The Minister of Finance has delivered a big-spending budget. But is the timing right given the current economic challenges?

Budget 2022 does not show any restraint on Government expenditure which has increased significantly over the term of this government. Nor does it indicate any concern for the level of debt in NZ and our ability to service it. It feels like a missed opportunity to defer some key policy initiatives given the underlying issues currently facing the economy.

The government has allocated significant amounts in yesterday’s budget. They will be welcomed by those who benefit and, in many cases, are necessary. There is, however, a sense that once the money is allocated all problems are solved. Critically, there are currently no checks and balances to measure the quality of the outcomes achieved. Future labour shortages, especially in the health sector, may hold back the delivery of the services budgeted.

 

Winners & losers

It was well documented that Budget 2022 would not meet everyone’s expectations and it has delivered on this. There are winners and losers.

Law & Order

Pre-budget announcements included a $633m law-and-order package. It will provide additional police resources and focus on addressing the gun violence and increasingly emboldened gang activities, including the recent ram-raid phenomenon hitting the country.

Health

Health is a winner (as expected) with $11 billion made available over four years. It will establish the new health entities, Māori health initiatives, and capital infrastructure. It also forgives existing DHB debt and provides for an additional 1,500 primary care workers.

Pharmac receives a boost with a focus expected on funding more cancer drugs. It should ease the anxiety of patients currently in limbo on treatments. More funding for ambulance services, both paramedics and additional emergency vehicles, will go some way to reduce St John Ambulance Inc’s dependence on charity to meet its day-to-day obligations.

Poverty

The budget has recognised the Cost-of-Living crisis by extending the petrol tax rebate and the public transport discount by two more months with a provision for possible extension. A $350 payment for those on a salary of under $70k is welcome. However, it does not kick in until 1st August, putting more immediate pressure on household incomes. Excluding Government Superannuation recipients from this payment is hard to rationalise. They receive the winter energy subsidy; how is this related?

Climate change

$569m from the Climate Emergency Response Fund [CERF] has been earmarked for the” scrap-and-replace” programme. It pays to get old high-emission vehicles off the roads, replacing them with a subsidised EV, PHEV or hybrid. In addition, there is $1.2m for the transport sector from the CERF to focus on reducing carbon emissions. In our view, market forces would achieve the same outcomes. EV cars will come down in price, and petrol prices will increase as fossil fuel exploration declines.

 

What’s in Budget 2022 for the SME business sector?

Very little. The Covid lockdowns over the last two years and multiple Government-mandated cost increases have hit SMEs hard. All sectors are experiencing significant skilled labour shortages resulting in unrealised economic outputs and extended lead times.

Extending the Apprentice Support Scheme is great but it will take time to realise the benefits of this. Business needs skilled staff now. As a result, we’re finding that many business owners are finding it significantly more difficult to grow their businesses.

The recent immigration reset seems complicated. It could act as a barrier to attracting the skills required to get our economy moving. Should the business community not go to the world market to procure resources? Rather than have the government dictate what is on offer.

All in all, the budget has few benefits for SMEs but presents plenty of challenges.

 

By Trevor Clark