New Zealand: Budget 2013 – functional, not flashy

Brief Counsel
Last Updated: 18 May 2013
Article by Mike Woodbury and David Patterson

Most Read Contributor in New Zealand, September 2016

Finance Minister Bill English's approach to Budget 2013 was "to spend well, not to spend up". Flashy, no. Functional, yes.

If last year's budget had an edgy feel as the Government tried (successfully) to keep the ratings agencies at bay, this year's budget feels much more comfortable. The fiscal and economic outlook is steadier and the Government has managed to squeeze out of the Treasury a skinny forecast surplus for 2014/2015.

Key announcements

  • Meridian Energy confirmed to be the next partial share offer (later this year).
  • Large, although yet to be decided, cuts to ACC levies.
  • Mighty River Power proceeds to go largely to the Christchurch rebuild (the redevelopment of Christchurch and Burwood hospitals, the justice and emergency services precinct and Canterbury tertiary institutes).
  • Extension of the legislative framework supporting the Auckland Housing Accord to other high housing cost areas.
  • An announcement that the Government signed a new Memorandum of Understanding with the Reserve Bank this week which will require banks if necessary to hold extra capital on their balance sheets and to restrict high loan-to-value lending in the housing sector.
  • Contributions to the Cullen Fund not to be resumed until 2020/21.

Economic outlook

The forecast GDP growth rate for the year ended March 2014 is 2.4% followed by 3% in 2015, 2.6% in 2016 and 2.2% in 2017. But this will be driven mostly by domestic demand, reflecting in large part a continuation of current exchange and interest rate settings.

The currency is assumed to remain high until 2015 "before depreciating somewhat". The 90 day rate is expected to remain low by historic standards, although to begin rising in mid-2014 to reach 4.7% by 2017 as inflationary pressures rise in the economy.

It is accepted that the high dollar "will hold back activity in exporting and import competing firms, especially those not experiencing what are expected to be relatively strong export commodity prices".

As a result, the current account balance is forecast to plunge further into deficit – from 4.8% of GDP in 2013 and 2014 to 5.2% in 2015, 5.8% in 2016 and 6.5% in 2017. This represents a serious point of economic exposure for New Zealand, even accepting that the figures have been bulked up by the legacy of the Christchurch earthquakes.

Fiscal outlook

The promised return to surplus by 2014/15, although a source of significant scepticism in the commentaries on last year's budget, is forecast to be delivered – even if only a skimpy $75 million and even if only achieved through a fiscal sleight of hand. The Government got there by slicing $200 million off the new spending allowances from Budget 2014 onwards.

Such reductions are politically much easier to achieve on paper and ahead of the event than they are in reality. However, to the Government's credit, this subterfuge was only necessary to accommodate the lower ACC charges.

The ACC changes

Continuing improvements in ACC's performance (notably its investment returns which were $1.1 billion ahead of budget at February 2013) mean there is scope for "significant and sustainable" cuts in ACC levies.

The budget allows for $300 million in levy reductions in 2014/15 and a likely reduction of $1 billion by 2015/16. The actual size of the cuts will be determined later this year. It is projected that by 2015/16, ACC levies will have decreased by 40% from their 2011/12 levels.

The "growth package"

Consistent with the budget's general modesty, this is not large ($100 million a year) and is very tightly focussed.

Components include:

  • a boost in funding for science, innovation and research of $200 million over four years
  • the already announced $158 million for tourism
  • $40 million over four years to promote export education
  • proposals to let start-up businesses claim a refund in relation to tax losses on R&D and to allow tax deductibility for certain types of "black hole" expenditure (such as advisory costs incurred in applying for a patent, immediate deduction on annual listing fees (although not on the cost of listing), and all direct costs associated with dividend payments to shareholders), and
  • $80 million for regional irrigation projects.

However, on the other side of the ledger, the budget introduces changes to the thin capitalisation rules to prevent non-resident investors from artificially loading debt into their New Zealand investments to limit their tax exposure. These will apply from 2015/2016. See our earlier commentary here.

And the IRD gets another $7 million a year towards tax compliance relating to investment properties, which is expected to recoup $45 million a year in additional revenue.


Legislation to expand the basis of the Auckland Housing Accord, signed last week between the Government and the Auckland Council, to other tight housing markets will be introduced today as part of Budget 2013 and given urgency at select committee.

The new law will apply for three years. It will allow Special Housing Areas (SHAs) with streamlined consenting processes to be designated for residential greenfields and brownfields development where housing demand is high. The three year timeframe is to allow for the Government's Phase Two Resource Management Act reforms to come into effect.

The Government clearly regards Christchurch as a potential candidate for an accord. Should an accord not be reached in an area of severe housing unaffordability, the Government can intervene to achieve the same results.

In the social housing area, the budget:

  • extends the income-related rent subsidy scheme to community housing providers (putting them on an equal footing with Housing New Zealand)
  • shifts housing needs assessment from Housing NZ to the Ministry of Social Development to enable a more holistic response, and
  • extends regular tenancy reviews to all state house tenants who signed up to their existing leases before 1 July 2011.

The information in this article is for informative purposes only and should not be relied on as legal advice. Please contact Chapman Tripp for advice tailored to your situation.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.