Wellbeing Budget 2022

Investing approximately $5.9 billion per year – Budget 2022 aims to ensure Aotearoa New Zealand’s economic and social security for generations to come, by investing in the infrastructure alongside the largest investment in the health system to date. Climate action and lifting more children from poverty, building more houses, encouraging education, upskilling, and delivering higher-wage jobs to drive productivity feature also.

As New Zealand sees inflation rise, the government seeks to cushion the impact of the inflation cycle on families with a special cost-of-living package contained within Budget 2022.

There are strong claims of; preparing for the future, hard times and good, while ensuring economic security for Aotearoa New Zealand.

On reviewing Budget 2022 – we can’t help but question if this spending based approach is likely to in fact increase the cost of living and drive interest costs higher? And, will middle income earners be negatively impacted due to being in-eligible for the cost-of-living package?

It is no surprise to see there is no tax relief yet again – this is mildly disappointing for those holding out hope for a tax relief announcement today.

We’ve been notified by Inland Revenue that the cost-of-living package will be automatically dispensed to eligible individual’s bank accounts. Will this create a surplus and an administration nightmare for individuals who do not have up-to-date details loaded with the IRD?

We look forward to navigating Budget 2022 alongside you and if you’d like to discuss what this means for you or your business, please reach out.

Budget 2022 Investments

Aiming to look ahead to a high wage, low emissions economy for economic security, the government is investing $5.9 billion per annum in net operating spending. There are further initiatives funded as pre-commitments from Budget 2023 and 2024 allowances (as a result of new multi-year funding approaches). Additionally, there is a significant package of initiatives funded through the Climate Emergency Response Fund.

Budget 2022 has a particular focus on delivering long-term solutions in two areas; embedding reforms to our health system and addressing climate change.

This is alongside a $1 billion cost of living package to support New Zealanders, particularly those on low- and middle-incomes, with the rising cost of living by reprioritising funding remaining following the closure of the COVID-19 Response and Recovery Fund.

Supporting New Zealanders with the rising cost of living

The Government is introducing a cost of living payment of $350 in three monthly instalments starting 1 August, to provide short-term support to low and middle income earners. This is the equivalent of around $27 per week for three months, and represents half the total couple rate of the Winter Energy Payment. The payment will be available to individuals who earned less than $70,000 per annum in the past tax year, and are not eligible to receive the Winter Energy Payment – approximately 2.1 million New Zealanders.

Additionally, Budget 2022 is responding to the rising cost of living by:

This package of support comes on top of the package of income support measures that came into force on 1 April this year. This included a significant lift in main benefit rates, student allowances, and increases to the Family Tax Credit, childcare allowances and superannuation. On 1 May the 2022 Winter Energy Payment ($450 per individual and $700 per couple) began to be provided to Kiwis on income support and superannuation to help them meet additional costs across the winter months.

Covid-19

An overview of how the COVID-19 response is evolving and the Response and Recovery Fund allocation to date can be read here.

The COVID-19 response has become part of standard public service delivery, future COVID-related costs are being moved to within the standard Budget process, and will repurpose the remaining CRRF funding to the most pressing issues facing New Zealanders. This includes:

Economic Recovery

The establishment of Industry Transformation Plans (ITPs) brings together all relevant parties in an industry to agree on a long-term vision, and identify the actions that can be taken by the industry, government and others to realise that vision.

Budget 2022 provides funding to make progress across the ITP programme, including funding for:

Other Economic Recovery Initiatives:

Health: Laying foundations for a better future

Budget 2022 introduces a new multi-year funding model for Health, beginning with a two-year package of investments through Budget 2022 and Budget 2023, before eventually moving towards a three-year funding cycle from Budget 2024 to support the first New Zealand Health Plan. This Budget includes $11.1 billion total operating and $1.3 billion capital to address historic and future funding pressures across the health system.

New approaches to public finance

The Justice Cluster is one of two pilots in Budget 2022 looking to enable more efficient and effective inter-agency investment beyond an annual Budget cycle, with the aim of delivering improved and enduring wellbeing outcomes for New Zealanders. The Justice Cluster agencies will receive $2.7 billion total operating and $65 million capital funding across the forecast period, representing three Budgets’ worth of investment which will be counted across multiple allowances. Read more about the Justice Cluster here.

The Natural Resources Cluster will receive a budget of $1 billion of total operating (reflecting three Budgets’ worth of decisions, counted across multiple operating allowances) and $12 million capital funding to the Cluster agencies to progress priorities.

Climate Change: A secure future relies on addressing climate change.

With the release of the first Emissions Reduction Plan, the Government has set out a comprehensive strategy as to how to meet the first emissions budget. The first Emissions Reduction Plan (released on 16 May 2022) focuses on meeting the first emissions budget (2022-2025) and will lay important foundations for plans and strategies to meet the second (2026-2030) and third (2031-2035) emissions budgets. A $2.9 billion climate change package for Budget 2022 is an important first step toward implementing the Emissions Reduction Plan and meeting the first emissions budget.

Key Climate Emergency Response Fund initiatives

Initiative title
Total funding over forecast period
Funding Further Decarbonisation of Process Heat and Implementation of Supporting Policies
$653 million
Cleaner Vehicles for Low-Income New Zealanders - Vehicle Scrap and Replace Scheme
$569 million
Mode-Shift and Reducing Light Vehicle Kilometres Travelled
$375 million
Agriculture Emissions Reduction - Accelerating Development of Greenhouse Gas Mitigations
$339 million
Establishing Native Forests at Scale to Develop Long-Term Carbon Sinks and Improve Biodiversity
$145 million
Maximising Carbon Storage: Increasing Natural Sequestration to Achieve New Zealand's Future Carbon Goals
$111 million
Reducing Emissions from Waste
$103 million
Increasing Woody Biomass Supply to Replace Coal and other Carbon Intensive Fuels and Materials
$91 million
Decarbonising the Public Transport Bus Fleet
$41 million
Agriculture Emissions Reduction - Supporting Producers and Māori Entities Transition to a Low Emissions Future
$35 million
Māori Climate Action
$31 million
Decarbonising Freight Transport - Resourcing and Seed Funding
$20 million
Supporting the energy transition to a low emissions economy
$18 million
Equitable Transitions Programme
$16 million


Source: The Treasury

Child Poverty Report 2022

Budget 2022 is supporting low-income families and whānau and tackling child poverty and inequality through a suite of changes.

 

If you’d like to discuss what Budget 2022 means for you and your business, please contact PKF Dunedin.

 

This summary was prepared by Michael Markham, Chief Executive and Director, Kendons, on behalf of PKF New Zealand.



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