Opening the books: Government targets mental health, creating opportunities for Māori and Pacific people in 2019 Budget priorities

The Government has opened its books, six months between Budgets.

The Government is "running surpluses, controlling expenses and keeping on top of debt", Finance Minister Grant Robertson said today, describing the economy as "healthy"  as the Half Year Economic and Fiscal Update, along with next year’s Budget priorities were released.

Summary:

- GDP growth forecast 3 per cent over 2018/19 and 2019/20
- Beyond 2019/20, GDP growth expected to ease
- Net migration expected to decrease
- Unemployment rate declined to 3.9 per cent in September 2018 quarter, and forecast to remain about four per cent
- Wages forecast to increase by over 3.3 per cent

Well being Outlook

A shift to a low-emission economy, moving to a digitalised nation, reducing child poverty, lifting incomes and opportunities for Maori and Pacific people, and focusing on improving the mental wellbeing of youth are set to be prioritised in the upcoming 2019 Budget.

"The development of Budget priorities represents a new way of working and of thinking about how we develop our priorities as a Government, and measure our success as a country," Mr Robertson said.

He said Ministers and agencies would be collectively responsible for delivering on the priorities and would develop Budget bids while working together across portfolios.

“Strong economic fundamentals and sustainable economic growth remain integral to New Zealand’s success, but they are a means to an end, not an end in themselves.”

Mr Robertson said too many New Zealand children did not have strong foundations to improve their wellbeing, highlighting violence as a lifelong impacting factor in detrimental outcomes.

“We have to tackle the scourge of family and sexual violence that exists.”

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He noted the importance of an inter-generational approach alongside an all-of-government approach.

The use of well-being indicators was “ground-breaking” and “big strides” would be made in Budget 2019, but better data was needed for accurate measuring, Mr Robertson said.

“We do have good data in some areas, educational attainment, home ownership, but better data measures were needed in areas such as natural capital, child wellbeing and cultural wellbeing.

He said the Budget priorities were the measures people think about in their daily lives and were issues New Zealanders care about.

Economic Outlook

The Treasury today released the Half Year Economic and Fiscal Update (HYEFU), showing a forecast of GDP growth of three per cent over the 2018/19 and 2019/20.

“The economy appears to be operating around full capacity following several years of strong growth”, Gabirel Makhlouf, Secretary to the Treasury wrote.

The HYEFU stated there was a noticeable decline in the unemployment rate down to 3.9 per cent and there was an expectation of wage growth increases.

Wage growth was supported by policies for low wage workers and ongoing tightening of the labour market. However, weak business confidence could contribute to slow growth.

A sharp, “but temporary” increase in inflation was caused by high global fuel prices and a decline in the New Zealand dollar.

It forecasts that net permanent and long-term immigration would decline from 63,000 in the year ended September, 2018, to 25,000 in 2021/22, “and is unchanged thereafter.”

Mr Robertson said historically the numbers have not dropped to the level of projected immigration decreases and when asked if it was too low, he said it was a projection.

“The forecast is for it to drop off, we’ll see if that happens. We just have to make sure we get the right mix in.”

Global economic outlook remained positive in the HYEFU, however, the outlook has become “more uncertain and global growth could slow more sharply than expected”.

Fiscal outlook

New Zealand is set to have a $1.7 billion surplus in 2018/19, expected to rise to $8.4b in 2022/23.

Core Crown expenses were forecast to decrease from 29.5 per cent of GDP in 2018/19 to 28.3 per cent in 2022/23.

Net debt looked to be 19 per cent of GDP in 2021/22.

The 2019 Budget Policy saw the Government allocated $2.4 billion to spend each year in the next four Budgets.

“This is the new spending that will be available at Budget 2019 for new initiatives and to meet growing demand for high-quality public services,” Mr Robertson said.

Mr Robertson described New Zealand’s economy as “healthy”, with the books managed to the Budget Responsibility Rules.

“We’re running surpluses, controlling expenses and keeping on top of debt.”

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