Wellbeing Budget 2020 - Rebuilding Together
In the absolutely unprecedented times of this global COVID-19 pandemic, Minister of Finance Grant Robertson has presented his third budget. Budget 2020 is unique in that its almost sole focus is on “rebuilding together” and outlines the Government’s proposed steps on the long road back to economic normality – whatever that may be. COVID-19 has changed the lives of all New Zealanders and with an election looming, only time will tell if the Government’s plan is fit-for-purpose in the eyes of voters.
In 2019, the Government delivered its first “Wellbeing Budget”. This signaled a programme of change and introduced Budget decisions based on what matters to New Zealanders. With the outbreak of COVID-19, New Zealand faces health and economic challenges unparalleled for 100 years. Already there has been enormous social and economic disruption, requiring the Government to ‘put on ice’ some initiatives to rightly focus on what matters now – keeping people in jobs and ensuring the economy restarts as quickly as possible.
Before the COVID-19 pandemic, New Zealand’s GDP growth was higher than many of our international peers. Unemployment was at historically low levels and inflation was within the target range. Government debt was below 20% and previous surpluses enhanced the balance sheet.
New Zealand, along with the rest of the world, now faces the largest economic shock not seen in peacetime since the Great Depression of the 1930s, with annual global growth expected to fall to minus 3%. While we may have acted swiftly to contain the virus and cushion the economic blow, the reality is the impact on parts of our domestic economy has already been severe. For example, the number of tourists entering the country in April was basically zero.
Despite the measures announced previously, unemployment is still expected to rise to 9.8% by September 2020.
Last year’s $7.4 billion Government surplus has evaporated into a deficit of $28 billion, with similar projections over the coming years. Debt peaks at just over $200 billion or 53.6% of GDP, with a forecast surplus only returning in 2028.
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Director and Head of Tax
PKF Dunedin Ltd