New Zealand: Budget 2015 – steady as she goes

Brief Counsel
Last Updated: 25 May 2015
Article by Andy Nicholls and Lucy Hare

Most Read Contributor in New Zealand, September 2016
Finance Minister Bill English's seventh budget is a workmanlike affair.

The English "brand" is there in the steady-as-she-goes fiscal and economic management and in the finely targeted policy interventions.

The talking points will be the benefit increase, the new passenger departure levy and the removal of the $1,000 "kick-start" payment to encourage the KiwiSaver habit (a decision which is expected to save the Government more than $500 million).

But business may be disappointed in the paucity of initiatives to support the Government's Growth Agenda.

Economic and fiscal overview

The growth forecasts have been wound back since Budget 2014 as the stimulus created by low interest rates, strong population growth and robust investment activity is off-set by sluggish global demand and the inhibiting effect of the high exchange rate on exports.

GDP growth in March years is expected to reach 3.3% this year before tapering back to 3.1% next year, 2.8% in 2017 and 2018, and 2.4% in 2019.

The budget deficit has been chopped back from $18.4 billion in 2010 to a projected $684 million this year but the promised surplus is still a speck on the horizon – not so much because of its distance (it is forecast for the 2015-16 financial year) but because of its size; a tiny $176 million.

And this assumes that Treasury's central scenario for commodity prices holds. If it surprises on the downside, the surplus will be deferred until the June 2018 year.

Poverty package

The political focus in the budget media pack was front and centre, the "hardship reduction" package which will put more money into the lowest income households while also increasing the incentives to work.

The carrots:

  • a $25 a week net increase in benefits for families with children, from 1 April next year (the first increase above the annual inflation adjustment since 1972)
  • a $12.50 a week increase in Working for Families for households earning $36,350 a year or less. Those earning between $36,350 and $88,000 will also get an increase but it will be smaller and will be calibrated to their income. But those on incomes over $88,000 will sustain a small cut, averaging around $3 a week per household, and
  • an increase in Childcare Assistance from $3 an hour to $4 for up to 50 hours a week per child.

The sticks:

  • reducing the point time at which sole parents and their partners must seek part-time work to when the youngest child is three (down from five currently)
  • increasing the part-time work expectation from 15 hours a week to 20, and
  • requiring sole parents to reapply each year for their benefit.


Treasury is forecasting continuing rapid house price inflation in Auckland this year, noting that the housing supply response "remains muted". Against that background, the Budget did not devote much time to the Auckland property market issue but that was because most of the new policy measures – the two year rule and the search for Crown-owned land for residential development – had already been announced.

The Budget has allocated $52.2 million to this purpose, and the Government hopes to have the first development agreement signed within six months.

Innovation measures

These are modest and include:

  • $25 million over three years to support the establishment of new, privately led Regional Research Institutes outside Wellington, Auckland and Christchurch, and
  • $11.4 million for more engineering places in tertiary education.

Other items

  • A new border clearance levy of around $16 for arriving passengers, $6 for departing, to apply from 1 January.
  • $20.4 million to support implementation of the RMA reforms, $4 million for the Environmental Protection Agency to implement the EEZ legislation in 2015-16 and $16.8 million to support the freshwater management programme.
  • $107.8 million to the Christchurch rebuild for land clearances to make way for Anchor Projects.
  • An extra $8.1 million for the Serious Fraud Office and $20 million for the SIS and GCSB.
  • An additional $24.9 million operating over four years and $2 million capital for biosecurity.
  • From the Future Investment Fund:
    • $210 million in new capital next year for KiwiRail, and a further $190 million pre-commitment against Budget 2016
    • a $210 million contingency for additional investment to bring Ultra-Fast Broadband to 80% of New Zealanders, and
    • a $150 million extension of the Telecommunications Development Levy for improvements in rural broadband.
    • 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.

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