As with every Budget, there are winners and losers.
The winners
It is fair to say that the biggest winners of this year’s budget are welfare beneficiaries. The increase of weekly main benefits rates by $32 and $55 per week is not insignificant. If that is also measured against the minimum wage rate increase, it is a large step to lift people off the poverty line. A counterargument I heard on News Hub was that instead of a rate increase, there should be an increase in the amount of money a beneficiary can earn before their benefit is impacted. The reasoning being that it would continue to encourage people to get out and work. Interesting to note that we still have a raft of jobs out there that Kiwis don’t want. Consequently, many businesses are being forced to bring in migrant labour. Increasing welfare rates will not help that problem.
The Health, Education and Infrastructural sectors are getting a boost. I think it is fair to say that the entrenched problems that exist there are long overdue in being addressed.
Tourism is to receive $200 million to support communities most reliant on international tourism. This should help the hard-hit West Coast and Queenstown areas.
$1.3 billion is being allocated to aid the Covid vaccine rollout. This is not before time as New Zealand has slipped in its response rate compared to other countries. It’s now behind the eight-ball in terms of being able to open up to trade and international travel.
A further $5.1 billion is retained in the Covid-19 Response and Recovery Fund (CRRF). This can be used to provide financial support to employers and workers in the case of another outbreak, which makes good sense.
The losers
There was little in the budget that directly helps small and medium-sized businesses. Although the increase in infrastructural expenditure will be beneficial as these projects get underway. The small amount of money directly allocated to digital upskilling will benefit only 30,000 of the country’s 530,000 SMEs so would seem to be little more than a token gesture. If taken with the Covid funding already received by businesses, however, it could be argued that the sector has already received its fair share.
The big picture
As always, a budget is not going to please everybody. Distributing a finite amount of cash to the places where it can do the best, both for today and for tomorrow, is a fine balance. While some opinion may be directed at the lack of funding being sent into the business sector, it is widely accepted that Health, Education and Infrastructure have suffered from underinvestment for some time. It is also clear that support for the business sector following the Covid outbreak was not held back. Recent performance in the sector backs that up.
By Andrew Ross | Business Advisor | Director