New Zealand Budget Proposal Offers Small Financial Relief Ahead of Elections

Finance


Wellington, New Zealand — Months before the election, New Zealand’s government on Thursday provided modest economic relief to many of its citizens by making most prescription drugs free and increasing subsidies for childcare and public transport.

However, the government’s annual budget plan was conspicuously lacking in major new initiatives. Since taking office earlier this year, Prime Minister Chris Hipkins has promised a back-to-basics approach, scrapping many of the more ambitious and controversial plans of his predecessor Jacinda Ardern.

Treasurer Grant Robertson said the budget is all about getting the basics right.

“It’s realistic, realistic, and the right budget for these times,” Robertson said. “Was there anything else you wanted to do? What else did the minister want to do? 100 per cent. But now is not the right time to do all that.”

Opinion polls show Hipkins and his liberal government are in a tight race against Christopher Luxon’s conservative opposition in October’s elections.

New Treasury forecasts released on Thursday showed that New Zealand’s economy is no longer expected to enter recession as it cools this year. Still, the forecast predicts a sharp rise in unemployment and weak economic growth.

The government’s budget plan comes after flash floods, cyclones and other extreme weather events in Auckland earlier this year caused billions of dollars in damage to infrastructure and housing, plunging the country into economic recession. rice field.

The budget eliminates small co-payments for most prescription drugs, extends subsidized childcare for preschoolers to 2-year-olds, and makes bus and train rides free for all children under 13.

The plan also significantly increases spending on new schools, hospitals and other infrastructure, and spends billions on building more weather-resistant power grids and roads to replace those destroyed by cyclones and floods. .

The plan requires legislative approval, but it is seen as a formality because Hipkins and his supporters hold a majority in Congress. The budget will go into effect in his July when the fiscal year begins, but not all efforts will start immediately.

Opposition leader Luxon said the government was drowning in spending.

“Treasurer Grant Robertson has committed a vital budget,” Luxon said. “What he has done is wasteful spending that will result in a massive increase in the budget deficit and an increase in debt for years to come.”

The Treasury Department expects inflation to fall sharply from its current level of 6.7% to around 3% by the end of next year. This shows that the central bank’s base rate has already reached its peak of 5.25% in the current cycle.

The Treasury Department forecasts that the economy will grow by 1% in the year starting in July and will accelerate to 2.1% in the following year. The Treasury Department expects the unemployment rate, currently at 3.4%, to rise to 5.3% by the end of next year and then decline.

The government expects to return to a budget surplus by 2026 after running a budget deficit since the outbreak of the new coronavirus pandemic in 2020. We expect government debt to peak at 22% of GDP before declining.



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