Willis has staked out “growth” as the signature tune for her second Budget.
This focus is timely.
Notably, she wore her economic growth hat – not her finance hat – when she took herself down to Sir Peter Jackson’s Stone Street studios in Wellington yesterday to announce the expansion of the screen production grant, which allows for a 20% to 25% rebate on almost every dollar a production spends in New Zealand.
She backed economic growth: “The reality is we simply won’t get the offshore investment in our highly successful screen sector without continuing this scheme.”
The upshot is the New Zealand film industry will benefit to the tune of $577 million over the next four years, taking the expected rebate for film productions to $1.09 billion over the forecast period.
This was not a foregone conclusion. Some of Willis’ Cabinet colleagues are opposed to the expansion of subsidies, tax rebates and grants – particularly as New Zealand projects itself as a “free market” icon where, in agribusiness at least, it is not the beneficiary of subsidies or tariffs, although there are Government grants to foster innovation in the sector.
Other industries that have closed up shop in New Zealand in the absence of Government financial assistance and a hard-nosed approach may have a different take.
What is uncertain is how US President Donald Trump’s threatened 100% tariff on films made outside the United States will ultimately impact on the New Zealand industry.
Trump’s threat came as a shock to the global film industry
In a post on Truth Social, the President said he was authorising the US Department of Commerce and the US Trade Representative to start the process to impose the levy because America’s movie industry was “dying a very fast death”.
He has subsequently said he will consult with Hollywood executives on his proposal.
It is clearly absurd for Trump to suggest there has been a concerted international effort to destabilise the US economy through incentivising big-budget films to move offshore to take advantage of attractive tax breaks in countries like New Zealand. It is more complex than that.
The war is closer to home. Hollywood is being disrupted by giants like Amazon and Netflix, which are now funding original film productions and television series for their global streaming services.
Amazon MGM Studios productions are streamed on Prime Video and also include movies for theatre release and content for Freevee, Amazon’s free streaming service.
Netflix uses an AI recommendation engine to personalise content suggestions based on user viewing habits, ratings, searches and time spent on the platform.
California Governor Gavin Newsom is currently looking to more than double the state’s film and TV tax incentives to US$750 million ($1.272 billion) annually, which will benefit Hollywood. He claims Trump has no authority to use the International Economic Emergency Powers Act to impose the film tariff.
This will play out over time.
On May 22, analysts (including those from BusinessNZ and the CTU who were ridiculously temporarily barred from the Budget lock-up) will focus on Willis’ second Budget.
Most will focus on the numbers.
Last year, Willis was accused by her political opponents of creative accounting when she announced ACC’s revenue and expenses would be shifted out of Obegal – the Budget’s operating balance before gains and losses – to form ObegalX.
She claims containing a long-term funded scheme in the Government’s short-term decision making process was not helping the Government with its goal of getting the books back into shape.
Treasury would continue to report the original Obegal – with ACC still included – in future forecasts and Budgets. It did not support the new measure, over concerns about how it would be communicated.
It is important that Treasury continues to report the Government’s finances through a quasi private-sector lens focusing on “continuing earnings” and showing clarity.
It is also important that contingent liabilities – New Zealand Super, which is projected to rise over the next 10 years from the current $23.2b to $40.5b a year – are addressed.
New Zealand could also face a bill of $24b in the years leading up to 2030 in order to meet its international climate change targets, according to a 2023 Government report.
These numbers matter.
