Grant Robertson said his budget rights the wrongs of 30 years ago, with boosts to benefits and the health sector. But what do the experts think?
Janet McAllister: Benefit rises welcome, but nowhere near enough
Treasury tells us that today’s income support increases will mean child poverty will reduce by – drumroll please – 1.4 percentage points. Pre-Covid, the poverty rate for children was 18.4% on the measure used; by 2023, the rate is forecast to fall to 17.0%. That leaves around 190,000 children still in poverty.
That is why our message is subtle: the rises are welcome but not enough. Nowhere near enough. New Zealand doesn’t allow whole communities enough resources to buy food, as the government’s child poverty indicators showed last week. Due to ongoing colonisation and discrimination, this particularly affects Māori and Pacific communities. MSD is still booting people out of emergency housing.
On the bright side, the announcement today does seem to be an acknowledgement that families headed by couples are in particularly dire circumstances – their modest increase was slightly higher than that of sole parents. Hopefully we hear of fewer couples breaking up because they can’t afford to stay together.
Disability allowances have not changed at all even though children in households with disabled members are nearly three times as likely to live in hardship than other children.
If this had been this government’s first budget, we would have been pleased. If it had been part of their response to the Welfare Expert Advisory Group in 2019 – with a future plan in place – we may have been pleased. As it is, we’re asking, once again, for liveable incomes.
Janet McAllister is the communications and research officer for Child Poverty Action Group
Ben Thomas: A rosy picture of calm
How do we even evaluate budgets any more? In 2019 we gasped in awe at the creatively-arrived-at $1.9 billion for mental health that crowned the Wellbeing Budget. In March, the government announced its Housing Acceleration fund of $3.8 billion and it was reported third after other elements of the package, if it was reported at all. Fair enough then for the government to put it in a large font in its budget summary today, in case you missed it first time around.
As Rawiri Waititi pointed out in a fiery contribution to the budget debate, more was spent on one month of wage subsidy last year than on two decades of Treaty settlements, and these newly huge figures can feel detached from reality. Is $300 million for Māori housing a lot? Not if it makes one-sixth the impact of 2019’s mental health package so far it isn’t.
There is some interesting forecasting underpinning the government’s plans: house prices stopping in their tracks this year, GDP growth shooting up, and many people leaving the newly increased benefit for employment. There’s also an unspoken assumption Covid has run its course. It’s a rosy picture of calm. It’s like the happy ending of Inception. For the moment, the top is spinning.
Ben Thomas is a podcaster and public relations consultant
Sam Stubbs: A traditional Labour budget, designed to quell discontent
Anyone who might question the Labour Party credentials will have little to talk about now. This was a traditional Labour budget, designed to quell any discontent in the base.
And given the K-shaped recovery post Covid, it is entirely appropriate that what was left in the kitty goes to beneficiaries. Nothing helps alleviate poverty like cold hard cash.
Business should be happy too, with more for infrastructure and trades training, and debt being properly managed. Grant Robertson is no drunken sailor with the nation’s chequebook.
My only disappointment is with continued spending on rail. The government’s environmental credentials would be better served by spending much of that money on electric vehicles, especially buses and cycleways. But just as Harry Potter didn’t get the bus to Hogwarts, so the Labour government cannot wean itself off the romance of rail.
This budget cements Grant Robertson’s place in a trifecta of great finance ministers, along with Michael Cullen and Bill English. Well done.
Sam Stubbs is the founder and managing director of KiwiSaver and index fund provider Simplicity
Susan St John: A start in the journey to unwinding 30 years of damage
It was very good to see a government acknowledge at last, after 30 years, that the damage of the 1991 budget under Ruth Richardson was huge and the pain that was inflicted on families has never been reversed despite all the piecemeal changes.
The 2021 budget claims credit for addressing the harm of 1991 by increasing core benefits and says it is doing what WEAG recommended in 2019. But changes announced today are just a first incremental step, not a transformative change.
In the coming year, from 1 July, families will benefit by just $20 per adult per week. In 2022 this rises to $35. While couples gain from a per-adult approach so that a two-parent family would have an eventual increase of $110 per week in core benefits, the changes WEAG wanted were far in excess of this.
CPAG modelling shows that $100-230 per week is needed to lift families on benefits paying a low market rent to a modest poverty line.
It appears the government has claimed credit for raising the incomes of families since 2017 (ie prior to the families package) by the increases WEAG wanted. But WEAG’s starting point was 2018, after the Families Package had been implemented, and their figures included a large increase to Working for Families.
Families on benefits continue to miss out on the full Working for Families package. To correct this would have delivered an extra $72.50 a week into the budgets of the worst-off families and together with today’s benefit increases made a much more meaningful difference.
Nevertheless, families must be encouraged that the government has started the journey to finally unwind the damage begun 30 years ago.
Susan St John is an honorary associate professor in the University of Auckland’s economics department and a founding member of the Child Poverty Action Group
Liam Hehir: A pretty boring budget
Obviously nobody was expecting any kind of reduction in income tax today. Nevertheless, it’s worth noting that it is now more than 10 years since the people of New Zealand were afforded any kind of relief here. That’s a decade of real dollar income tax increases as wage inflation pushes ever more middle earners into higher rates.
How is that all that additional money to be spent? Well, the government did much to salvage the economy through the wage subsidy last year, but at a hefty price. Grant Robertson has tried to make a big show of restraint in the face of debt and in practice this means a pretty boring budget. Which is what we got.
There are some modest increases in payments to benefit recipients. Funds already announced have been more particularly allocated. There might be a social insurance plan, which is a pretty good idea, though it’s all a bit vague.
So no rabbits have been pulled from any hats. Of course, with Labour already riding high in the polls, there was no reason to expect otherwise. But interesting that for some time now there’s been a stronger bipartisan consensus on bolstering the welfare state than there has been on moderating taxation – continued complaints about “neoliberalism” notwithstanding.
Liam Hehir is a political commentator
Joshua Hitchcock: Small carve-outs for Māori are never going to achieve systemic transformation
After sustained criticism following this government’s underwhelming first budget in 2018 and the lack of direct investment into “by Māori, for Māori” initiatives, a trend is becoming clear.
Each year, Labour’s Māori caucus is given around $1 billion in new spending to allocate how they can. In 2020, the focus was on education and employment. This year, Māori housing and health get the bulk of the new spend.
It is just so underwhelming. We will never reduce the inequality between non-Māori and Māori through small carve-outs each year. It might feel good. It might even feel like progress. But it is going to require true, systemic transformation to achieve equity.
The boost to Māori housing, the long-awaited promise of a Māori health authority, and the increase in benefit payments to those in our society most at need are wins to be acknowledged. Yet while the bulk of government spending directed at Māori is “by Pākehā, for Māori”, any hope of equity remains a long way off in our collective futures.
Joshua Hitchcock (Te Ātiawa) is a business adviser, accountant and writer on Māori law, policy and economic development
Gabrielle Baker: A good-looking budget for Māori
Back when it was in government, the National Party issued a media statement about one of its budgets, claiming “Māori are the big winners of budget 2014”. The assertion was laughable, with the flagship Māori policy at the time, Whānau Ora, securing an extra $15 million – small change in the context of the overall budget. It’s not like this was the first time benefits to Māori were oversold, but the icing on the cake was that headline.
Anyway, today’s media statement from Kelvin Davis (“Government invests in the wellbeing of whānau Māori”) is almost understating what budget 2021 provides for Māori: $380 million in housing, $242.8 in health, and more besides. In other words, it’s a good-looking budget.
Focusing on the hauora allocations, the prominence given to Māori health and the Māori health authority is super. I’m especially pleased to see investment in iwi relationship boards ($17.8million), after 20 years of under investment, given so much of the recently announced health and disability sector reforms hinge on the 20 relationship boards across the country partnering with the new health sector funders.
I’m more circumspect, though, about the “$126.8 million for Hauora Māori programmes run by the Māori Health Authority”. Realistically the authority will need a budget, so it is probably sensible to signal that now while more work is being done.
But since the real promise of the Māori Health Authority lies in a fundamentally different approach to health sector decision-making, I want to be certain this isn’t the end of the conversation about what the authority will actually do and what adequate funding looks like.
Gabrielle Baker (Ngāpuhi, Ngāti Kuri) is a consultant who has worked in Māori health policy for the past decade
Adam Currie: A missed opportunity to tackle the climate crisis
I’m gutted. This budget – the first where Labour has an outright majority – represents a missed opportunity to make an unprecedented investment in creating thousands of good, clean, living-wage jobs building the visionary, low-carbon infrastructure we so urgently need.
On climate change, winning slowly is losing – and this budget provides only a nudge in the right direction, paling in comparison to the action required. It funds the insulation of 47,700 homes, but leaves half a million uninsulated. It puts $67 million towards decarbonising the public sector – an amount that will fund the transition of only around 35 schools away from coal boilers, when over a thousand are still burning fossil fuels and need to stop doing so by 2025 if the government is to meet its own deadline.
It doesn’t make the investment in active transport that we need and almost entirely forgets agriculture, a sector which makes up half of our emissions.
As a young person whose home was invaded by the sea, it’s incredibly frustrating to watch politicians toy with our collective futures, choose not to invest in the just transition to a better world that we know is 100% possible, and ignore the climate solutions that indigenous people have known for millennia.
The government is currently developing its emissions reduction plan in response to the Climate Change Commission – the whole country is watching and we won’t accept anything less than the transformational change we need.
Adam Currie is a rangatahi climate justice activist with Generation Zero
Claire Achmad: A step in the right direction, but bigger increases needed
A brave and bold budget was what we’d called for; budget 21 takes the first steps, but more is needed. With more than a quarter of New Zealand children on some poverty measures, the benefit increases head in the right direction.
With the housing crisis spiralling and living costs continuing to rise, though, larger increases to income support will be needed, urgently, so our lowest-income families and whānau can experience dignity and inclusion.
It would have been good to see government front-load increases at higher levels than $20 per week, given the significant stresses families and whānau are under. Childhood is a time in life that passes quickly but which has lifetime impact.
The lack of investment in fair funding and pay for NGO social services means the estimated $630 million funding gap remains largely unaddressed. The demand and workforce pressures being experienced by NGO social services are unsustainable.
Covid-19 showed more clearly than ever the essential role our NGO social services play in supporting children and whānau most in need, and in preventing crisis and hardship. Fair funding and fair pay for NGO social services must follow fast, as it’s directly linked to the child wellbeing focus the government has pledged.
Dr Claire Achmad is the chief executive of Social Service Providers Aotearoa
Eric Crampton: Ring-fencing ETS revenue a just climate transition
This year’s budget brought one potentially welcome surprise. The government will ring-fence money it earns selling carbon credits through the emissions trading scheme. It could make it a lot easier for New Zealand to achieve net zero, if it’s handled properly.
New Zealand’s ETS has a binding cap. Every year, the government auctions a fixed number of carbon credits into the system. Emitting more requires someone to generate new ETS credits by sequestering carbon – for example, by planting trees. Government will progressively reduce auctioned units to achieve net zero.
The government has worried rising carbon prices making life more expensive for poorer households could be the political breaking of the ETS.
But the problem builds its own solution: take the money raised at auction and return it to Kiwi households as a carbon dividend. It would be a progressive transfer as rich people spend more on everything, and carbon is in everything.
The stumbling block has been ring-fencing the revenues. Now that the fence is built, the trick will be to use it wisely as a carbon dividend to help Kiwis fund their own transition to lower carbon.
Otherwise it risks being just another slush fund for ministers’ pet projects.
Dr Eric Crampton is chief economist with The New Zealand Initiative
Mary Jo Vergara: Climate change mitigation a welcome focus
The 2021 budget put the minister of finance in a dream position. The government’s books are in far better shape than thought possible a year ago amid the uncertainty of the pandemic. A surprisingly resilient economy has also afforded the government the opportunity to lift spending over and above what had been previously signalled.
A key highlight in the government’s new shopping list is the focus on climate change mitigation. The profound impact of climate change on the economy suggests a need to act with urgency and scale to ensure we meet our carbon emission goals. We need to rethink the way in which we use natural resources and energy.
Greater investment in technology and innovation within the climate change space in budget 2021 was especially encouraging, and a continued step in the right direction. The $300m injection into NZ Green Investment Finance supports the transition to a low-emission economy. Because cleaner, greener and more efficient technology is needed to make the transition.
Mary Jo Vergara is an economist with Kiwibank’s Kiwi Economics team
Cath Conn: Recovery budget makes sense this year, but transformative change needed soon
The recovery budget 2021 appears to provide a solid contribution in the short term, especially given the effects of Covid are ongoing and the border is not expected to open until early 2022. Yet, it is the long-term challenges of a rapidly transforming digital world, with the clock ticking on climate change, that will be really meaningful for New Zealanders, especially next generations.
In health, there is still no roadmap to address the key challenges of health inequity and high prevalence of non-communicable diseases. The Health and Disability System Review of 2020 set out a commendable plan for restructuring the health system, providing a structural basis to move from a sickness to a precision prevention model. However, the proposed shift to prevention, leveraging technology, would require very different decisions about resource allocation; including a multi-sectoral approach to health and wellbeing.
Education is a key factor in future health and wealth, as it results in higher incomes, reduced inequity, and greater self-determination and innovation. Yet, the 21st century education required for young New Zealanders to be equipped for the future is some way off. This is a particular issue for Māori and Pacific youth who provide a small proportion of a growing technology-oriented employment across the sectors in Aotearoa.
Dr Cath Conn is a social scientist and the co-director of the AUT Child and Youth Health Research Centre
Andrew Lessells: A tale of two cities for students
Budget 2021 is a tale of two cities for students. The $25 increase to allowances from 2022 and restoration of the training incentive allowance will make tertiary education more accessible to student groups that have often been failed by the system. But postgrads have yet again been left out in the cold. Chris Hipkins promised a restoration of the postgraduate allowance in 2017; four years later students are living on food parcels and borrowing harrowing amounts to simply survive.
This tale continues to funding for tertiary institutions. The 13% increase in vocational education funding is a massive step forward and goes a long way to addressing the savage cuts that the sector has experienced in the last decade. The funding is too late to save many educators, researchers and support staff but will future proof the sector and guarantee the success of RoVE.
Universities experiencing a surge in students don’t have the resourcing to cope. Staff from Auckland to Otago are overworked, underpaid, and burning out in droves. With more compliance and expectations placed on staff, there needs to be more funding to enable this. The government needs to recognise this, or a generation of students will be failed.
Andrew Lessells is the national president of the New Zealand Union of Students’ Associations
Nicola Gaston: A disappointing lack of investment in science and research
The 2021 budget is not the investment we needed to see, future proofing our economy for a world in which carbon costs. There is, admittedly, a $300m investment in low-carbon technology through the Green Investment Fund – and this will pay dividends – but it is still minor, in the scheme of things.
Structural changes – such as the inclusion of biofuels and hydrogen in the Low Emissions Transport Fund – are definitely as important as new money, in addressing climate change. But none of the investments signalled in this budget are transformational.
I think we do need to remind this government that investment in science, investment in research, investment in education are critical to building capacity and resilience. That there are no major new initiatives that would reshape the scientific and investment landscape for the growth of deep tech is disappointing, but more or less what I expected.
What I am saddened by is much less dramatic: the Endeavour Fund, cut on the order of 10%; the Health Research Fund, similarly cut; the Marsden Fund, cut in real dollars after inflation. These are the bread and butter of our research sector, and anything other than an increase in line with inflation is a slap in the face.
Nicola Gaston is an assistant professor at the University of Auckland’s physics department
Alison Pavlovich: No significant tax changes in budget, but we need them
As expected, there are no significant tax changes in the 2021 budget. However, given the pressing fiscal demands upon the government, it is reasonable to ask whether it’s time for (some) New Zealanders to pay more tax.
Research shows progressive tax systems are linked with higher levels of subjective wellbeing. The budget states progressivity is an objective for the tax system and has put new funding into researching the tax paid by high-net-worth individuals. But how can we make our tax system more progressive in New Zealand?
The government has just introduced a new marginal tax rate applying to income earned over $180,000 – that will help. However, perhaps we should be pulling some old tricks out of the top drawer, such as inheritance taxes. Taxes on these windfalls create a new stream of government revenue, reduce inequality, and can even result in improved economic growth. Only a few weeks ago, the OECD recommended the use of inheritance taxes to its member nations to deal with the post-Covid fiscal crises they will face.
While the word “transformational” has disappeared from the Labour party narrative, there is still time and opportunity for more transformation of the tax system for a government willing to be brave.
Alison Pavlovich is a lecturer in taxation at Massey University’s school of accounting
Subscribe to The Bulletin to get all the day’s key news stories in five minutes – delivered every weekday at 7.30am.