Spending will be reprioritised to respond to COVID-19 and support the subsequent recovery
The COVID-19 response has shown how important it is to maintain strong public services that are able to support all New Zealanders through challenges, disruptions and crises. The Budget 2020 package complements our $62.1 billion of available support in response to the COVID-19 pandemic and kickstarting the recovery. It invests more than $3 billion in operating funding per year to ensure core government services continue to support New Zealanders through this extraordinary time. It provides $1.4 billion per year in additional support for the health sector so that it can respond to the pandemic while maintaining the sustainable delivery of existing services. It also invests $500 million per year in additional support for both government and non-government social services, which will support New Zealanders' education, employment and housing outcomes.
We know that to overcome this 1-in-100 year health and economic challenge, it is now more critical than ever to prioritise investment in areas we know will make a real difference to the wellbeing of our people and communities. While the Budget package presented today is different to the Wellbeing Budget planned pre-COVID-19, our wellbeing approach remains embedded in this Budget package and its aim continues to be improving the wellbeing of current and future generations of all New Zealanders.
Our key priorities for the core Budget 2020 package include:
- Health - investing in our health sector to ensure that it is able to respond to the pandemic while maintaining the sustainable delivery of existing services.
- Social Sector - with initiatives aimed at growing strong and resilient communities and supporting vulnerable and marginalised populations.
- Education and Skills - providing support to students across all levels of education, while also targeting investment in areas that will benefit students who need it the most, including students with disabilities and those with English as a second language.
- Primary Industries - investing in initiatives that will ensure our primary industries are supported and sustainable now and into the future to support the economy and the environment.
- Justice - supporting a safe and equitable justice sector and continuing our work to reduce crime over the medium and long term.
- Arts and Culture - preserving our nation's taonga, promoting creativity and celebrating New Zealand's diversity and history.
- Defence and Foreign Affairs - enhancing defence estate infrastructure and military capability to support delivery of the Government's defence, security and peacekeeping policy priorities.
- Transport - enhancing the resilience and reliability of our transport network and over time, contributing to efforts to reduce our carbon footprint.
Table 4 - Budget Allowances
|$ billions||Budget 2020||Budget 2021||Budget 2022||Budget 2023|
|Operating allowances at 2020 Budget Policy Statement (per year)||3.0||2.4||2.4||2.6|
|Operating allowances at Budget 2020 (per year)||3.3||2.4||2.4||2.6|
|Multi-year capital allowance at 2020 Budget Policy Statement||8.4|
|Remaining multi-year capital allowance after Budget 2020||4.8|
Source: The Treasury
We have kept operating allowances broadly unchanged compared to the 2020 Budget Policy Statement,with a slight increase in operating allowances in this Budget to $3.3 billion (Table 4). With the introduction of the CRRF, Budget 2020 spending has been reoriented to address cost pressures, rather than new initiatives. Our response to the COVID-19 pandemic remains ongoing and at a later stage we may need to adjust future allowances as the fiscal position becomes clearer.
The Government will continue to use the fiscal management approach of fixed nominal baselines combined with Budget allowances to control expenditure. Managing within allowances will require active management of cost pressures. As the economy starts to recover from COVID-19 and the fiscal position becomes clearer, future operating allowances may be adjusted.