The 2022 Budget – What’s In It For You?

What’s in the Budget for you, as Business Owners:

If you are like me, I’ve been extremely worried about the Government’s spending and I was hoping to see some belts being tightened. But we also need the Government to spend, to stimulate the economy, so tightening the purse strings can upset the economy too. If we compare back, in 2020 the Government announced a $50 billion Covid response package and in last week’s 2022 Wellbeing Budget, they have pulled their budget spending right back and are investing an average of $5.9 billion per year in new operating spending and investing $4.7 billion in new capital spending against the Multi-Year Capital Allowance. Yet our Net Core debt (risen sharply since 2019) is still forecast to increase from $61.2 billion in the year ending June 2022 to $75 billion the year after and to $83.6 billion the year after that (year ending June 2024) before coming back down.

BusinessNZ has put out a great article which you can read here and in my summary, I have highlighted some of their main points.

So, of the $10.6 billion budget, what’s in here for you, and to assist with the short term economic recovery in their “Wellbeing Budget 2022 – A Secure Future”:

  • $130m for eight Industry Transformation Plans, some are:
    • $37 million for the Construction Sector Accord Transformation Plan to increase the productivity, capability, and resilience of the construction sector.
    • $30 million for the Advanced Manufacturing ITP. This plan focuses on identifying existing and emerging points of comparatives advantage, maximising our global brand and international connections.
    • An additional $5 million for the Agritech ITP to build the skills and practices required to transform the sector into a sustainable and competitive export industry.
    • $20 million for the Digital ITP to grow the software-as-a-service sector and ensure the skills and talent to need to grow.
  • $100m towards a new Business Growth Fund to support small and medium-sized businesses to access funding to accelerate their development. This is being developed alongside NZ’s major banks. When the details come out on the Fund, I’ll send out more information but from what I’ve read so far, you maybe be putting equity (shares) up as security.
  • $230m boost for apprenticeships that will help alleviate pressure caused by skills shortages, supporting firms to keep early-stage apprentices employed, bring on new apprenticeships, and strengthen the skilled workforce. 38,000 apprentices are expected to benefit from the extension of the Apprenticeship Boost through to the end of 2023.The subsidies on apprenticeships have been successful over the past two years and much appreciated. Great to see this boost in apprenticeships again.
  • $110m in additional funding for the Regional Strategic Partnership Fund. To see additional funding here, I think is good use of money, the Chamber and ChristchurchNZ have provided many of our clients with some worthwhile Grants and really assisted with budgets, business & strategic plans, marketing, health & safety and management training to name a few.
  • $200 million Regional Strategic Partnership Fund to invest in local projects tailored to a region’s particular needs and advantages.
  • Where’s the $4.7 billion capital investments going:
    • $349m capital funding to replace and modernise rail assets, and $1.3 billion to upgrade health infrastructure.
    • There is a focus in transitioning to a digital economy, improving how public services are delivered and keeping existing digital services safe from cybersecurity risks. Key investments include:
    • Setting aside funding for a new digital system for the Courts.
    • $220 million operating and $100 million capital set aside for investments in health system data and digital infrastructure and capability.
    • $60 million to improve broadband infrastructure the worst-served areas, enabling stronger connections and greater productivity.

There was also a number of not unexpected policies such as supporting NZers to meet the cost-of-living pressures through a targeted ($1 billion) package of support focusing on low and middle income New Zealanders.
The overall cost of living package includes:

  • an extension to the reduction of fuel excise introduced in March, by two months until mid-August
  • an extension of the road user charges (RUC) cuts introduced in April, until mid – September, (make sure you buy up in September on RUC) and
  • an extension of half-price public transport fares introduced on April 1, until the end of August.

There will also be a short-term targeted support payment to low and middle income earners through a $350 Cost of Living Payment across three monthly instalments from August 1. This works out to be about $27 per week for an estimated 2.1 million New Zealanders. This payment will be available to people aged 18 and over who earn below $70,000 per annum, based on last year’s tax data, and who are not eligible for the Winter Energy Payment.

I do think a straight tax cut for anyone earning under $70,000 would have been much more effective and beneficial rather than something in place for as short as three months. Where could this be funded from? Maybe dropping the $180,000 threshold for tax at 39% to $170,000.

As signalled pre-Budget, the overall focus of the Budget was principally on Health and Climate Change, with the Emission’s Reduction Plan (ERP) released earlier this week. The plan, the first produced under the Zero Carbon Act, contains around 300 initiatives, with a big emphasis on cutting transport emissions and cutting out the use of coal for heating, and for industrial use. However, around half the actions are not necessarily plans at all but are plans to make plans further down the track. A lot of detail still needs to be fleshed out. The plan confirms that agriculture will face an emissions pricing mechanism from January 2025, although the exact form is still to be determined.

The emissions budgets are set as a sinking lid, the first three budgets take us to 2035. Those budgets are now set:

  • 1st Budget until 2026: 290mt, 72 metric tons (mt) per year.
  • 2nd Budget 2026-2030 (set only in principle) 305 mt, 61mt per year.
  • 3rd Budget 2031-2035 (set only in principle) 240 mt, 48mt per year.

These initiatives will be funded from Climate Emergency Response Fund (CERF), of $2.9billion for the coming year and they are expecting to get from the Emissions Trading Scheme $4.5billion.

Of the $2.9billion, $1.17b of this will be spent in the first 2 years, with most of it used to: convert industrial coal boilers ($230m); fund efforts to encourage transport mode shift ($373m); reduce emissions from waste ($100m); pay for tech R&D to reduce agricultural emissions ($92m); and contribute to funding of low public transport usage during Covid ($47m).

Overall, it’s a big responsibility where to focus the countries expenditure; to keep the economy buoyant, stimulate growth, look after our social services and needs, invest in the future for the better and keep the country running.

Please email us if you would like a copy of the budget or further material in relation to the budget – [email protected].