Budget 2021

Budget Policy Statement

Foreword

The Speech from the Throne highlighted the importance of continuing our strong response:

“We have more freedoms, are a more open economy and have saved more lives than nearly every other country we normally compare ourselves to. We can rightfully be proud of our success to date as a nation, as a team. But we cannot afford to be complacent, nor stand still. We must keep going.”

New Zealand’s elimination strategy for COVID-19 has been successful in saving lives and livelihoods. The economy has been resilient and has rebounded far more quickly than expected. As the Government prepares Budget 2021, the success of the response to date is highlighted by a range of economic and social indicators. Unemployment remains lower than expected at 4.9%, the economy in the September 2020 quarter was larger than before COVID-19, New Zealanders’ life satisfaction remained high during the Alert Level 4 and 3 restrictions, and the economy quickly opened up again as New Zealand eliminated COVID-19.

There is still considerable uncertainty about how COVID-19 will affect the global and New Zealand economies in 2021. Optimism driven by the rapid development and initial availability of vaccines is mitigated by new, highly transmissible variants of the virus, and the consequent lockdowns in many countries. In addition, geopolitical uncertainty continues to be a factor affecting confidence across the world.

The continuing uncertainty demonstrates the importance of New Zealand continuing with its evidence-based, strong public health response, supported by significant investment in the recovery and rebuild from COVID-19.

The Labour Government’s overarching policy goals for the next three years are:

  • Continuing to keep New Zealand safe from COVID-19
  • Accelerating the recovery and rebuild from the impacts of COVID-19
  • Laying the foundations for the future, including addressing key issues such as our climate change response, housing affordability and child poverty.

Budget 2021 is an important vehicle for delivering on these policy goals as the first Budget since the 2020 General Election. At the election, New Zealanders voted for certainty and stability by returning a majority Labour Government. They placed huge trust and responsibility in the new Government by giving it a mandate to implement the policies Labour set out during the campaign to accelerate the health and economic response, and the recovery and rebuild from COVID-19.

This Budget comes as the Government is already making significant ongoing investments through the COVID-19 Response and Recovery Fund (CRRF) set up at Budget 2020. These investments include substantial economic stimulus to cushion the blow of COVID-19 and position businesses and the economy to recover and rebuild. They also include important support for the public sector to deliver essential services like healthcare and education to support all New Zealanders through the pandemic.

The Budget 2021 priorities recognise these factors. The priorities are:

  • continuing the COVID-19 response
  • delivering priority and time-sensitive manifesto commitments
  • supporting core public services through managing critical cost pressures, and
  • continuing to deliver on existing investments.

Investment decisions under these priorities will be guided by the Government’s wellbeing objectives, as required by the Public Finance Act 1989.

Our wellbeing objectives at Budget 2021 are:

  • Just Transition – Supporting the transition to a climate-resilient, sustainable and low-emissions economy while building back from COVID-19
  • Future of Work – Enabling all New Zealanders and New Zealand businesses to benefit from new technologies and lift productivity and wages through innovation, and support into employment those most affected by COVID-19, including women and young people
  • Māori and Pacific – Lifting Māori and Pacific incomes, skills and opportunities, and combatting the impacts of COVID-19
  • Child Wellbeing – Reducing child poverty and improving child wellbeing
  • Physical and Mental Wellbeing – Supporting improved health outcomes for all New Zealanders and keeping COVID-19 out of our communities.

The wellbeing objectives recognise the importance of addressing key issues such as climate change, housing and child poverty. Housing outcomes, for example, can be influenced across a range of the objectives: the sustainability of our housing stock will contribute to our Just Transition and climate change goals; Māori and Pacific communities currently have lower rates of home ownership and will benefit from more affordable housing; and improving children’s wellbeing will be greatly influenced by improving access to warm, safe, dry and affordable housing, as will physical and mental wellbeing.

This Budget Policy Statement (BPS) includes a Wellbeing Outlook section, providing an overview of wellbeing across the four capitals of the Treasury’s Living Standards Framework – human, social, natural and physical and financial. The Wellbeing Outlook highlights how New Zealanders and the economy have come through the COVID-19 pandemic generally in good shape, particularly with regard to life satisfaction measures. However, there are areas that continue to require sustained investment to address long-term issues such as child poverty and mental wellbeing.

This section is followed by the wellbeing objectives, which are a new requirement following an amendment to the Public Finance Act passed last year.

The Budget Allowances section outlines the funding available for new operating and capital investments at Budget 2021, as set out in the December 2020 Half Year Economic and Fiscal Update (Half Year Update). The Government will carefully prioritise spending to those people and areas that need it the most. As we recover and rebuild, the Government is committed to maintaining the balance between supporting New Zealanders and the economy through COVID‑19, and maintaining New Zealand’s strong fiscal position, particularly when compared to other developed economies which are experiencing higher debt than New Zealand. These allowances are subject to change, particularly as economic conditions evolve domestically and around the world. The Economic and Fiscal Forecasts sections of this BPS outline economic developments since the Treasury’s Half Year Update forecasts were published, and the Government’s fiscal position. The Fiscal Strategy section sets out the Labour Government’s fiscal strategy in the form of short-term intentions and long-term objectives, as required by the Public Finance Act 1989.

New Zealand’s strong response to COVID-19 to date has meant that we have come through the first stages of this pandemic in good shape compared to the rest of the world. As set out in the Speech from the Throne, the Labour Government’s priorities focus on making sure we protect the gains we’ve achieved through our strong response, while making the investments required to accelerate the recovery and rebuild from COVID-19.

HON GRANT ROBERTSON
Minister of Finance
9 February 2021

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