Today’s Budget is all about big spending and big promises, but many will feel that critical issues in housing, infrastructure and climate resilience have been left untouched.
Key points for the property sector:
- A $733 million investment into Māori housing, including $380m into delivering about 1,000 new homes for Māori including papakāinga housing, repairs to about 700 Māori-owned homes and expanding support services.
- $300 million to accelerate investment in low-carbon technology, a quadrupling of the Green Investment Fund
- $3.9 billion of the capital allowance invested into infrastructure projects, including $1.3 billion for rail.
- $150 million into extending the Warmer Kiwi Homes initiative to support 47,700 homes to receive insulation and heating retrofits.
New Zealand’s economy at a glance
- The economy will continue to grow over the next four years, peaking at 4.4% in June 2023
- Unemployment to climb in 2021 to 5.2%, reducing to 4.2% in 2025
- The books to remain in deficit until 2027, peaking in 2022 at $18.4bn
- The Treasury is predicting a ‘sharp’ drop in house price inflation from 17 per cent in 2021 to 0.9 per cent in 2022
How did our Budget Wish List stack up?
More support and resource for local councils to free up land and build more houses.
No
Most of the investment into resource management will go into the design and testing phase. No additional investment into speeding up current processes or supporting councils/authorities to do so was announced.
Reform our planning laws so that the system says “yes” and embraces further sustainable development.
Partially
The Government made a commitment to invest in successful implementation of the proposed resource management reforms, but no signal when that is coming and what that ultimately looks like.
Make sure our tax system is fair and doesn’t place unnecessary burden on mum-and-dad landlords and developers.
No
Signalled interest deductibility changes still on the table, no changes to the tax system proposed.
Provide certainty and transparency around national transport and infrastructure projects with clear timelines and committed funding.
Partially
A significant increase in the capital allowance, but the projects referred to have either been signalled earlier, or the additional investment is in already built infrastructure.
Imbed incentives that help every fraction of our community to change behaviours that mitigate against climate change and reduce our emissions.
Partially
A $300m investment into accelerate investment in low-carbon technology, a quadrupling of the Green Investment Fund.
Key Property Council priority areas
Cities and infrastructure
A significant increase in capital infrastructure spending, including an additional $3.9 billion this year alone. Dunedin and Christchurch receive a significant chunk of the $1.3 billion investment into rail. We are disappointed there aren’t more initiatives targeted at getting our cities moving and thriving, particularly given the investments being made into climate change resilience and housing in particular. Major issues like resource management, three waters and local government reforms largely left untouched.
Housing
A $733m injection into Housing, including $380m for Maori papakāinga housing and $350m ringfenced from the Housing Accelerator Fund to support infrastructure for Maori housing. It is likely this infrastructure investment will benefit all New Zealanders due to the nature of supportive infrastructure. There is very little detail around the Housing Accelerator Fund, particularly about how it will increase supply and control costs. We believe the Treasury’s house price inflation assumptions is heroic.
Regulation and tax settings
No significant change to regulation and tax settings. The Government intends to still progress interest deductibility and bright-line changes. The Treasury assumes – heroically – that these changes will reduce house price inflation from almost 18 per cent in 2021 to 0.9 per cent in 2022. We think this is heroic given the Government have not finalised policy settings for interest deductibility, and the fact IRD do not know how many investors the bright-line changes will affect. The Government has also signalled a Social Unemployment Insurance scheme based off the ACC model, so there could well be an extra levy on businesses and employees to fund this.
Sustainability and resilience
A $67.4m Carbon Neutral Government Programme, including a $19.5m boost for the State Sector Decarbonisation Fund and a quadrupling of the Green Investment Fund. While the additional support for the Government to roll out its plan for a carbon neutral public sector by 2025 is welcomed, there is no support for the private sector to change and adapt at the same pace. If the Government expects the private sector to reduce emissions in the built environment, they need to come to the table to support the private sector to do so. Climate change mitigation has to be a partnership.
Planning system
$131.8m investment into implementing planning law reforms, including design, enactment, transition and initial implementation. This would have been the perfect opportunity to support local authorities and communities to adapt to and implement the changes, as well as support interim measures to keep consenting and developments going. Equally, supporting local communities to prepare for change and support businesses in that endeavour is lacking in this Budget. There is also no real clarity around support for necessary densification in our major cities.
Political analysis
This Budget will alleviate some of the criticisms coming from Labour’s left with the likes of benefit increases to match the Welfare Expert Advisory Groups recommendations, significant investment in rail and the creation of a Social Unemployment Insurance Scheme. But it also has appeal to National voters – fiscal constraint in keeping Debt to GDP ratio below 50 per cent, getting the books back into surplus by 2027 and significant projected economic growth.
The challenge for Labour is two-fold – firstly, meet the expectations they lay out for themselves in the Budget in regards to economic growth, unemployment, housing inflation and child poverty. And secondly, make sure they deliver on the significant investment with regards to social and economic infrastructure as well as their major structural reforms in Health, Three Waters, Resource Management and Local Government. As with anything, housing remains a perpetual challenge for this Government. Although the Budget indicators remain promising that house price inflation and supply issues will come under control in the short term, little evidence or policy detail sits behind those assumptions which may set the Government up for a rocky road ahead.
Finance Minister Grant Robertson has a tough job ahead of him but the numbers – at least on today’s measures – look positive for the Government’s planned recovery road map.
Author | Liam Kernaghan
Southerner Liam is no stranger to politics, with a Bachelor of Arts and Laws from the University of Otago. With his thesis titled ‘Rethinking Reform: Constitutional Reform Processes in New Zealand’, there was little chance of him not entering the political sphere. He backed up his studies with a stint as Ministerial Advisor to Hon Amy Adams and bounced around the halls of Parliament for a few years in advisory roles for several leaders of the Opposition.
Liam is spearheading Property Council’s resource management reform and climate change campaigns, as well as representing our South Island and Wellington members in their specific advocacy initiatives. Energetic, personable and with a fierce wit and ability to make the complex seem simple, Liam is a valued addition to the team.
