Weekly $27 cash payments, fuel discounts and half-price public transport are among the short-term sweeteners offered up by New Zealand’s government in its latest budget, as it tries to juggle the cost-of-living crisis with big-ticket spending commitments, including $11.1bn of healthcare system reform and $2.9bn responding to the climate crisis.
“While we know the current storm will pass, it is important we take the hard edges off,” prime minister Jacinda Ardern said in remarks accompanying the budget’s release.
“The plan this year is to do two things,” Ardern said. To “ensure Aotearoa New Zealand’s economic and social security for generations to come … making us less vulnerable to external shocks,” and “cushion the impact of the inflation cycle on families”.
It’s the latter that will draw many households’ attention. Local headlines on budget morning were not dominated by fiscal policy but by cheddar cheeseAnd frozen berries – reports on recent supermarket price-spikes topping the most-read. New Zealanders are feeling the pinch on many fronts. Petrol prices have risen to $3 per litre, food prices have risen 6.4%, inflation at its highest level in three decades, and rents have risen 6.9% since 2021.
Grant Robertson, the finance minister, announced more than $1bn in cost of living relief. He also announced a weekly cash payout that will be distributed to nearly 2.1million New Zealanders. The $814m relief package, which will be distributed over three months to people earning less than $70,000 per week, will cost $27 per person, or approximately $350. The government will also extend some of the temporary measures it took earlier this year, including reducing 25c per litre fuel excise duty, cutting road user costs, and extending half-price public transportation fares.
“Eighty-one per cent of working age New Zealanders are now being supported through these cost of living pressures as a result of what we’ve done in this budget,” Grant Robertson said. Asked whether those payments amounted to a “short term sugar hit”, Robertson said they were a targeted approach – as opposed to broad-base tax cuts – which would not contribute to worsening inflation.
Those short-term measures represent a concession from the government in a year in which it had hoped to focus on big ticket, far-horizon spending and securing Labour’s policy legacy after two tumultuous, pandemic-dominated years. The budget for 2022, which was created after the Covid fires were put out, provides an opportunity to invest in long-term issues such as emissions reduction and a failing health system.
The overhaul of New Zealand’s health system was the other major headline item, with $3.1bn allocated over the next two years. The government had already committed to creating a new, centralised health system and doing away with the “postcode lottery” of uneven care it said was created by the current, district-based health board system. All in all, the budget outlined more than $13.2bn in health system investments over the next four years, which Robertson said was the largest ever investment in New Zealand’s health system.
Health minister Andrew Little said $1.8bn would be committed this year to “clear the financial deck,” paying off past years’ health system deficits and launch two massive new national health entities – Health NZ and the Māori Health Authority. The Māori Health Authority, a new body set up to provide by-Māori, for-Māori services and try to address disparities in care, would receive only a tiny portion of overall funding, including $168m for commissioning services.
Climate crisis mitigation was the other major spending area, with $2.9bn invested in climate security and decarbonising transportation. These measures are part a $4.5bn climate fund. Announced earlier this weekTo drive a low-emission economy and prepare the country to deal with the consequences of climate collapse.
Spending on social issues spending like child poverty, mental health and homelessness – previously headline items for the Ardern government – took a lower rung. A range of measures were implemented to reduce gang violence, increase child support payments for single parents, and fund services for families and sexual violence. $202 million was allocated to addiction treatment and the mental health system.
Opposition parties on the right are advocating for tax cuts, and said the budget would contribute to the “brain drain” by driving young New Zealanders in search of greener pastures. “$350, I don’t know if that buys you a plane ticket to Australia these days, but I think that some people when they look at the forecast, and this budget, and they will make that choice,” said National party finance spokesperson Nicola Willis.
National leader Christopher Luxon said the $350 payment was “just a bandaid on a major wound”.
The Act party called it the “brain drain budget”. Leader David Seymour said the government’s strategy was to “tax the productive to fund Labour’s ideological fantasies, then just hope they don’t leave. Unfortunately, more and more will.”
Many community providers and advocates will be disappointed that social relief spending doesn’t go further to address deep-rooted wealth in New Zealand and ethnicity inequalities. The cost of living measures will be finished within three months, family violence and child poverty spending is minor, and the investment in Māori health services represents only a fraction of the overall health reform package.
But Robertson was quick to emphasise that while the immediate demands of the Covid crisis were fading from view, it had only been replaced by new, international crises and pressures – most of which were not New Zealand-specific. “Budget 2022 is being delivered against the backdrop of a global inflation spike, with existing supply chain pressures being exacerbated by pressure on oil prices from the war in Ukraine. This will pass but we need to protect New Zealanders from the immediate impact.”
“The last few years have been challenging for everyone,” Robertson said. “Some of those challenges are still with us.”