Great Expectations

In the wake of a more than convincing election victory, the Government now needs to set its sights on carefully managing electorate expectations in Budget 2015.

Four key platforms have characterised the last three Budgets; returning the Government budget to surplus and reducing debt; creating a more productive and competitive economy through a range of micro-economic reforms; embedding a focus on results to ensure better value for money from public services; and continuing to support the Christchurch rebuild.

So what are some of the great expectations the Government has to manage in 2015?

Against a backdrop of an expanding economy and sustained economic growth, the December 2014 outlook reversed a previously forecast surplus of operating balance gains and losses (OBEGAL) of $297 million to a deficit of $572 million (which currently represents 0.2% of GDP). But in turn this year’s projected loss will then become a modest surplus of $565 million, which relative to other OECD countries puts New Zealand in a good position.

To continue its quest to build a more productive and competitive economy via the Business Growth Agenda, Budget 2015 will reveal continued investment in skills, training and apprenticeships, incentives to further increase the number of building consents, revising the current system for processing oil and gas permits, an improved infrastructure system that supports businesses both internationally and domestically, and helping businesses access the capital they need to grow.

New Zealand also has a public sector that represents a quarter of New Zealand’s economy. So if the Government is to reduce long-term welfare dependence, crime and educational under-achievement, we are likely to see more focus on servicing the needs of users and customers, rather than agency boundaries. Crown expenses are expected to total $73 billion and increase to $83 billion by 2018/19.  Together health, education and social welfare still make up $52 billion or just over 71% of this, so it’s no surprise that Ministers of the Crown have made it clear that that there will be priority spending in these areas. Most other areas will be expected to remain within current baselines. The mantra of achieving “more with less” will continue to focus the thinking of the leadership teams in many Government departments and Crown entities

And who can forget National’s electoral landslide in Canterbury? We can certainly expect some detailed commentary about Christchurch and the Government’s remaining $16 billion contribution to its rebuild.

Electorates also have the enticing prospects of further reducing both household and business ACC levies and lowering income taxes from 2017 for low and middle-income earners.

And as we have already heard from the Prime Minister, another focus for Budget 2015 will be continuing work to deliver better outcomes from social housing for New Zealanders in need.  From announcements made to date it’s clear that housing community providers will continue to grow in importance in the social housing sector.

So it appears that the Government is gilding its hat trick of election wins with a Budget to please many and disappoint very few. It will be interesting to watch the story unfold on 22 May 2015, but even more fascinating will be the post-Budget the response from the voting public and the pundits.

Further enquiries, please contact:

Mark Hucklesby
National Technical Director and Partner
Grant Thornton New Zealand
T +64 (0)9 308 2534