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Home / New Zealand

Budget 2009: Main points in brief

Herald online
28 May, 2009 02:05 AM6 mins to read

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Click here for the full Budget

* Tax cuts off: Personal tax cuts planned for April next year and April 2011 are off - "deferred to avoid further increasing debt". By putting off these tax cuts, the Government will save around $900 million a year from 2011. "Tax cuts will be assessed to consider whether they are affordable, as part of future budget processes."

Finance Minister Bill English says it's unlikely the National Government will be able to cut tax any further during its current term in power.

* Super Fund put on ice: The massive investment fund previously known as "the Cullen Fund" -designed to fund future demand for superannuation commitments - has been put on ice, with only a small $250 million contribution in this Budget.

Annual contributions of $2.3 billion to this fund will not now occur until the Government's books are next in surplus - not expected for the next 11 years.

It says that continuing to make automatic contributions to the super fund would have added $19.5 billion to debt over the next 11 years. When and if Government re-starts paying into the fund, it will have to pay $2.5bn a year, rather than the annual $2.2bn that has been paid in up till now.

* No cuts to benefits or other social welfare entitlements. This includes student support, Working for Families and National Superannuation.

* Health spending is increasing by $3 billion over four years and $1.68bn for education, justice by $950m. Most of the extra health spending - $2.1bn - goes straight to the District Health Boards. Extra money for education is spent largely on building and modernising schools. New police officers and probation workers account for much of the new justice spending.

* New funding of $243.7m is going to the scheme for better insulating and heating New Zealand homes: Government grants of up to $1,800 will be available for houses to install better heating, such as heat pumps and wood burners and insulation for ceilings and under floors. 180,000 homes will be eligible for help under this scheme.

These grants will be available to households, though people with a Community Services Card will be able to get an extra $1,200 contribution towards a clean heading device.

* Projections included with the Budget show the New Zealand economy will "trough" this year. In the current year to March 2010, the economy will contract by 0.9pc, followed by a 1.7pc fall. Then, in 2011, a 1.8 per cent growth is expected, followed by 2.9pc and 4pc in 2013.

Unemployment is forecast to peak at 8 per cent in the September quarter of 2010.

* A deficit of $7.7bn is expected this year, peaking at $9.3bn in 2010/2011. "These are significant deficits and could persist for up to ten years," said Finance Minister Bill English.

* Government's gross debt is expected to peak at 43 per cent of GDP in 2016/17 before falling to 37pc in 2022/23, against forecasts of 70pc and climbing, in 2022/23 without policy changes.

* The Budget provides for an extra 300 police officers in the Counties-Manukau district and another 300 across New Zealand by the end of 2011. While there is no announcement of a new prison, $385m is being spending on providing 1000 new prison beds through increased "double-bunking" at five existing prisons. $10 million will be spent on introducing new "taser" stun guns to police.

* Budget cuts across Government have freed up $2bn over the next four years, says English. This money will be "put back into Government priorities".

The biggest areas of "reprioritisation" are in education, social development, Overseas Development Assistance and the Ministry of Foreign Affairs and Trade. Government says these annual savings of $500m represent less than one per cent of total Govt spending of $65bn.

* The pace of increase in Government spending will slow - with the $1.75bn operating allowance for new spending expected for this year cut to $1.45bn. For future budgets, this will be capped at $1.1bn and will then grow at an annual rate of just 2 per cent.

WINNERS AND LOSERS
Areas targeted for cuts:
* Reducing the funding subsidy for hobby courses in adult community education - $54m
* the previously announced decision to not reduce early childhood teacher-child rations - $275m
* reducing tertiary tripartite funding - $55 million
* cutting support function spending in the Education Ministry - $55m
* ending enterprising communities subsidies - $32.3m
* reconfiguring the Market Development Assistance Fund - $101m
* cutting the New Zealand Innovation Centre - $15m
* cutting conservation spending over four years - $54m
* reducing overseas development assistance over four years - $166m
* cutting at the Foreign Affairs Ministry over four years - $105m
* productivity gains at the Social Development Ministry - $354m

Areas gaining funding:
* Funding new schools and maintaining existing ones including operational funding
* more money for special education services
* $81.6m over the next four years for the Government's Fresh Start initiatives for young offenders.

Other allocations in today's Budget:
Science and Technology
* an extra $40 million over four years to the Crown Research Institute (CRI) capability fund, to help CRIs maintain and develop research
* $36m over four years to the Marsden Fund, to help investigator-initiated research
* $32m over four years for health research
* $4m in new funding over four years for the Prime Minister's Science prizes
* $16m capital injection in 2010/11 for the Kiwi Advanced Research and Education Network, to help telecommunications research. Foreign Affairs
* a review of the five-year $621m funding from last year's budget, cutting $9.5m in the 2008/09 year, and $298.6m over the next four years Arts and Culture
* an extra $7.1m over the next four years to Culture New Zealand
* an extra $3.4m over the next four years to the Royal New Zealand Ballet. Primary sector
* $190m over four years for the Primary Growth Partnership, which at its peak will invest $70m a year in primary sector (pastoral, horticulture, seafood, forestry and food processing) innovation
* $1.9m over four years to help develop sustainable aquaculture.

ACC
* $500,000 in new funding in 2009/10 for a "stock take" of ACC accounts. Commerce
* $11.7m to "further strengthen" financial regulations over the next four years
* boost to the Securities Commission budget by $2m in 2009/10 $4m in 2010/11 and $2.9m in each of 2011/12 and 2012/13. Child abuse
* $2.4m extra over four years, to help the campaign against the child pornography trade - a 25 per cent per annum boost for the Censorship Compliance Unit.

- Chris Daniels and NZPA

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Opinion

What do you think of the 2009 Budget? Did you want tax cuts?

28 May 02:21 AM
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