Budget 2022 set to address long term challenges

The Government’s fiscal strategy continues to aim for a balanced approach to supporting current and future generations. The Government says it will manage debt prudently and reduce the deficit caused by COVID-19, while growing the economy sustainably and investing in public services like health and education.

Budget 2022 will be the Labour government’s fourth wellbeing budget. New Zealand’s relatively strong economic performance has allowed the Government to continue its focus on progress against the goals the Government set at the start of this parliamentary term:

• 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 New Zealand’s climate change response, housing affordability, and child poverty.

The Government has set aside $6 billion for spending on new projects in Budget 2022. This one off increase in 2022 reflects substantial investment to support the Government’s reform programmes. In his speech announcing the Budget Policy Statement, Minister of Finance, Grant Robertson, identified the Government’s intention to address major long-term issues and challenges, including housing access and affordability, three waters and immigration. The Budget Policy Statement 2022 does not mention housing, but it highlights the government’s intention to make significant investments into New Zealand’s health system and addressing climate change.

COVID-19 has put the spotlight on New Zealand’s health system. Lockdowns and a dose of good fortune prevented a health disaster, like those experienced elsewhere in the world, but the recent spread of the Delta variant and the emergence of the Omicron variant has highlighted the potential threat to the nation’s health system.

However, it is not just recent experiences that have necessitated changes to, and investment in, the health system. The Government believes that the District Health Board (DHB) based system has failed to adequately meet the health needs of New Zealanders, and it has developed a vision for a truly national public health service that delivers equitably across the country and places a greater focus on primary and community care. To deliver this vision, earlier this year the Government announced plans to replace DHBs with three new national health bodies. A national organisation, Health New Zealand, that will take over the planning and commissioning of services and the functions of the existing 20 DHBs to remove duplication and provide national planning, the Māori Health Authority, to drive hauora Māori and a dedicated Public Health Agency.

Budget 2021 provided the initial funding to begin these reforms and Budget 2022 will provide significant investment to establish these entities and begin the staged delivery of the reforms envisaged for the health system.

Looking ahead to Budget 2022, while this one off investment will support the transition of the health system, the Budget Policy Statement is silent on addressing the other long term challenges the health system has faced. To support the new health agencies, it will be necessary to increase investment in the operating and capital allowances for the health sector to address historic long term under investment.

A just transition, supporting the transition to a climate resilient, sustainable and low emissions economy, has been a wellbeing objective since this Government’s first budget. A just transition means actively supporting a move away from fossil fuels towards a low carbon economy in a way that supports businesses and communities to make changes to how they live and work.

The Government has signalled that, to respond to the challenges of climate change, New Zealand will need to make significant investments across multiple budgets. Following the Budget 2021 announcement that the proceeds of the Emissions Trading Scheme would be spent on emissions reduction programmes, Budget 2022 will look to deliver on this. The Government will establish a Climate Emergency Response Fund, and Budget 2022 will include $4.5 billion of investments to fund initiatives and programmes from the Government’s Emissions Reduction Plan.

Overall, the Budget Policy Statement signals the outlook as one where the Government will try to consolidate its position and reinforce delivery of the priorities it campaigned on. Looking at New Zealand’s three year electoral cycle, whereas Budget 2021 heralded significant investments in social programmes, Budget 2022 will look to demonstrate a strong stable government honouring its election promises. The real problem, however, is that the Government needs to go beyond formulating policy and making spending announcements, to actually delivering outcomes that improve the wellbeing of all New Zealanders.

For more information on the Budget Policy Statement’s intentions for climate change investment see this article by Urvashi. More detail on the Half Year Economic and Fiscal Update and the September quarter GDP result can be found in this article.