The Wellbeing Budget

Investing in New Zealand

Investing in New Zealand

Highlights

$1.7b to fix hospitals over the next two years

10-year $1.2b investment in schools, starting with $287m this year for new buildings

Bowel screening programme extended to five more DHBs

Investing in better and more healthcare with $2.9b for DHBs

The past decade has seen significant underinvestment in crucial national infrastructure. Infrastructure is the backbone of our economy. It connects our regions and cities and drives economic activity.

Our ability to deliver world-class education and healthcare relies on the state of our schools and hospitals. Long-term underinvestment means our infrastructure is aging. New Zealand has also been warned by the IMF and OECD about the negative impact that persistent underinvestment in infrastructure has on our economy and productivity.

Our ability to deliver world-class education and healthcare relies on the state of our schools and hospitals. This underinvestment means our infrastructure is ageing. The Treasury's recent Investment Statement 2018 showed nearly 40 per cent of the government's social assets – including schools and hospitals – have aged to a point where they are holding back teachers' ability to teach and nurses' ability to care for patients.19

New Zealand has also been warned by the International Monetary Fund (IMF) and OECD about the negative impact that persistent underinvestment in infrastructure has on our economy and productivity.

The Coalition Government has committed to closing the infrastructure deficit. Budget 2018 began this work by investing in school refurbishments, fixing mouldy and crumbling hospitals and investing in our regions. The Government's Policy Statement on Land Transport commits record investment into New Zealand's roads, rail and public transport infrastructure over the next 10 years.20

The Government is a central player in New Zealand's infrastructure and construction market, accounting for about 20 per cent of construction contracts in New Zealand. That means capital investment decisions made by the government can have a considerable impact on this sector and the economy as a whole. This includes providing certainty about future projects and funding, which will help the industry plan ahead.

In recent months, economists have been warning about the growth slowdown happening around the world. The New Zealand economy is resilient, but not immune from this. In the face of these global economic headwinds, the Coalition Government has made a decision to get ahead of these effects by announcing a multi-year infrastructure investment in Budget 2019 to stimulate the economy and support Kiwi businesses and workers.

We can do this while maintaining investment package in core public services like health and education because we are managing the books responsibly and because the economy continues to be supported by solid underlying fundamentals.

The wellbeing approach in action – Supporting the infrastructure pipeline through a multi-year approach to the capital allowance

Budget 2019 is the first time the Government has used a multi-year allowance for capital investments. The approach, which moves away from the long-standing single-year allowance, allows the Government to signal forward several years not only the pipeline of work but also the scale of investment.

In the past, Governments set a single-year allowance for that year's Budget, which skewed decisions by producing trade-offs between potential investments submitted in a single year rather than taking a longer-term view.

The new approach uses a rolling four-year funding envelope based on the fiscal headroom for the next four Budgets. It allows Governments to make better long-term investment decisions by committing earlier to investment-ready proposals that often require several years to procure, plan or design. It also provides greater clarity for the construction sector and improves transparency by tracking and reporting the cash impact of initiatives over time.

Footnotes

19. https://treasury.govt.nz/publications/investment-statement/2018-investment-statement

20. https://www.transport.govt.nz/assets/Uploads/Our-Work/Documents/c6b0fea45a/Government-Policy-Statement-on-land-transport-2018.pdf

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