economic cake. Yet we gloss over the important things in our distraction by the trivial. 

Budget 2023 has announced additional spending of $76 billion over the next four years, of which nearly one third or $25 billion will be spent on increases in New Zealand superannuation. This significant trend is not mentioned.

Against such generosity, spending on Working for Families changes hardly at all – sitting at around $3 billion annually. This represents a real cut in value when the expected 12% inflation over the next four years is taken into account.

The minister of finance continues to claim that his is a wellbeing budget and makes references to reductions in child poverty rates which go back at least a decade. His focus on wellbeing is selective and appears very much based on who votes and who doesn’t.

We would be better served by politicians who are courageous enough to think in terms of generations rather than election cycles. Regrettably, Budget 2023 has not shown this courage.

Alan Johnson is deputy co-convenor of the Child Poverty Action Group

Samantha Murton: Urgent need for more GPs not addressed

All of our members will have patients who struggle to pay for their prescriptions and removing this barrier is good news.

But the earmarked $118 million to help reduce waiting lists by “improving patient flow and enabling planned care to be delivered in primary care” sounds good in theory, but serious attention needs to focus on growing the number of GPs and rural hospital doctors being trained as specialists, supporting their wellbeing, and supporting those thinking of retirement to stay in the profession.   

There have been some steps to support training with Minister Little’s announcements last year but there is much more that can be done. We need to have a solid plan in place and significant investment to grow our own workforce.  

To highlight the urgent need for more GP investment, if the 425 specialist GPs aged over 65 retired tomorrow, we estimate that 725,000 more New Zealanders would be without a doctor. When it takes between 11-14 years to train as a specialist GP, it will be our patients and communities who suffer.

Samantha Murton is the president of the Royal New Zealand College of General Practitioners

Andrew Eagles: LED expansion not the lightbulb moment needed

Continuing and expanding the Warmer Kiwi Homes programme is great news for thousands of New Zealanders living in cold unhealthy homes. We’ve long called for an expansion to what the programme offers, so it’s great to see the addition of basic measures like LEDs and hot-water heat pumps.

But it remains a very minor step forward when we should be rapidly making major improvements to New Zealand homes. Spending $100 million a year on these basic home improvements is a drop in the bucket when we consider the rapid deep retrofits required for us to meet our climate targets. We should be spending $1 billion a year on this.

We need to be ensuring everyone has at least double glazing. We should be removing gas lines from our homes. We should be installing better wall insulation and efficient ventilation. Basic things that our sector failed to deliver when these homes were built need to be added in over the next decade.

 Our future will demand homes that perform well. By delaying deep improvements now, we risk having to revisit these homes again in future for a second round of improvements.

Andrew Eagles is chief executive of the Green Building Council

Mika Hervel: A step in the right direction for public transport

It’s pretty awesome to see fares completely free for people under 13 and half price permanent for under 25-year-olds. We would love to see the fare subsidy applied to all full- and part-time tertiary students, but many of the students who are under 25 will benefit from half-price fares. That’s important, because it can be a significant administrative hurdle for some people to get community services cards. We’re happy with the target groups they’ve identified; these are the people who will benefit most from reduced fares. We hope this will be a fantastic way to address climate change to meet public transport mode shift targets and address cost of living pressures – this is absolutely a step in the right direction, but we need to go in leaps and bounds, investing more in public transport that can benefit everyone.

Mika Hervel is a spokesperson for Free Fares NZ

Robyn Walker: Tax rate rise should lead to repeal of trust disclosure rules

For the 400,000 trusts registered in New Zealand, the increase in the tax rate on trusts from 33% to 39% will undoubtedly be perceived as a significant increase, especially off the back of the introduction of considerable disclosure requirements.

Support for the change came from new information from Inland Revenue that showed “an almost 50% spike in income subject to the trustee rate, from $11.4 billion in the 2020 tax year to $17.1 billion in the 2021 tax year”.

Given this statistic pre-dates the trust disclosure data which has just been collected, it’s not clear what the real purpose of the disclosure rules was, as the decision to increase the trustee rate hasn’t been based on that data.

With the significant costs incurred in complying with the trust disclosure rules, we hope these compliance-cost-heavy rules are repealed as a consequence of the rate change.

The increase in income in 2021 doesn’t come as a surprise, as more of a natural and expected reaction to the increase in the personal tax rate, and something Inland Revenue has indicated they didn’t have a concern with.

The official budget press release suggests that this change won’t materially impact most trusts, however the fact that most trusts will not be paying the majority of the tax will be of little comfort to the significant number of trusts held by “regular New Zealanders” with a marginal tax rate of 33% or lower.

Robyn Walker is a tax partner at Deloitte

Brooke Stanley Pao: These fake wellbeing budgets are trash

Until we get EVERYTHING 4 EVERYONE – where the government meets the essential needs of People and Planet and commits to supporting tino rangatiratanga via matike mai (constitutional transformation), then these fake wellbeing budgets and ALL budgets will forever be trash.

Brooke Stanley Pao is the coordinator of Auckland Action Against Poverty (AAAP) and a spokesperson for Fairer Future

Eric Crampton: More fuel to the fire

There are a few budget and macroeconomic rules of thumb.

When the economy is running hot, a Reserve Bank that targets inflation responds by increasing interest rates. Government should not add fiscal fuel to those fires.

The budget projects substantial increases in gross and net debt as compared to the government’s December forecasts. By 2027, net debt is expected to be five percentage points higher, relative to GDP, than had been forecast – despite an improved overall economic outlook.

It makes sense to take on debt to deal with cyclone recovery. But workers and materials to do the work have to come from somewhere; debt doesn’t magic them into existence. And when the government is borrowing $160 million to hand to the video game industry, one wonders whether they are entirely serious.

The government now expects a small return to surplus in 2025/6: a little over half a billion dollars. But the government relies heavily on tobacco excise revenues: $1.7 billion per year, or about 1.1% of total tax revenue. Cigarettes with any substantial amount of nicotine in them are banned after April 1, 2025.

So if the new tobacco rules work as intended, there’s a cigarette burn mark in the accounts.

Dr Eric Crampton is chief economist with The New Zealand Initiative

Vanessa Cole: We need a more ambitious commitment to public housing

An acknowledgement of the important role of public housing in addressing the housing crisis can be seen through budget 2023’s commitment to an additional 3,000 new public homes by mid-next year, however, there needs to be a more ambitious commitment to a public housing programme if we are to clear the waitlist and match the need.

An ambitious public housing programme would see a commitment to the building of an abundance of public homes, the maintaining and repairing of existing stock so that it is healthy and accessible, and an extension of the availability of public housing to more people struggling with the costs of living.

The cost of this public housing programme would be significant, but the risks of not doing so are far greater. The private market has continued to fail to house people in safe and secure housing with people continuing to live in motels, sleep in cars and live in overcrowded conditions despite more housing being built.

Vanessa Cole is a housing researcher with Public Housing Futures

Ah-Leen Rayner: Nothing in it for women’s health

It’s hard to see how the government is serious about its women’s health strategy when this budget has nothing in it for women’s health – let alone breast cancer.

In this cost of living crisis, the continued refusal to extend the screening age shows the government expects our older women to continue paying for a life-saving service which should be freely available to them. Extending the breast screening programme to 74 is a solution for the immediate problem of women needlessly dying from breast cancer, yet the government still won’t see this as a priority.

With no new money for Pharmac, New Zealand remains at the bottom of the OECD on drug funding. This budget leaves hundreds of desperate women with incurable breast cancer unable to access medicines that could give them more years to live.

Ah-Leen Rayner is chief executive of Breast Cancer Foundation NZ

Graham Le Gros: Science funding ‘breaks down silos’

The $450m investment in New Zealand science and innovation recognises the value that research, science and innovation brings to our nation’s resilience and prosperity.

It is thoughtful, tightly linked and breaks down silos that have been operating between institutions for many decades.

From building resilience in the face of future pandemics to investing in biotech, innovation and talent to help move New Zealand to a high-wage economy, we can rejoice in some much needed infrastructure so that all New Zealand scientists have a place to really focus their energy and attention.

This is bigger than Wellington, it brings together expertise and capability from across the country to work together collaboratively with a real future focus.

Professor Graham Le Gros is director of the Malaghan Institute

Lara Greaves: Labour is targeting swing voters with young kids

First, remember that most voters will see bits and pieces of coverage but will not sit down and read the budget. This budget is obviously more important to public opinion in an election year, and with a new prime minister.

The media commentary that this is a “balanced”, “no-frills”, or “bread-and-butter” budget will help Labour to make the argument to voters that they are not “addicted to spending”.

National has argued that Labour tax and spend in various ways: blowout, sugar hit and addiction are some of the hit phrases. Full 2005 thank-you-very-much-for-your-high-taxation jingle vibes. This is a sensible strategy given that most voters believe National is best at handling the economy.

Labour has also attempted to target swing voters, particularly those more likely to have young children. Analyses of the 2020 election showed those who moved to Labour were more likely to be under 40,  and more were women. We can likely expect more targeting of young families in 2023.

Alongside infrastructure spending – which is hard to oppose at the current time – there were a few evidence-based equity measures, for example changes to prescription charges, public transport, and Māori-medium education. Although critics on the left will inevitably argue that these haven’t gone far enough.

Associate Professor Lara Greaves (Ngāpuhi, Pākehā, Tararā) is a political scientist at Victoria University of Wellington

Russel Norman: Making taxpayers pay for agribusiness climate pollution

With this budget we can see clearly the impact of the government’s decision to exclude agribusiness from the Emissions Trading Scheme, and to reject Climate Commission advice on strengthening the ETS.

It has resulted in less income from climate polluters to pay for climate initiatives, which has meant the government has had to cut future funding for climate initiatives and has had to borrow to pay for the rest.

The government’s decision to backtrack on making polluters pay means that taxpayers have to pay instead. It is an invidious outcome in the final budget of the second term of the government.

The income the government receives from auctioning off ETS carbon credits is recycled into the Climate Emergency Response Fund. But with agribusiness demand for carbon units not included in the scheme, and the settings weakened, the ETS price of carbon has dropped, meaning income to the CERF has dropped.

This means there is a lower price signal to drive emissions reductions, and that the most polluting sector (50% of emissions) doesn’t have to face a price on its emissions at all. But it also means that the government has to cut funding for climate initiatives or borrow to pay for them, or both.

What is also notable is that many of the climate initiatives, while good, do not cut emissions. The home insulation scheme and the free public transport fares for children will have a modest impact on cutting emissions. Most people actually face an increase in public transport fares under this budget as the half-price fare initiative comes to an end. And some of the other investments are about adaptation. Adaptation is necessary but it won’t stop the problem of climate change – we need to cut emissions.

On top of this, the Treasury has estimated that the New Zealand government now has a contingent liability of up to $23 billion to pay for offshore carbon offsets to meet its Paris Climate agreement commitments because there is little policy in place to cut domestic emissions.

So in summary, in this budget we see the government’s inaction on climate coming home to roost. It is costing taxpayers dearly in this budget but it is going to cost us all a hell of a lot more if we don’t actually, you know, cut emissions.

With respect to this government’s approach to economic management, my expectation was for a return to the second half of the 1980s minus the bad hairstyles. That is, just as with the “Rogernomics” of the fourth Labour government, a broadly monetarist approach in which the Reserve Bank drives up interest rates, to send economic growth in a negative direction, increase unemployment to place downward pressure on wages, and reduce inflation. Government supports this tight monetary policy by maintaining a tight rein on its spending.

How does this budget stack up with regard to this expectation? For 2024, Treasury optimistically forecasts a decline of inflation to 3.3%, aided by unemployment rising to 5.0% from 3.7% this year. Government spending is forecast to decline as a percentage of nominal GDP from 2021 to 2027. Don’t be fooled by the political rhetoric on both sides of the political spectrum.

In essence, this is an economically conservative budget that is far from being “transformative” in areas such as climate change, housing, education, health, welfare, and tax. Indeed, it will continue the government underfunding in these areas that became increasingly evident during the three terms of the Key-English government that preceded it. For example, with respect to funding of tertiary education providers it does little to address the deep cuts to funding for providers in 2022 and 2023 (allowing for inflation and the 1.7% and 2.75% caps on tuition fee rises). The promised nominal “increase of 5.3% for tertiary tuition and training subsidies” will provide only cold comfort for the five of eight New Zealand universities experiencing financial difficulties as a result of chronic government underfunding spanning the past decade. 

Brian Roper is an associate professor of politics at the University of Otago

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