Today’s budget “Support for today, building for tomorrow” focused on four key themes: the cost of living, continuing key services, recovery and resilience and fiscal sustainability.
But what does this mean for the property sector?
Key points for the property sector
- The government is expanding the Warmer Kiwi Homes Programme to $403 million for heating and insulation installations to 100,000 more homes.
- National Resilience Plan set up with initial funding of $6 billion – first priority is repair and rebuild of telecommunications, energy and roading after Auckland flooding and Cyclone Gabrielle. This will also fund our long-term infrastructure deficit and pipeline.
- $100m fund to help Councils invest in future flood resilience.
- $71b across five years for new and existing infrastructure investments.
- 3,000 new public housing places by June 2025.
- Extension of the Apprenticeship Boost programme.
- Enhancing data on adaptation and mitigation.
- Increasing supply of Māori housing, boosting Whānau Ora, education and Pacific Wellbeing and languages strategy.
New Zealand economy at a glance
The economy has expanded by 2.4% over the 2022 calendar year.
Inflationary pressures remain; however, inflation is forecast to drop to 3% by next September.
Treasury no longer forecasting a recession, due to cyclone recovery.
Unemployment is forecast to peak at 5.3% in late 2024.
GDP is forecast at 3.2% this year, dropping to 1 per cent next year.
Net core Crown debt hits $181 billion with net debt forecast to peak at 22% in 2024.
- Several initiatives were announced to address the cost of living, including extending 20 hours childcare to two-year-olds (commencing March 2024), scrapping the $5 prescription co-payment, and free public transport for under 13 year olds.
- 6,600 new student places plus four new schools as part of a $3.6 billion operating and $1.3 billion capital investment.
- Boost in frontline staff in Health to the tune of $1 billion. More money to help reduce waiting lists ($118 million) and $100 million to boost primary care. $63 million for 500 extra nurses. $75 million more for Pharmac.
- In terms of fiscal sustainability, the Government announced a $4.8 billion per year new operating package and a $10.7 billion new capital package with $4 billion in savings.
- There will be alignment of the Trustee tax rate with the 39% top tax rate, an increase from 33%. This change is expected to raise $350 million a year.
- Return to surplus forecast in 2025/26 – one year longer than originally forecast.
Property Council Priority
Property Council Recommendation
Government Response
Local government infrastructure, housing and emissions reduction
Increase funding and finance for local infrastructure to support housing near key transport nodes to reduce emissions.
Yes
Prior announcement of $1b Infrastructure Acceleration Fund, supporting core infrastructure for intensification near key transport nodes, retail and employment to reduce emissions.
Yes
$71b across five years for new and existing infrastructure investments.
Resource consents
Establish a National or Regional Consenting Authority to speed up resource consents.
No
Skills and resources continue to remain a major pressure point for local government.
Transport
Announce alternative funding and financing mechanisms for future large-scale transport projects such as Auckland Light Rail and Harbour Crossing.
No
No announcement on how Auckland Light Rail or other large scale infrastructure projects will be funded.
Tax
Make changes to depreciation and overseas investment rules for Build to Rent.
Redesign Fire and Emergency Funding Regime.
No
No
Environment and sustainability
Introduce tax deductions for retrofit strengthening, environmental refits and service fits to encourage commercial property owners to undertake work that will reduce overall emissions.
No
Instead, the focus is on warmer, drier homes.
Political analysis
From the Auckland floods to Cyclone Gabrielle, 2023 is proving to be the year of emergency responsiveness. But can it be the year of resilience too?
Budget 2023, “Support for today, building for tomorrow” is the Government’s attempt to widen the gap in current political polling in the lead up to October’s General Election. This saw an expected Government response of trying to reduce current cost of living pressures for low and middle-income New Zealanders while simultaneously investing in core infrastructure.
The cost of living lolly scramble extended 20 hours free childcare to two-year-olds, scrapping the $5 prescription co-payment, free public transport for under 13-year-olds, and expanding the Warmer Kiwi Homes Programme.
The Government also introduced a $6b National Resilience Plan focusing on “building back better”, which seeks to improve the future resilience of national infrastructure. A further $71b over five years, was announced to fund our long-term infrastructure deficit and pipeline. It is no secret that New Zealand has an over $210b shortfall in National Infrastructure, and today’s announcement will seek to help close that gap.
Property Council’s long-standing position on infrastructure, is it can’t just sit on Central and Local Governments balance sheets, for them to kick the can down the road. While supportive of today’s announcements around National infrastructure and Regional resilience funding, we need to look at additional sources of revenue to support large-scale transport projects (such as user pay systems like congestion charging). Without alternative funding and financing mechanisms, we are simply pushing today’s infrastructure issues onto future generations.
It’s no secret that past and current Governments have struggled with housing supply and affordability. This Government has pulled long-term levers such as medium density housing rules, National Policy Statement on Urban Development and the introduction of Build to Rent as an asset class. While, we know these changes can make a difference in the long term, we currently face short-term challenges of interest rates, labour shortages, access to building materials (especially carbon-friendly), and long waits for resource consents. Today the Government announced building 3,000 new public housing places, an over-reliance on public sector delivery and independently of the private sector. If we are serious about resolving New Zealand’s housing challenges, we must better work together.
Today’s budget was heavily focused on infrastructure and making the little stuff more affordable for younger families. But will it be enough to pull an election win out of the bag?
Author | Katherine Wilson
As Property Council’s Head of Advocacy, Katherine is tasked with leading our advocacy campaigns at both a regional and national level.
Level-headed and engaging, Katherine has both a law degree from Otago University and an arts degree (majoring in politics) from Auckland University. With solid experience as a policy analyst and advisor in Wellington and Auckland, she has extensive networks and solid analytical skills.
Katherine is hugely dedicated, highly intelligent and committed to ensuring the voice of our members is heard at all levels of governance. She’s also relentlessly positive and enjoys a good chat.
