New Zealand Budget 2018: Winners and Losers

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(Bloomberg) -- In her government’s first budget, New Zealand Prime Minister Jacinda Ardern has attempted to address social inequality by ramping up spending in health, education and housing. Here are the winners and losers.

WINNERS

Health, Education

The centerpiece of the budget is a big funding boost to health and education. Health will get NZ$3.2 billion ($2.2 billion) more in operating funding over the next four years and NZ$850 million in new capital, most of which will be used to address urgent problems such as deteriorating hospital buildings. More money will also be poured into education to build hundreds of new classrooms and fund 1,500 new teachers.

First-Home Buyers

“Too many New Zealanders are hurting because of the housing crisis,” said Housing Minister Phil Twyford. “Many are locked out of the kiwi dream of home ownership. Others are homeless or suffering the health effects of poor-quality housing.”

The government says the best response is to increase housing supply. It has already announced its Kiwibuild program, which aims to build 100,000 affordable homes for first-time buyers over 10 years. In addition, the budget increases the number of state houses that will be built to 1,600 a year.

Children

Ardern, who is also minister for child poverty reduction, said the government’s families package will boost the incomes of 384,000 households from July 1. The budget extends free doctor visits and prescriptions to under-14 year olds, making 56,000 more children eligible.

Diplomats

Foreign Affairs will receive an extra NZ$150 million over four years to establish 50 new foreign policy positions and reopen New Zealand’s embassy in Stockholm. Diplomats will help to distribute an additional NZ$742 million of overseas aid, primarily in the Pacific region.

Green Issues

The budget allocates NZ$100 million for a Green Investment Fund that will encourage private-sector investment in low-carbon industries. There is also more money for protecting native species and conservation initiatives.

Wage Earners

Nominal wage growth is forecast to double to 3.2 percent this year and stay around 3 percent through 2022. Midwives in particular are in for a pay boost, with extra funding for an 8.9 percent “catch-up” wage increase for more than 1,400 lead maternity carers.

Racing Industry

The budget allows NZ$4.8 million over four years for tax deductions that can be claimed for the costs of high-quality horses acquired with the intention to breed. The change means a new investor can claim tax deductions as if they had an existing breeding business.

LOSERS

Home Owners

The boom in prices that home owners have enjoyed in recent years is over, according to the budget. It forecasts house-price growth will slow from 7 percent this year to 2.8 percent in 2019 and 2 percent in 2020, which will see it barely outpacing inflation. The government also plans to reduce the favorable tax treatment of rental homes and extend to five years the period in which capital gains tax must be paid on investment properties.

Prison Guards

The government aims to reduce the prison population by 30 percent over the next 15 years.

Tax Dodgers

The government expects to reap an extra NZ$726 million over four years from making the tax system fairer and cracking down on tax dodgers.

Drug Smugglers

The budget allocates extra money to Customs to hire more staff and enhance its ability to disrupt drug smuggling.

Defence

The Defence Force gets an extra NZ$324 million over four years for its operating budget. But in last year’s budget, the previous National government planned a NZ$982 million funding boost.

©2018 Bloomberg L.P.

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