Ardern govt lays out 'budget for the kids'

May 17, 2018

New Zealand's government has set up some high spending in the core areas of health and education.

The New Zealand government has delivered multi-billion dollar spending surprises for health and education in its first budget under Jacinda Ardern, along with a run of fiscal surpluses.

After plenty of goodies in December's half-year mini-budget and announcements in past months, the Labour prime minister had been playing down the odds of another splurge.

But she and Finance Minister Grant Robertson also pointed to the need to "rebuild" after what they described as nine years of under-funding of schools and hospitals under the previous centre-right National government.

Thursday's budget - also the first from a Labour-led government in a decade - led with a $NZ3.2 billion boost to health operating funding over four years and $NZ1.6 billion for schools, along with significant increases for justice, housing and child poverty initiatives.

That will see the total education budget rise from about $NZ11.8 billion to $NZ12.3 billion in 2018/19, and health from $NZ16.5 billion to $NZ18.2 billion.

And despite promises of $NZ10 billion of new capital investment over four years - to a total $NZ42 billion - only $NZ1.8 billion was set aside for the coming financial year.

Mr Robertson said this was a "start".

"There needs to be long-term sustained investment in infrastructure," he said.

"We can't make up for nine years of neglect in one budget."

On the fiscal front, New Zealand is still looking at budget surpluses out to 2022.

Net crown debt is forecast to drop to 19.1 billion by 2022, below the 20 per cent target promised to voters.

The 2017/18 surplus is tipped to come in at $NZ3.1 billion - $NZ600 million more than expected, thanks to a healthier tax take.

And the surplus for 2018/19 is pegged at an ever better $NZ3.7 billion, compared to the $2.8 billion forecast made six months ago.

Meanwhile, Treasury's forecasts for gross domestic product growth have steadied over the long-term.

The optimistic 3.6 per cent growth rate for 2018/19 predicted in December has now been cut to 3.3 per cent.

However, the outlook has improved for each year after 2020 - averaging out to about 3 per cent - and unemployment is expected to flatten out at 4.1 per cent.

And there have been political trade-offs.

The government's plan to make GP visits cheaper across the board has now turned into a more targeted policy.

Heading into the last election, Labour promised 1800 more police officers by 2020. But now the bulk of the funding won't kick in until after then.

Recently, the Ardern government warned deals with its allies in government - NZ First and the Greens - combined with a promise of no new taxes or borrowings - had meant some tough decisions.

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