KiwiSaver $1,000 kick-start payment to cease

21 May 2015 0 Comments

People enrolling in KiwiSaver from 2pm today will no longer receive a $1,000 kick-start payment, Finance Minister Bill English says. The change does not affect existing KiwiSaver members.

“KiwiSaver has been successful in attracting members, with 2.5 million New Zealanders having a KiwiSaver account and together receiving $2.5 billion in kick-start payments since the scheme started in 2007,” Mr English says.

“However, it also has considerable costs for taxpayers. The Government will spend more than $850 million this year on two subsidies – the ongoing government subsidy of up to $521 a year per member and the $1,000 kick-start.

“Because of these costs, the Government has decided to remove the $1,000 kick-start payment from today.”

Contributing KiwiSaver members aged 18 or over or under 65 will continue to receive an annual Member Tax Credit from the Government of up to $521.

Employers in general are still required to contribute at least 3 per cent of an employee’s gross wage or salary and employees will continue to make their own contributions.

“Removing the kick-start payment for future enrolments will save over $500 million over the next four years,” Mr English says. “This money is being reinvested in this Budget into priority public services.”

In 2015/16, the Government is forecast to spend $705 million on the KiwiSaver Member Tax Credit plus $12.3 billion on New Zealand Superannuation.

“Auto-enrolment when starting a new job, the 3 per cent employer contribution and the member tax credit of up to $521 each year means people still have an incentive to sign-up to KiwiSaver and to keep saving for their retirement.

An in-depth evaluation of KiwiSaver is available at www.ird.govt.nz

Share offer funds support education, UFB, rail

21 May 2015 0 Comments

Proceeds from the Government’s share offer programme provide a further $939 million of new capital investment in Budget 2015 without the need to borrow more from overseas lenders, Finance Minister Bill English says.

“The share sale proceeds provided $4.7 billion to the Future Investment Fund for spending on new public assets without having to borrow,” Mr English says.

Future Investment Fund allocations in Budget 2015 include up to $210 million to extend the roll-out of Ultra-Fast Broadband (UFB). This takes the total investment in UFB and the Rural Broadband Initiative to around $2 billion.

As confirmed by the Prime Minister last month, education receives $244 million for new schools, kura kaupapa and new classrooms. This will allow an additional seven new schools to be built, with the first expected to open in 2017.

In tertiary education, up to $100 million has been set aside for Lincoln University to rebuild its earthquake-damaged science facilities, as part of the Lincoln Hub development.

KiwiRail receives $210 million in 2015/16 and a further $190 million as a pre-commitment against Budget 2016 for its freight rail services and to maintain the national rail network to a safe and reliable standard.

“Rail is an important part of New Zealand’s transport landscape. However KiwiRail’s current operations require around $200 million a year in ongoing Crown support just to break even,” Mr English says.

“The Government is committed to a national rail network, but ongoing subsidies at this level are unsustainable. The funding provides the KiwiRail board with a two-year window to identify savings and reduce the level of ongoing Crown funding.”

Budget 2015 also provides $97 million from the Fund for regional highways, as well as $40 million for investigation, design and construction of urban cycleways.

Other initiatives within the Future Investment Fund in Budget 2015 include:

  • Up to $52 million in contingency to replace the Waitangi Wharf on the Chatham Islands.
  • $40 million of investments into Te Papa for capital works on its Wellington buildings. 
  • $35 million to further extend Immigration New Zealand’s new ICT systems to deliver greater border security and more efficient visa services.
  • $13 million to relocate the Archives New Zealand Christchurch regional office.

From Budget 2012 to Budget 2015, $3.9 billion of proceeds from the Government’s share offer programme have been invested through the Future Investment Fund. This has included $635.6 million in education, $684 million in health and $990.1 million in transport.

“There is a further $726 million remaining in the Fund to spend on new assets in Budget 2016 without having to borrow,” Mr English says.

“The success of the Government’s share offer programme means taxpayers will not have had to borrow money for new capital spending over about five years. The plan to sell down the Government’s majority stakes in energy companies and Air New Zealand to pay for new public assets is working.”

Books in good shape as surplus nears

21 May 2015 0 Comments

The Crown’s books are in good shape and on track to surplus as the Government maintains its careful and responsible management of public spending, Finance Minister Bill English says.

“We’re making good progress on the Government’s fiscal priorities and the outlook is positive,” Mr English says.

The Treasury is predicting solid growth, growing employment and real wage increases. However, lower inflation means tax revenue is not rising as quickly as expected.

The Budget forecasts for 2015/16 show a modest OBEGAL surplus of $176 million, increasing to $1.5 billion the following year, and $3.6 billion in 2018/19.

For 2014/15, the forecasts show a deficit of $684 million, which is $2.2 billion less than last year’s deficit.

“The overall fiscal trajectory has not changed,” Mr English says. “The surplus target has helped to turn around the Government’s books.  We’ve come from an $18.4 billion deficit four years ago to seeing steadily rising surpluses into the future.”

The forecasts also show the Government meeting its other major fiscal target of reducing net government debt to 20 per cent of GDP by 2020.

“The Government has no intention of making cuts to services, programmes or income support in response to lower tax revenue simply to chase a surplus.

“We have a track record of sticking to our spending plans to protect the most vulnerable and to provide certainty for users of public services. We won’t change that approach just to turn a small forecast deficit into a small forecast surplus,” Mr English says.

There is therefore no change to the amount set aside each Budget for new policy initiatives. Budget 2015 has a net operating cost of $1 billion per year. This is made up of $6.1 billion of new operating spending over the next four years, of which $2 billion is funded through reprioritisation and increased revenue.

Budget 2016 also has an allowance of $1 billion. A one-off higher Budget allowance of $2.5 billion in 2017 provides options for future income tax reductions should fiscal and economic conditions allow. The allowance for Budget 2018 then falls to $1.5 billion.

These allowances are much smaller than the amount spent by the previous Government, which averaged over $3.3 billion in each of their last six Budgets.

“The Government has focused on controlling its spending and getting better results from public services. This approach is succeeding. Core Crown expenditure has fallen from 34.1 per cent of GDP in 2008/09 to an expected 30 per cent in 2015/16.”

As in previous years, Budget 2015 includes reprioritisation of lower-value spending. For example, removing the $1,000 KiwiSaver kick-start saves over $500 million over four years. Introducing a border security levy means taxpayers will no longer have to meet the cost of passenger border clearance, which is around $100 million a year.

“We are committed to delivering ongoing spending restraint. In part this will be achieved by actively investing in better public services,” Mr English says. “By addressing the long-term drivers of social dysfunction, we can deliver results for the community and results for the Government’s books.

“Last year, we reduced the expected cost of supporting current beneficiaries over their lifetime by $7.5 billion. A key part of this was getting more sole parents into work.”

The forecasts also include provision for annual ACC levy cuts of $375 million in 2016 and a further $120 million in 2017, depending on the outcome of public consultation. This is in addition to the $1.5 billion reduction in annual ACC levies since 2012.

New capital spending in this Budget is funded by reprioritisation, drawing on a further $939 million in proceeds from the Government’s share offers through the Future Investment Fund.

Budget 2015: At a Glance

21 May 2015 0 Comments

Budget 2015 delivers careful management of public spending, hand in hand with investment in public services.

(All figures for four years to 2018/19 unless otherwise stated).

Looking ahead to the results of responsible economic management

  • Economic growth forecast to average 2.8 per cent over the next four years.
  • Average wages expected to rise by $7,000 to $63,000 a year by mid-2019.
  • Unemployment forecast to fall below 5 per cent in 2016.
  • In line with the allowance set in December, Budget 2015 has a net operating cost of $1 billion per year. This is made up of $6.1 billion of new operating spending over the next four years, of which $2 billion is funded through reprioritisation and increased revenue.
  • Deficit of $684 million forecast for 2014/15, moving to a surplus of $176 million in 2015/16 and growing to $3.6 billion in 2018/19.
  • Net core Crown debt is forecast to peak at 26.3 per cent of GDP in 2015/16, and then fall to 19.7 per cent of GDP in 2020/21.
  • Government remains committed to $1 billion new operating allowance in Budget 2016, increasing to $2.5 billion in Budget 2017 to allow for modest tax cuts before returning to $1.5 billion a year in Budget 2018 and growing thereafter at 2 per cent per Budget.
  • Core Crown expenses have fallen from 34.1 per cent of GDP in 2008/09 to an expected 30 per cent in 2015/16 and are expected to continue to fall.
  • Provision for annual ACC levy cuts of $375 million in 2016 and a further $120 million in 2017, depending on the outcome of public consultation.
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Budget Speech

21 May 2015 0 Comments

Mr Speaker,

I move that the Appropriation (2015/16 Estimates) Bill be now read a second time.

It’s a privilege to present the National-led Government’s seventh Budget.

New Zealand has come through significant challenges and is now a more confident and resilient country than it was seven years ago.

Successive Budgets have sought to put New Zealand on a track to surplus and debt reduction, and as a result the Government’s books are in good shape.

Careful management of public spending has gone hand-in-hand with investment in public services.

The economy has risen from deep recession to solid, 3 per cent growth.

In the 2011 Budget, I mentioned Treasury’s forecast of 170,000 additional jobs by June 2015, and this was treated with some scepticism.

I can report that this target has already been surpassed, with three months still to go.

However, Budget 2015 is about looking forward, not looking back.

This is a responsible and supportive Budget from a responsible and supportive Government.

In this Budget we are providing further support for the lowest-income families and children in New Zealand.

We’ve allowed for significant ACC levy reductions.

We’re strengthening tax rules on property investment.

We’re investing more in the drivers of economic growth.

And we’re supporting health and education with $2.4 billion over the next four years.

This is achieved within an overall expenditure track that sees debt start reducing as a percentage of GDP and helps keep pressure off interest rates.

Delivering this Budget is only possible because of the constructive working relationships National has with the Maori Party, ACT and United Future.

I want to acknowledge their continuing support and contribution to stable government.

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Help for families at heart of responsible Budget

21 May 2015 0 Comments

A package of measures aimed at reducing hardship among children in New Zealand’s lowest-income households is at the heart of new spending announced in the Budget today, Finance Minister Bill English says.

The package, costing $790 million over four years, includes increased work obligations for sole parents on a benefit, more childcare support for low-income families, a $25 a week increase in benefit rates for families with children, and an increase in Working for Families payments to low-income families not on a benefit.

These measures are part of Budget 2015 which was delivered today against a backdrop of sustained economic growth, rising wages, more jobs, low inflation and low interest rates.

“In our previous six Budgets, careful management of public spending has gone hand-in-hand with investment in public services,” Mr English says.

“Budget 2015 builds on that. This is the type of Budget that a responsible Government can deliver when it’s following a plan that’s working.”

Budget 2015 outlines the Government’s investment across a wide range of areas including health, education, welfare, housing, innovation, Ultra-Fast Broadband, defence, police and the Canterbury earthquake recovery.

As previously announced, the Budget allows for nearly $500 million of cuts to ACC levies on workers, businesses and motor vehicle owners.

In addition, the Budget includes measures outlined last weekend by the Prime Minister to bolster the tax rules on property investment. 

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$790m package for children in poorest families

21 May 2015 0 Comments

Budget 2015 includes a $790 million package to reduce hardship among children in New Zealand’s poorest families, as the next step in the Government’s commitment to address the long-term drivers of deprivation.

The package includes increased work obligations for sole parents on a benefit, more childcare support for low-income families, a $25 a week increase in benefit rates for families with children, and an increase in Working for Families payments to low-income families not on a benefit, Finance Minister Bill English and Social Development Minister Anne Tolley say.

“This package strikes a balance that offers more support to low-income families with children, while ensuring there remains a strong incentive for parents to move from welfare to work,” Mr English says.

“Moving to paid work is the best way to lift more families out of poverty, while an increase in benefit rates will help address our concern about children whose family’s resources have been falling behind other households.

“Over many years, beneficiary family incomes have hardly changed in real terms, while those for working families have increased. Two-thirds of children in more severe hardship have a parent on a benefit, and nine out of 10 of those are sole parents.”

As a result of this package, from 1 April next year:

  • Most sole parents, and partners of beneficiaries, will have to be available for part-time work once their youngest child turns three, rather than five as now.
  • All beneficiaries with part-time work obligations will be expected to find work for 20 hours a week, rather than 15 hours a week as now.
  • Benefit rates for families with children will rise by $25 a week after tax -  the first time since 1972 that core benefit rates have been increased by more than inflation.
  • Beneficiaries receiving Sole Parent Support will have to re-apply for their benefit every year – as people receiving Jobseeker Support already do.

Mrs Tolley says there has been widespread reform of the welfare system over recent years aimed at increasing people’s independence where possible.

“I am confident that these changes being outlined today will not contribute to further dependency, and will have a positive impact on the lives of beneficiary families and their children.”

It is expected that around 110,000 families, with 190,000 children, will receive the higher benefit rates.

“While two-thirds of children in more severe material hardship live in beneficiary families, the remaining third have working parents on low incomes, and the Government thinks those families could also do with extra support,” Mrs Tolley says.

“That’s why we are also making changes to Working for Families to give more financial support to lower-income families not on a benefit.”

Low-income working families earning $36,350 a year or less, before tax, will get $12.50 extra a week from Working for Families, and some very low-income families will get $24.50 extra.

Working families earning more than $36,350 will get extra from Working for Families but it will be less than $12.50 a week, with the exact amount dependent on their family income.

Some higher-income families earning more than $88,000 a year will get slightly less from Working for Families, with the average reduction being around $3 a week.

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Budget 2015: Extra property tax measures

17 May 2015 0 Comments

The Government is taking extra steps to bolster the tax rules on property transactions – including those by overseas buyers - and to help Inland Revenue enforce them, Finance Minister Bill English and Revenue Minister Todd McClay say.

The tax measures are also expected to take some of the heat out of Auckland’s housing market and sit alongside the Reserve Bank’s latest moves to address associated financial stability issues, Mr English says.

“Taken together, they will help Inland Revenue enforce existing tax rules, provide it with extra resources and ensure that property investors pay their fair share of tax – whether they’re from New Zealand or overseas.”

The Budget this week will confirm that, from 1 October this year, the following will be required when any property is bought or sold:

  • All non-residents and New Zealanders buying and selling any property other than their main home must provide a New Zealand IRD number as part of the usual land transfer process with Land Information New Zealand.
  • In addition, all non-resident buyers and sellers must provide their tax identification number from their home country, along with current identification requirements such as a passport.
  • And to ensure that our full anti-money laundering rules apply to non-residents before they buy a property, non-residents must have a New Zealand bank account before they can get a New Zealand IRD number.
  • In addition, a new “bright line” test will be introduced for non-residents and New Zealanders buying residential property, to supplement Inland Revenue’s current “intentions” test. Under this new test, gains from residential property sold within two years of purchase will be taxed, unless the property is the seller’s main home, inherited from a deceased estate or transferred as part of a relationship property settlement.
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Small deficit in Crown accounts to March

11 May 2015 0 Comments

The Crown accounts for the nine months to March 31 posted a deficit of $358 million, smaller than the $1.2 billion deficit forecast by Treasury in December, Finance Minister Bill English says.

The smaller deficit primarily reflects tax revenue coming in $844 million higher than forecast.

Corporate tax was $545 million higher than forecast, customs and excise duties were $129 million higher and other individuals tax was $357 million above forecast. As in previous months, this was partially offset by GST being $201 million lower than forecast – in part driven by very low inflation leading to lower than expected consumer spending.

“Although tax was ahead of expectations, these figures underscore the difficulty in forecasting the difference between two large numbers,” Mr English says. “Treasury consider that around $400 million of the variance was the result of tax being paid earlier than expected – rather than an ongoing increase in the tax take.

“Treasury’s latest forecasts have tax for the 2014/15 year lower than forecast at Budget 2014, primarily due to lower inflation which currently sits at 0.1 per cent in the year to March.”

The Government continues to control its own expenditure, with core Crown expenses in the year to March coming in $127 million below forecast.

Core Crown expenditure for 2014/15 is now expected to be $4.1 billion lower than forecast in 2011, when the surplus target was first set.

“We’re getting on top of spending, but lower inflation, while good for households and businesses, means Treasury’s Budget forecasts will show a small deficit for 2014/15,” Mr English says.

Flag process is structured correctly, English says

07 May 2015 0 Comments

The process for considering the New Zealand flag is structured in the best way to give the fairest outcome, Deputy Prime Minister Bill English says.

A petition before the Justice and Electoral Committee today suggested that the question, “Do you want to change the flag?” should be added to the first referendum on the flag, which is likely to be held in November or December this year.

Mr English says the purpose of the first referendum is to allow people to rank four alternative flag designs that will be chosen by the Flag Consideration Panel following public consultation. The design that gets the most support in that referendum will go through to a second referendum where voters will choose between it and the current flag.

“Those are logical steps, designed to give the fairest outcome,” Mr English says. “It makes sense that people should know the alternative before they vote on whether they want to change the flag.

“We also have advice that if the change question was asked at the first referendum it could not only cause confusion but even if it meant a second referendum was not required, the financial saving for the Electoral Commission would be only about $2.3 million.”

Many people are already taking the opportunity to put forward alternative designs, Mr English says. 

“I think many New Zealanders realise that it is a rare privilege to have the opportunity to vote on such an important symbol for our country.

“There is a cost of about $26 million in running an independent and public process, but New Zealanders have not considered this issue formally for more than 100 years and we are committed to allowing full public participation.”