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10 July 2019

The lead-up to the Wellbeing Budget has been well signposted even if the track’s been somewhat muddied by drama. It’s a bold step to try and quantify progress in other than strictly financial terms. The brief is to implement change and manage the country’s finances.

The focus is on 5 priority areas:

  • taking mental health seriously

  • improving child wellbeing

  • supporting Māori and Pasifika aspirations

  • building a productive nation, and

  • transforming the economy

Mental health initiatives include a new frontline service for mental health, funding boosts to existing suicide prevention services, more nurses in secondary schools, and 1,044 new Housing First places to tackle homelessness.

Child wellbeing measures see a $320m package to address family and sexual violence, assisting young people out of state care into independent living, increased funding to decile 1-7 schools to take financial pressure off parents, and indexing main benefits to wage growth from April 2020, meaning benefit payments will rise in line with wages - not inflation.

Māori and Pasifika are supported by a major boost for Whānau Ora (family health) focusing on health and reducing reoffending, support for the Pacific Employment Support Service and Te Reo and Pacific languages, and a $12m programme targeting rheumatic fever.

While it’s hoped that increasing health and wellbeing in New Zealand will foster increased prosperity, the business community gaze will be on building a productive nation, and transforming the economy, as well as on tax policy ahead.

Building a productive nation

Innovation is seen as the key to assist New Zealand industries in the transition to an economy high in productivity but low in emissions. The challenge is for businesses to be more innovative and New Zealanders to adapt to changing job markets.

The R & D legislation born out of last year’s budget has passed and it’s up to Kiwi businesses to take up opportunities there. The Budget allocates $157m to support the “Commercialisation of Innovation” package of initiatives to invest in research and science. An “Innovative Partnerships Programme” seeks to attract globally leading firms and innovators. “Business Connect” establishes a cross-agency digital platform of business-focused services.

New start-up businesses have been spotlighted as likely to run with some of these initiatives, the Minister for Research, Science and Innovation calling them “the ultimate champions of innovation that often introduce more radical, disruptive innovations than more established firms”.

But how does a start-up expand? The Budget establishes a $300m fund to support venture capital investments taking “mid-size” start-up businesses to the next level. This is designed to stimulate growth and help businesses remain onshore, reducing pressure on companies to sell prematurely to overseas buyers.

The initiatives also fund vocational education and training. These include reforms to boost apprenticeships and trade training, increased subsidies to Tertiary Education Organisations, wage subsidies, and funding for an “Industry 4.0” demonstration network to help businesses embrace smart technologies and data driven solutions.

Transforming the economy

On the global stage, New Zealand’s economy has obvious vulnerabilities: its reliance on export, uncertainties affecting major markets and political instability across many regions, complicated by a lack of coherent global action on climate change.

This Budget has focused on climate change, land use and national infrastructure. With a capital boost of over $3b, the aim is to create opportunities for businesses, regions, iwi and others to transition to a sustainable low-emissions economy.

The $229m Sustainable Land Use Package will fund projects to protect waterways and wetlands and support farmers and growers in using their land more sustainably. It provides funding for advice to farmers; support for Māori agribusiness and farmers changing over to more environmentally sustainable and higher value production; improving on-farm emissions data and upgrading decision and regulatory tools; protecting high value food exports; and updating the country’s official assurances system. An additional $49 million is allocated to help transform the forestry sector and support the One Billion Trees programme.

$1b over the next two years is allocated to modernising KiwiRail. Reduced carbon emissions and increased regional business opportunities are key drivers. If taking some heavy traffic off our roads reduces our road toll, the payback will be in human capital.

Tax and the Budget

Further developments with digital services tax and collection of the International Visitor Levy were announced and the Government remains committed to modernising and simplifying the tax system.

Pre-Budget

The major announcement pre-Budget was that Capital Gains Tax is now off the table and that has pretty much overshadowed any tax announcement since. The Government also announced two specific pre-Budget tax measures:

  • GST on telecommunications, and

  • repeal of racing totaliser duty

GST on telecommunications

The Government has announced a proposal to change the GST of telecommunications so that these would be aligned with the treatment of other remote services and based on the residency of the supplier. The main implication of this new proposal concerns roaming services provided by telecommunications providers in that:

  • outbound mobile roaming services to New Zealand residents overseas are proposed to be subject to GST (currently they are zero-rated), and

  • inbound mobile roaming services provided to non-residents in New Zealand would no longer be technically subject to GST.

Repeal of racing totaliser duty

The racing totaliser duty or betting levy will be phased out. It represents 4% of betting profits, amounting to $13.9 million in 2018. This sum will be redistributed to the racing codes and Sport New Zealand, with a proportion set aside to reduce gambling harm.

Meanwhile, the tax policy work programme is still progressing and the next stages of Inland Revenue’s Business Transformation programme look at the administration of student loans, KiwiSaver and child support. We’ll keep you updated.

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