Prime Minister Jacinda Ardern and finance minister Grant Robertson unveiled a beneficiary focused Budget. Photo / Mark Mitchell.
Prime Minister Jacinda Ardern and finance minister Grant Robertson unveiled a beneficiary focused Budget. Photo / Mark Mitchell.
The simple headline that perhaps best summarised the Budget was that it was a "Budget for Beneficiaries" with most of the immediate news reports focusing on the additional $3.3 billion in benefit payments allocated over the next four years.
The announcement was entirely in keeping with the expressly stated governmentobjective of reducing inequality, whilst also continuing the less openly stated policies of redistribution via the mechanism of government taxation and spending.
One of the most remarkable things in the Budget was that revenue forecasts from Treasury still do not incorporate any additional revenue estimates from the Government's recently announced housing policy changes.
The Budget release said: "This is because some design features of the housing changes are still under consideration. While it is likely there will be a revenue uplift from these changes, the size of this is subject to the final design of the policy."
This is quite extraordinary given the potentially meaningful impact these deliberate policy changes may have on property transaction prices, volumes and taxation payments.
The Budget was political as much as economic and the spending announced is focused on traditional Labour Party areas of health, social security and housing.
Sean Keane, founder and managing director of Triple T Counsulting.
No one was surprised by that, and it is unlikely that the RBNZ will change its forecasts or outlook in response.
Where there was some market surprise was around the size of the government's bond programme.
The Budget announced a $10b reduction in its size versus the prior estimate, and that was on the low side of most market expectations.
It is unlikely the size or timing of the announced changes will have any immediate impact on the RBNZ's large-scale asset purchase programme or that it will trigger any change in its policy stance.
Eventually, we expect it will be able to reduce its bond purchases and allow the market to step back in fully without the need for central bank support.
Both the market and the RBNZ will watch carefully to see how successful the Government is in executing some of the spending plans.
Capacity to execute is a real constraint in the economy with borders mostly closed — the Government may find it difficult in some areas without squeezing out the private sector at the same time.
The RBNZ will also closely monitor how quickly the uplift in payments to beneficiaries get circulated into the economy.
All economic models highlight that those on the lower end of the economic income scales have a higher-than-average propensity to spend and a much lower propensity to save.
The RBNZ and Treasury will be looking for signs the higher benefit payments are being rapidly consumed and boosting activity in the wider economy.
