In a pre-budget speech yesterday Minister of Finance Steven Joyce indicated a major increase in infrastructure spending.
Today I can announce that the Government has decided to invest $11 billion in new capital infrastructure over the next four years including $4 Billion in this year’s budget alone.
To put that into context, the net new capital allocated in the last four Budgets was $4.8 billion, of which $4.1 billion was funded through the proceeds of the mixed ownership model programme.
In Budget 2016 we were forecasting just $3.6 billion in new capital spend between Budget 17 and Budget 20 compared to $11 billion now.
The $11 billion is additional spend on top of investments already planned by the Government.
If you add the Government’s budgeted new capital investment together with the investment made through baselines and through the National Land Transport Fund – the total is around $23 billion over the next four years, or an average of nearly $6 billion per year.
Details of how the first tranche of that money will be invested will be laid out in the Budget on May 25th.
A big spend announced in election year.
He outlined his budget priorities.
I have four key areas I am thinking about in getting ready for this year’s Budget.
First, delivering better public services for a growing country – providing all New Zealanders with the opportunity to lead successful independent lives.
Second, building the infrastructure we need in growing a modern economy.
Third, we need to keep reducing debt as a percentage of GDP.
And finally, we remain committed to reducing the tax burden and in particular the impact of marginal tax rates on lower and middle income earners, when we have the room to do so. We need to always remember that every dollar the Government spends comes from hard working Kiwi families.
That’s a lot of things to work on. And at the same time we need to make sure that we continue to build a strong economy. It’s only by having a strong economy that we get to consider these four priorities.
“This Government’s recipe for economic growth is pretty clear”.
First, is trade. Much has been made of the massive growth of middle-income consumers across Asia. But it has been New Zealand companies, supported by a trade-friendly government that have been converting those opportunities to actual trade, making New Zealand steadily wealthier. And our exports have continued to grow despite the dairy downturn.
Second, our working-age population is growing, and becoming more highly skilled. That means our companies can hire the people they need to keep growing. Our education system is delivering more graduates with the right skills, our immigration system is providing the necessary skilled migrants, and our flexible labour market is encouraging businesses to add more jobs.
Third, New Zealand firms are becoming more innovative. We are building a strong innovation ecosystem of high-tech companies across the health sector, agri-tech, fintech, software as a service, edtech, govtech, and so on. Our programmes encouraging business research and development are achieving real success – Business R&D was $356 million higher last year than it was in 2014.
Fourth, we are actively encouraging more private sector investment in new businesses and in growing existing businesses especially in regional New Zealand. That includes attracting new international investors whose capital can provide more jobs for Kiwis. At the same time we are working hard to balance the economic needs of our regional communities with our all-important goal of improving environmental outcomes.
Finally, we are building the public infrastructure needed to support growth, including roads, rail, broadband, schools, houses and hospitals. In some parts of New Zealand, including Auckland – you can’t move for road cones at times – which is frustrating – but a strong sign of how we are building for further growth.
The Government’s plan is called the Business Growth Agenda. Blended with sensible, conservative fiscal policy, and successful orthodox monetary policy and you have a recipe for a steadily growing economy that provides more job opportunities and growing incomes.
One of the biggest risks in the New Zealand economy at the moment is the more insular economic policies being pushed overseas, and by our opponents domestically.
A budget speech with an eye to the election.
The Government’s budget is about balancing competing concerns, and that is always the challenge.
Whether in deficit or in surplus there are many alternative uses for the available resources.
The Government has set four priorities for Budget 2017 – boosting public services, building new infrastructure for a growing country, reducing debt, and seeking to lift family incomes.
However the biggest priority is the one that pays for the other four. It is only through having a strong economy that we can tackle the others, and provide for the income and security of New Zealanders.
Building and sustaining a strong economy therefore remains the Government’s most important goal.
It is only through having a strong and prosperous economy, that we can deliver a prosperous and successful New Zealand.
With Bill English chugging along without being noticeably impressive, and National at risk of settling down in the polls that show a coalition with NZ First would be needed to stay in power – see Roy Morgan – April poll – a lot will be riding on what Joyce delivers in the budget, and how Labour in particular responds.