Polity by Rob Salmond


Budget 2016: Dull on top, hollow underneath

This is the Budget you write when you’ve got no new ideas.

Today Bill English hands down a Budget that says the words “innovation” and “investment” a lot, but contains not one actual innovative investment to meet the housing crisis, the health crunch, or falling standards of education.

And while the economy is forecast to grow, New Zealand’s working people (wage and salary earners like the vast majority of us) are forecast to miss out on most of the gains.

Let’s start with the biggest package in the Budget, the $2.2 billion of new funding for health. Sounds big, right?


First, health is a big ticket item, so the first year’s $670 million is only a 4% increase. Second, that increase gets almost entirely eaten by inflation and population growth, and it’s the biggest increase on offer. The money gets smaller from there, while inflation and population growth carry on trucking. 

In fact, I did the numbers using the Treasury’s own forecasts for health spending, population, and inflation, and found that by 2020 real health spending per person will be about $300 lower (in 2016 dollars) than today. (Nerds: Table at bottom.)

Yes, that’s right, lower.

Even accounting for their much trumpeted $2.2 billion package, you’ll be getting less healthcare than today if National gets its way.

It’s a 10% health cut for every person in New Zealand, over the next four years.

In the media lockup, someone pointed out to Bill English that the proportion of GDP going to healthcare is falling under his watch. Under this Budget, even as he crows about more money for health, it’s forecast to fall from 6.1% of GDP to 5.2% by 2020. English’s response: “Oh well, the amount of money you’re spending isn’t really the issue.”

Then why the hell did he crap on about how much money he’s spending?!

(I guess it’s not much fun playing with smoke and mirrors when the mirrors are so easy to see.)

The other billion dollar package, $2.1 billion on “public infrastructure,” suffers from the same smoke-and-mirrors trickery. Yes, building new classrooms because you have more kids to teach is a good idea, and there’s more money for that – but it’s hardly an innovative investment.

It’s like pausing for a standing ovation each time you pay the power bill.

There’s almost nothing in the budget to address falling educational rankings, and that’s a huge problem for New Zealand down the line.

After that, the second biggest investment in the public infrastructure package is in the “Inland Revenue’s new tax administration system,” which gives you a bit of a clue just how excited the nation’s media were at the Budget lockup just now.

These two non-events are the “highights” in the budget. 

National obviously feels that the current state of New Zealand, where education achievement is going backwards, more people are getting turned away from doctors, and the housing crisis rolls inexorably on is good enough.

I disagree, especially when it comes to housing. And so do most New Zealanders.

The crisis in homeownership gets almost entirely ignored in this Budget, with Nick Smith getting $100 million to buy a few more cemeteries and exploding substations to put houses on.

It’s a case of tinkering while Auckland burns.

Smith promised 500 hectares and got $50 million for this last year, but delivered only 13 hectares and no houses, and spent the whole budget. With double the money, here’s hoping he can do massively better that 26 hectares and no houses. Auckland desperately needs better than this on housing.

The one positive thing I’ll say about the Budget, consistent with my post last week, is that the government is doing good work taking a more data-driven approach to getting the most value for taxpayer funds spent on welfare. My issue isn’t so much with the investment approach – which started its life in ACC under Labour.

My issue is with the investment levels. Declining health resources for each New Zealander is a case in point. As our national income rises, our people deserve access to more healthcare, not less.

Overall, this Budget is deathly dull on the surface, and insidious underneath. There’s nothing major for anyone on any side to get excited about. It’s a sign of a government that’s run out of ideas.


YearPop'n (000)Health ($m)Inflation %Real health $ per person
2016 4662 15156 0.1 $3,251
2017 4751 15567 1.5 $3,228
2018 4808 15585 2.0 $3,131
2019 4852 15588 1.9 $3,045
2020 4985 15626 2.1 $2,964

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