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New Zealand has just delivered a well-being Budget for 2021. The budget represented the government’s plans on economic recovery of the country and a strategic approach for the future. This involved solving challenges arising from COVID-19, rebuilding the economy, securing the economic recovery, and locking in the gains made till now.
Budget 2021 attempts to continue the boost the economy has during this period while still considering the need to keep a cap on the required debt the country had to take during the COVID-19 pandemic in order to secure lives and livelihoods.
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Budget will add significantly to New Zealand’s policy goals for the coming 3 years. One of the goals is accelerating the recovery and rebuild from the impact of COVID-19.
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The NZ economy held up well during the COVID-19 pandemic. The economy has been well positioned, thanks to decisive steps taken to eliminate the pandemic, early efforts to save jobs and help firms, and quick responses from businesses. However, there is still a great deal of economic instability amid ongoing COVID-19.
Significant investments to accelerate economic recovery
Prime Minister Jacinda Ardern and Finance Minister Grant Robertson stated today that Budget 2021 would secure New Zealand’s recovery from the pandemic.
The government has set out an ambitious agenda to help the economy rebound from COVID-19 at the start of this term. Budget 2021 expands on the strategy by investing heavily in hiring, industries, housing, and tourism in order to boost and develop the economy.
Here are some of the investments planned in this Budget to stimulate the economy:
- Recovery agenda has prioritised, bringing more Kiwis into schooling and training.
- $44 million to be spent on a digital skills initiative for 60,000 small businesses.
- Targeted support to businesses in the communities hardest hit by COVID-19 as part of $200-million Tourism Communities: Support, Recovery, and Re-set Plan.
- Infrastructure investment through investments in rail, DHBs, and education.
Crown infrastructure investment over the next 5 years totals $57.3 billion.
Forecasts made in the Budget
Finance Minister Grant Robertson has predicted a substantial leap in economic growth, a dwindling deficit and lower-than-expected debt levels. The economy is expected to get back from the COVID-19 pandemic much quicker than earlier projected with a much smaller peak in unemployment.
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Annual economic growth is estimated to average 3.4% over the next 4 years.
NZ GDP is expected to climb 2.9% by the end of June 2021, 3.2% in the next year, and 4.4% in the year to June 2023.
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The growth numbers showed a substantial upgrade to forecasts made in December 2020. New Zealand economy had been doing much better than earlier expectations.
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Unemployment is expected to climb from 4.7% in the three months ended in March 2021 to 5.2% in the June quarter, peaking at 5.3% in the subsequent quarter before declining to 4.2% in 3 years.
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The Treasury had previously predicted in December that unemployment would reach a much higher rate of 6.8% during April to June 2022.
Robertson acknowledged that the government's improved economic status would lead others to claim that it should take on more debt but asserted that "a balanced solution" was needed.
(NOTE: Currency is reported in NZ Dollar unless stated otherwise)
