NZ Budget May 2025

[donna]

Here's a good summary of the Coalition's May 2025 Budget

Economic Outlook

• GDP Growth: Forecasted at 2.9% for the year ending June 2026, down from a prior forecast of 3.3%.
• Inflation: Expected to remain at 2.1%.
• Deficit and Debt: The budget forecasts a NZ$14.74 billion deficit and anticipates net debt peaking at 46% of GDP in 2027/28.

The Gov't has cut spending to a new 10 year low!

Good for Business.....

• Investment Boost: Introduces a tax incentive allowing businesses to deduct 20% of the cost of new assets on top of depreciation, estimated to cost NZ$1.7 billion annually.
• Invest New Zealand: Establishment of a new agency to attract overseas investment and increase capital available for growth across critical sectors.

Good for needy...

Working for families get more, also good for retirees and rates rebates, less Doctor visits with 12 mth prescriptions. Plus a funding boost for charities.

Not good for working women.....

Pay equity is out - huge savings from ditching it - $11B over 4 years.

Main sources - Reuters, NZ Budget Summary, One News and NZ Herald - info mainly sourced from ChatGPT

Not good for Kiwisavers -

How do we feel about this budget?

The National-led coalition has done what they said they'd do, cutting back on spending. They are also turning the tables to focus outwardly on business and overseas investment.

regards,

Donna

[hawkeye]

I suggest you listen to interview Hillary Calvert on The platform to get another point of view on the pay equity changes. It’s nothing to do with gender discrimination.

[hawkeye]

Bad for KiwiSaver? Not really, govt contribution has been means tested for people on high incomes, and rebate halved. But it now starts at age 16 instead of 18, and if employer contributes 4% the govt is increasing their contribution to 4% over a few years. So might end up with more in the long run.

[donna]

Worth a read - from NZ co-founder of Sotheby's International Realty.

Opinion: Budget restraint could be just what the property market needs

Nicola Willis described this year’s Budget as ‘responsible’, and I’d have to agree with that. This is a future-focused budget, and the Government has approached it with the commitment to spend within their means. This year’s spending money was a modest $1.3 billion, the smallest allowance the Government has had in a decade. Naturally, the smaller spend dished out across all sectors is reflective of the tightening of their purse strings.

The newly established housing fund, set up to distribute $128 million towards social homes and affordable rentals over four years, is a great initiative. We’ve got a housing supply issue in New Zealand, and any contribution towards alleviating this, and assisting first time buyers and young families into new homes, is a step in the right direction. When we look at the state of the housing market, it’s moving forwards. The Budget’s Economic and Fiscal Update forecasts a 5.6% growth in house prices by next year. While different segments of the market are accelerating more quickly than others, overall, the trajectory is promising. While I would have liked to see some progress on the foreign buyer ban in this year’s Budget, the $65 million pledged towards tax changes for foreign investment is a positive development. Anything to encourage investment in the current economic climate is the right thing to be doing. The ‘Investment Boost’ component of the Budget – where businesses can write off 20% of the cost of new assets from their tax bill – is a productive approach. If we were to open another office in Auckland for example, therefore employing more people, we would presumably be able to claim a deduction on that expense, which would be a positive outcome for both the company and the employees. The Government's initiative is designed to encourage businesses to invest, boost economic growth, and raise wages – that can only be a good thing for the property market. In terms of sales, regional markets such as Hawke’s Bay, Nelson and Taupō are all moving pretty quickly. The Southern Lakes region has had one of the best Aprils in a long time, with a dynamic and diverse market driven by both local buyers and offshore purchasers, particularly from Australia. The Auckland market is showing signs of improvement with substantial deals coming through from high-end suburbs like Herne Bay, Ponsonby and Takapuna. While the frequency of sales is not quite as consistent as we would like to see, or as consistent as it was in 2021, it’s certainly better than this time last year. Overall, this year’s Budget should bring confidence to people, because the Government’s making strategic moves to put the country in the right place for everyone. This adds confidence to the market and provides a consistent pathway towards economic recovery. New Zealand is in a good place at the moment, we’re not jumping up and down with glee, but the outlook is a lot more positive than it was a year ago. - By Mark Harris, co-founder and managing director of New Zealand Sotheby’s International Realty ENDS

[donna]

Another perspective on Budget 2025 - seems like Grant Robinson started something that's going to continue and it's 'creative accounting' at best....

In 2022, in response to accusations he was “addicted to spending”, Finance Minister Grant Robertson changed Budget measures in order to claim government spending and debt weren’t as bad as they actually were.

To understand his strategy, we need to remember that the traditional measure of debt used by successive governments is “Net Core Crown Debt” - the sum of all the debt owed by Government Ministries and Departments along with the Reserve Bank, minus their financial assets.

This calculation does not include the semi-autonomous Crown Entities nor the asset-rich Super Fund.

The new measure the Minister introduced was “Net Debt”, which added both Crown Entities and the Super Fund into the equation.

The effect was to ’magically’ shrink debt from theNet Core Crown Debt value of $133.6 billion (36.9 percent of GDP) to the new Net Debt value of $61.2 billion (16.9 percent of GDP).

By changing the measure, $72.4 billion of Labour Government debt was erased in an instant!

Prime Minister Jacinda Ardern reinforced the ruse in her Budget speech to Parliament by boasting: “Debt sits at 16.9 percent”!

Questions are now being asked whether Finance Minister Nicola Willis is using the same tactic in Budget 2025, by redefining the Operating Balance Before Gains and Losses calculation. Termed OBEGAL, this is a measure which reports on the difference between total Crown revenue and expenditure - in other words, it evaluates whether the government is living within its means and will produce a surplus, or whether it’s not and will deliver a deficit.

The Minister has justified removing ACC - a semi-autonomous Crown Entity that is running a deficit – from the equation on the basis that eliminating it provides a better indication of government performance.

With ACC removed, the new OBEGAL measure called OBEGALx shows that in 2029, a surplus of $214 million is forecast. If ACC remains in the measure, as is the tradition, the surplus turns into a deficit of $3.01 billion.

Chief Economist at The Initiative, Dr Eric Crampton is highly critical of the move:

“This budget projected no return to balanced books. Headline figures projecting a return to surplus ignore ongoing accumulating deficits at the ACC. ACC is expected to spend $2.9 billion more than it earns in 2026 and 2027, with ACC’s deficit reducing to $2.3 billion by 2029. When those deficits are included, the government is in deficit through 2029.”

He explains, “The Public Finance Act requires fiscal responsibility. The legislation says that governments should aim at balanced budgets. It allows for deficits when circumstances warrant. But it requires the government to explain why it is in deficit and its plan for a return to surplus.”

In other words, the Public Finance Act is meant to ensure that governments do not spend more than they receive during normal times. By refusing to rein in spending, Dr Crampton believes the Coalition could be in breach of the Public Finance Act.

In essence, by continuing to spend more than they have, not only is the Coalition failing to demonstrate fiscal prudence, but through their actions they are revealing that they lack a true commitment to growth.

From Muriel Newman's newsletter