Aaron Quintal and David Snell: Little in Budget to address Auckland's issues

The two infrastructure problems facing Auckland are transport and housing, Aaron Quintal and David Snell write. Photo / Getty

Although the government is spending another $2.6b on infrastructure, there is little new in the Budget to address two of the key infrastructure issues facing Auckland: transport and housing.

More than a third of the new public infrastructure spending is on transforming Inland Revenue and the tax administration system. On transport, $115 million is to be spent on regional roads in Gisborne, Marlborough and Taranaki and $190 million for KiwiRail to operate its existing rail network.

While this money needs to be spent, it will not reduce the huge costs the country pays each year from having people and goods sitting on clogged Auckland arterial roads and motorways throughout the day.

Despite hopes there might be some good news on housing, the reality is there is little the government can do to solve Auckland's housing problems in the short term.

It has freed up both surplus land and $100 million of money in the current Budget to move things along, but this will only make a small impact on Auckland's housing supply, given building consents are already running at $4.1 billion per year.

Perhaps the bigger impact will come from the National Policy Statement on Urban Development the Minister of Finance announced which will, in his words, "direct councils to allow more housing development where necessary and to measure the impact of their decisions on house prices".

This should be taken as a shot across the bows of the Auckland Council that if the finalised unitary plan does not look like addressing Auckland house supply issues, the government will step in.

The centerpiece of Budget 2016 is a series of 25 initiatives collectively called Innovative New Zealand, to which the government is committing $761 million over the next four years.

The aim of this package is to boost science and innovation and upskill New Zealand workers. The scheme will fund a further 5,500 apprenticeships by 2020 and provide $411 million for science and innovation, focused on the Marsden Fund and the Health Research Council.

Of the Innovative New Zealand spending, $94 million is aimed at benefiting regional communities through boosting the government's Regional Growth Programme and to develop more regional research institutes, an initiative of Budget 2015 , across New Zealand.

The Innovative New Zealand package is an important step in addressing the problem New Zealand faces trying to get people with the right skills in the right places.

High net-migration of skilled workers is filling a gap, but it is widely accepted the current migration levels are not sustainable indefinitely. New Zealanders need the right signals and the right opportunities to upskill for the changing work environment.

Hopefully the money in the new package - combined with a clear focus on science, engineering and agriculture - can help New Zealanders make this change.

Despite these constraints and the hard times dairy is facing, the New Zealand economy continues to do well.

Growth continues to bubble along at a respectable 2.8%, unemployment is forecast to fall to 4.6% and the average wage to rise to $63,000 by 2020. If all of this comes through, the government is forecasting a fiscal surplus of $6.7 billion by 2020. This has allowed the government to shift its focus from generating a surplus to paying down debt.

However, forecast surpluses for both the 2016 and 2017 years are a rather modest $700 million. This would not seem to give the government anywhere near the headroom it would need over the next few years to fund the $3 billion tax cut John Key has said he would like to see.

Even out to 2020, surpluses are currently fully committed to paying down debt. If there are going to be tax cuts, something's got to give.

Aaron Quintal is a partner and David Snell and executive director at EY, a business consultancy.