New Zealand: Budget 2017 - choices of Finance Minister Steven Joyce


For a government chasing an historic fourth term, the Treasury-generated Budget Economic and Fiscal Update 2017 is a document full of opportunity.

Growth forecasts are solid – 3.1% this year, 3.5% next year, 3.8% in 2019. Projected investment levels are also strong– 6.1% of GDP this year, 5.1% next year and 6.6% in 2019.

This expansion, driven in part by continuing high net migration, shows up on the Government's balance sheet in rising surpluses and strong tax revenues.

The numbers are good. The rest is politics. We look at Finance Minister Joyce's choices.


The big move is the widely signalled increase in the two lower income tax thresholds – from $14,000 to $22,000 and from $48,000 to $52,000, effective 1 April 2018. This will give anyone earning more than $52,000 a year an extra $1,060 take home annually.

The Government yesterday, however, also released a discussion paper seeking feedback on proposals to improve the treatment of black hole expenditure, including making the change retrospective if the evidence is that businesses are deferring investment because of the tax implications. Submissions close on 6 July.

The Family Income Package

This is estimated to cost $2 billion a year and will raise the incomes of 1.3 million families by an average of $26 a week. Some of the lift will come from the threshold adjustments, which are available to all taxpayers.

Other features, all of which will kick in on 1 April next year, are:

  • increases to the Family Tax Credit of $9 a week for the first child under 16 and between $18 and $27 a week for subsequent children, depending on age
  • increases to the Accommodation Supplement to reflect 2016 rentals, and
  • increasing the maximum student Accommodation Benefit by $20 a week.

The Independent Earner Tax Credit will be discontinued.

What's in the budget for business?

The biggest item, the additional $4 billion over four years for infrastructure, had already been announced. A chunk of it – $812 million – will go to restoring State Highway One after the Kaikoura quake. Other recipients are education ($392 million), Transport ($1 billion, mostly in Auckland and Wellington), Defence ($576 million), Housing ($120 million), Health ($150 million), and Justice ($786 million).

Joyce said the Government planned to leverage this investment through the further use of public-private partnerships to deliver an "even larger infrastructure programme". More detail on this is expected in the next few weeks.


  • $203 million spread among the Strategic Science Investment Fund, Endeavour Fund, Callaghan Innovation R&D grants and the Strategic Innovation Partnerships Programme.

Economic Development

  • $31.1 million

Tertiary Education, Skills and Employment

  • $132.1 million


  • $4.9 million over four years to implement the National Policy Statement on Urban Development Capacity (requiring councils to provide adequately for population growth)
  • $3.5 million to administer the $1 billion Housing Infrastructure Fund
  • $18.4 million for biosecurity.

Other initiatives

  • EQC levies will increase to replenish the fund after the Christchurch, Seddon and Kaikoura earthquakes. The levy will rise from 15c per $100 of insurance cover to 20c to a cap of $276 – or up to $69 per homeowner
  • Vote Health gets an extra $3.9 billion, of which $1.76 billion will go to the DHBs, almost all of which are currently running up debts as they struggle against funding constraints. This compares to increases of $1.5 billion for education and $2 billion for law and order
  • Contributions to the NZ Super Fund are not to resume until 2020, by which time it is expected that net Crown debt will be below 20% of GDP
  • $321 million over four years for initiatives directed toward youth at risk under the social investment strategy.

Some comments

Given the scope of the opportunities apparently on offer, and the temptations of an oncoming election, this is a relatively subdued budget. The big surprise which has been a feature of previous budgets is absent this year as any initiative of heft or significance was either announced or telegraphed in advance.

The spending discipline reflects the government's ambitious debt reduction target (10-15% of GDP by 2020). The new operating allowance for this year is $1.8 billion ($300 million more than earlier allocated). The provision for next year is $1.7 billion, increasing by 2% a year thereafter.

But net migration is expected to add 212,000 people over the next four and a half years, similar to the gain over the past four and a half years. If this assumption is fulfilled or – just as possible – exceeded, every cent of the extra social and infrastructure spending in fast population growth areas will be needed just to maintain services at current standards.

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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