Government Releases New Budget
May 19, 2011 New Zealand Finance
New Zealand’s new government budget has been revealed, showcasing a series of changes aimed at shoring the country’s economic position into the future, through several cost cutting measures and a lack of any new public spending.
The New Zealand government released its 2011 budgetary plan on May 19th, revealing several changes to the country’s economic policies and new forecasts for the country. The release outlined the government’s primary goals of reducing spending, shrinking public debt, increasing national savings levels, and supporting the goal of a future financial surplus. The new budget was presented by the Finance Minister Bill English.
The Minister confirmed expectations that next year the budget deficit would reach NZD 16.7 billion, approximately 8.4 percent of the GDP. However, he suggested that through a series spending controls, the government would reach a surplus by 2015, one year earlier than previously forecasted. New Zealand’s net debt is now expected to peak at 29.6 percent of GDP in 2015, which is significantly lower than the previous estimate of 33 percent. Currently the government estimates that the debts will decline and be wholly paid off by 2024.
The recovery and rebuild of the earthquake stricken Christchurch region is a key priority in the new budget, with the government setting up a NZD 5.5 billion Canterbury Earthquake Recovery Fund. The new facility will be funded by sales of the to-be-instated Canterbury Earthquake Kiwi Bonds. Creation of the new equity offer will be subject to the National party’s reelection later this year.
The Kiwisaver system is also subject to significant changes. As of June 30th 2012, the government’s Member Tax Credit (MTC) contribution will be halved, with only 50 cent being paid out to every dollar contributed by savers. The MTC payments will be capped at NZD 521.43 per year. From April 1st 2012, the employer’s contribution to Kiwisaver will face Employer Superannuation Contribution Tax (ESTC), which will be applied at the employee’s marginal personal tax rate. From April 1st 2013, the minimum employee contribution rate will be raised from 2 percent to 3 percent. It is expected that the changes will cumulatively provide the government with NZD 2.6 billion in savings over the coming four years. Cost saving alterations will also be made to the national student loans scheme and the Working For Families system.
Photo by Ewan-M