Budget 2013: the main points

12:30 pm on 17 May 2013

The Government has confirmed Meridian Energy will be the next state-owned energy company to be partially sold.

In unveiling the 2013 Budget in Parliament on Thursday, Finance Minister Bill English said the Treasury has been instructed to ready the company for partial sale in the second half of this year, depending on market conditions.

Finance Minister Bill English. Photo: NATIONAL PARTY

Mr English confirmed a further $1.5 billion of new capital investment from the Future Investment Fund, which was established to invest proceeds from the partial privatisation programme.

That includes $426 million for the redevelopment of Christchurch and Burwood hospitals, $80 million for irrigation projects and $94 million for the fourth year of KiwiRail's turnaround plan.

Mr English also released details of how the Government intends to put a brake on rising house prices. He said new legislation will make housing more affordable by enabling local authorities to fast-track planning procedures for new housing developments.

This will be subject to accords between the Government and councils in areas where housing is least affordable - but if a local authority does not agree, the Government will have the power to step in and override its planning authority.

Another bill has been introduced to extend income-related rents to community housing providers and reviewable tenancies to all Housing New Zealand tenants.

Return to surplus signalled

Bill English says Budget 2013 confirmed the Government's books will return to surplus in 2014-15.

Treasury forecasts show an operating surplus before investment gains and losses of $75 million in 2014-15.

Net core Crown debt is forecast to peak at 28.7% of gross domestic product - the measure of the country's annual economic output - in 2014-15 before falling to 17.6% by 2020-21.

The Government intends to further delay contributions to the New Zealand Superannuation Fund until net debt is no higher than 20% of GDP, which under current projections will be 2020-21.

This year's Budget contains $900 million of new spending, $100 million more than indicated in the most recent Budget Policy Statement.

A new $100-million-a-year internationally focused growth package includes a $200 million boost over four years for science, innovation and research. This will be invested in expanding research and development business grants and a new repayable grant for start-up businesses to help them get ready for investment.

Accident Compensation Corporation levies are to be reduced significantly in future financial years, with a total reduction of $300 million in 2014-15 rising to about $1 billion in 2015-16.

Social policy

The Budget also contains spending targeting vulnerable children and families.

This includes $100 million over three years for the Healthy Homes insulation programme, targetting low-income households. This is expected to insulate an extra 46,000 houses. As well, $21 million will be spent over four years on rheumatic fever prevention and an extra $1.5 million next year will go to budgeting services for low-income families.

The Government is also exploring a warrant-of-fitness programme for social housing, and will pilot a low- and no-interest loan scheme for low-income borrowers.

An additional $2.1 billion from this year's Budget will go towards operating and capital spending in the Christchurch rebuild.

Education

The Government is reining in rises in student allowance costs by focussing on younger students.

This means people aged 40 and over will be restricted to 120 weeks of student allowance and people aged 65 and over will no longer be eligible for an allowance.

The Government has reconfirmed its commitment to keeping student loans interest-free.

Total spending on education is up to $9.7 billion.

Extra spending over the next four years includes $173 million for early-childhood education and $92.4 million for Greater Christchurch Education Recovery and Renewal and 21st-Century Schools.

More than $130 million over four years will be spent on the expansion of Maori and Pasifika trades training, a boost in funding for science and engineering courses and to support an increase in the proportion of young people with higher-level qualifications.

Health and welfare

Health spending in this year's Budget has risen to $14.7 billion, which includes $1.6 billion over the next four years for new initiatives and to meet cost pressures and population growth.

Another $92 million of new money over four years will be spent on paying family members who care for their disabled adult children.

The extra spending also includes $70 million for aged care and dementia services, $48 million for more elective operations, $35.5 million for diabetes and heart disease, $18.2 million for a new mothers and babies initiative and $25 million to get more people screened for diseases, particularly breast cancer.

An additional $186.6 million over four years will be spent on the next stage of the Government's welfare changes.

This includes 354 extra Work and Income staff, funding to allow the agency to contract external providers to manage beneficiaries, and services for particular groups of welfare recipients. Money will also be directed to further work on developing the investment approach to welfare.

Protecting the economy

The Finance Minister also confirmed a memorandum of understanding has been signed with the Reserve Bank governor containing four new measures aimed at protecting the economy and financial system from boom-and-bust cycles.

Those measures require banks to hold additional capital on their balance sheets as a buffer during an economy-wide credit boom; hold additional capital against loans in specific sectors if risks emerge in those sectors; adjust their funding ratios to use more stable sources of funding to avoid short-term funding shortages; and, finally, apply quantitative restrictions on the share of high loan-to-value-ratio loans in the housing sector.