Finance Minister Grant Robertson at his photo op for his Wellbeing Budget 2022. Video / Mark Mitchell
Opinion by Thomas Coughlan
Thomas Coughlan, Political Editor at the New Zealand Herald, loves applying a political lens to people's stories and explaining the way things like transport and finance touch our lives.
Finance Minister Grant Robertson told a business breakfast last year he would deliver a "trilogy" of budgets this term.
"It is simply not possible to fulfil every promise or commitment that we made or address all of our long-term challenges in a single Budget. But we do have anopportunity to make real progress across this term on the core priorities of the Government as we recover and rebuild," Robertson said.
The last Budget was meant to be focused on "foundational challenges, housing affordability, climate change and child wellbeing".
This Budget, according to Robertson, will be about health and climate change.
So, what can we expect to be announced at 2pm today:
Health
The focus in any Budget is who gets what new spending. That focus is more acute this year because the Budget allowance for new operating spending is $6 billion - the largest in history (Labour has previously kept allowances below $3.8b).
Most of the Government's climate change spending was announced on Monday as part of the Emissions Reduction Plan. This is funded through Emissions Trading Scheme receipts, and therefore outside the $6b allowance. The Government has suggested half of that $6b will go to health, which is currently in the midst of major reforms.
What could that $3b buy? Well, the Government will need to address existing DHB deficits and put Health NZ, which replaces DHBs, on a sustainable funding footing. Health spending is expected to be $22.8b next year - increasing it by $3b would lift total health spending by about 14 per cent.
The guess is that this alone could cost close to $1b. Putting that funding on a "sustainable" level could mean an even higher figure, considering the population is currently growing and ageing, meaning healthcare costs more every year just to stand still. The Government could find it tips more than $1b of the $6b budget into just keeping the health system's head above water.
Politically, one would expect the Budget to deliver some new health services, so people can see the benefits of reform. Primary care has been noticeably absent from health reform discussions. The Government could look to bring down the cost of GP visits.
The Government is also yet to deliver two dental promises (expanding emergency health grants and increasing the number of mobile dental clinics) from the 2020 election. Expect to see them funded this Budget.
Another big question is the resourcing and funding formula of the Māori Health Authority. The population-based funding formula that divvies up the health budget among DHBs has been repeatedly criticised as inadequately funding services for Māori. Budget 2022 will show the extent to which Māori health gets funded under the new regime.
Finance Minister Grant Robertson will deliver the Budget today. Photo / Mark Mitchell
Cost of living
The Government has been under pressure to address the current inflation spike. The Opposition has been goading the Government to cut taxes. This seems to be off the cards; Robertson said earlier this year tax cuts were unlikely.
The Government could look at cheaper, targeted interventions to lift incomes. The Government is currently consulting on the $3b Working for Families tax credit scheme, meaning any huge changes there are unlikely (look to that next Budget or before). However, on Wednesday while facing questions from Act leader David Seymour on what to do for middle income New Zealanders, Jacinda Ardern proactively mentioned the fact 60 per cent of families receive the family tax credit (part of Working for Families). Was this a nod to the fact the Government increased this credit on April 1 this year - or a wink to the fact a change was in store in Thursday's Budget?
Labour has made social development spends in each of its Budgets (most have been fairly substantial too) so expect to see something this year. It is unlikely to be as large as last Budget's benefit increases.
The Government may also be looking at ways to resolve the vexed issue of housing. With borders opening up, officials have warned some motels used for emergency housing will go back to housing tourists. A longer-term solution is needed here.
The public sector housing build is one of the few bright spots in the housing portfolio currently. Robertson has said the Government will not cut back on its building programme because of construction inflation concerns, but it is possible the Government will be cautious about expanding this programme further this Budget.
Fuel and transport
Another question begging for an answer on Budget day is whether the Government will extend the 25 cents a litre fuel excise cut, costing about $300m a quarter. It's due to expire in about a month and there's been little word on whether it will be extended or not - despite fuel prices continuing to spike.
Robertson and Transport Minister Michael Wood were asked on Monday about whether they would be extending the half-price public transport fares policy beyond an initial three months. Both gave fairly non-committal answers, suggesting greater clarity would come on Budget day.
Wages
The Government will also need to set aside money for the public sector wage round and pay equity agreements. It will not explicitly tag these as money for wages so that it doesn't undermine its negotiating position, but it will have to set aside money in contingency for wages.
Forecasts
Pay attention to tomorrow's Budget forecasts, which will set out the political battlefield of the next 12 months.
In the UK, the Labour opposition is attacking the Tory Government with allegations of "stagflation [stagnant GDP growth and inflation]". Gloomy growth forecasts combined with high inflation could be forecast tomorrow, setting the stage for a similar spat here.
Another thing to look for is Treasury's house price forecasts, which are the Government's official assessment: how much prices will fall this year.
Another two numbers to look at are wages and inflation. Inflation is outstripping wages this year, meaning most people are getting poorer. The silver lining is wages are meant to pick up next year. However, new forecasts released tomorrow are expected to show inflation sticking around for longer, meaning we could see evidence that people's real incomes are going backwards over an even longer period.
National
Because the Government hasn't set out what it will be spending its money on this Budget, National has been coy on what it will and will not support. This is particularly significant in 2022, as National has, at the same time, been suggesting the Government should spend less to control inflation.
Tomorrow, National should begin the process of explicitly stating which spending it does and does not back, and where the Government should look to reduce spending.
