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Highlights:
- NZ Budget to focus on healthcare and climate change
- New fiscal rules in the offing
- To cap the debt at 30% instead of current 50%
It’s the Budget month again. It’s the month when we finally get to see how much the Government will spend and where.
In his Budget previews, the finance minister Grant Robertson has clarified that New Zealand to spend more on healthcare and climate change over the next year. Outlining the priorities before the government in this year’s Budget, the Finance Minister, Grant Robertson said that these two areas will be the main focus this year.
Last year’s Budget focused on COVID-19 relief and recovery, housing packages, and vaccine rollouts. Besides, last year the government focused on keeping NZ safe so ensuring that borders were safe took centre stage.
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Also Read: Why is NZ’s business sentiment low despite partial lift in restrictions?
Also Read: Inflation is on the rise in NZ, hits 6.9%
Source: © 2022 Kalkine Media®
This year the main themes would be recovery and consolidation against the backdrop of rising inflation and high cost of living.
Healthcare funding
The FM said that the current health system was very inefficient. It needs to be streamlined to give maximum benefits to the New Zealanders, especially in the rural areas. Over the past two decades, District Health Boards have been running an annual deficit.
2022 Budget will be putting an end to that.
In his preview, the finance minister also stressed the need to introduce a borrowing limit, as the top priority was to recover from the pandemic and the economic shocks caused by the ongoing Russia-Ukraine war.
The FM said that the current health system was very inefficient. It needs to be streamlines to give maximum benefits to the New Zealanders especially in the rural areas. Over the past two decades, District Health Boards have been running annual deficit.
New Fiscal rules
Post-pandemic recovery also required that new fiscal rules were set out. These included a new debt measure and a debt cap. The new debt measure will be based on the recommendation from the Treasury to include government assets such as Super Fund and liabilities.
That will be a much more accurate picture of the financial position of the country, he said.
The new debt ceiling will be 30% of the new GDP under the new fiscal system. The current debt ceiling is 50% based on the net debt measure used until now.
While this gives the government a relatively low level of debt, it will provide more fiscal space to fund high-quality capital investments. Also Read: In a hawkish move, RBNZ raises OCR by 50 basis points
He said surpluses will be kept in the band of 0 to 2% of GDP to ensure new day-to-day spending is not added to the debt. He said it was important for the government to return to surplus in a balanced way so that the government can meet the challenge of NZ’s infrastructure gap.
Bottom Line: The government will focus on recovery and fiscal consolidation in the Budget of 2022. As outlined by the FM, this year the main focus will be on healthcare and climate change goals.
