Wellbeing Budget


30th May, 2019

New Zealand’s ‘Wellbeing Budget’ holds little promise for small businesses

Today, New Zealand’s Coalition government handed down what it’s dubbed the ‘Wellbeing’ Budget, in which it has “committed to putting the wellbeing of current and future generations of New Zealanders at the heart of everything we do”.

At least, that’s what Minister of Finance, Grant Robertson said as he opened his Budget delivery speech. But what’s in store for New Zealand’s employers, startups and small business sector?

Robertson’s speech started out with a heavy focus on the health and wellbeing of all Kiwis, which is hardly surprising given the title of the Budget. He also flagged the fact the Government has tweaked its measures of success.

“…not only has this Budget measured our success differently, we have embedded wellbeing at every stage of the creation of this Budget – from setting priorities, to analysing proposals to making the inevitable trade-offs that come with the privilege of being in government.”

Focusing on the quality of life for New Zealanders today and into the future

After discussing the impacts of the recent Christchurch attacks, Robertson highlighted the fact that the Wellbeing Budget wouldn’t only consider the Government’s economic and fiscal outlook, “but also the welfare of our people, the health of our environment and the strength of our communities” in benchmarking performance.

“Evidence from the Treasury’s Living Standards Framework, which is made of four elements of wellbeing, suggests New Zealanders currently have relatively high levels of wellbeing, but there are significant gaps,” he said before going on to call out the relatively strong position the country holds in most facets of life.

But it’s in those areas where “the Government needs to intervene” we see the Wellbeing Budget begin to take shape.

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“These areas of need include New Zealand’s poor mental health outcomes, significant numbers of children living in poverty, the country’s high levels of greenhouse gas emissions, unequal growth and low productivity, and significant disparities across indicators of wellbeing between Māori and Pacific peoples and other ethnic groups,” said Robertson.

It’s in these areas that the Budget focuses its attention, leaving little in the way of good new for the small business community, which is currently crying out for support.

Almost half (48 percent) of the country’s SME sector expects the New Zealand economy to worsen in the next 12 months, according to the latest MYOB Business Monitor survey of more than 1,000 local business operators.

Net confidence is down 15 points from a net balance score of -14 in the March 2018 survey to -29, which means this Wellbeing Budget has a lot riding on it to put the minds of NZ’s employers at ease.

$157 million for innovation

There was some good news from a purely business-based standpoint, and that arrived under the subject heading of ‘building a productive nation’ as described by Robertson as we approached the last quarter of his remarks.

“Productivity growth is a key driver of incomes, both at a household and country level,” he said. “But New Zealand has struggled for decades to be productive.

“We are committed to turning this around.”

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And the Government has committed $157 million to an innovation package, with “initiatives to support businesses to become more productive and develop high-value, low-emissions products”.

$26 million of that is dedicated to commercialising local science and research in a bid to generate new products and services.

Research, Science and Innovation Minister Megan Woods says startups are the way New Zealand will continue to develop unique, world-first and ground-breaking ideas.

“Having sustained support will mean that innovators can more effectively commercialise science and research and turn ideas into products and services that can then be successfully brought to market.”

$300 million for the New Zealand Venture Investment Fund

Robertson went on to highlight a gap in NZ’s domestic capital markets and the impact it could be having on suppressing business growth.

“In a productive economy it’s important to have well-functioning early stage capital markets and a healthy startup ecosystem,” said Robertson.

“New startups are well served but expansion after the startup phase is not well supported.”

The mid-market capital gap is something MYOB has discussed in the past, included in our 2018 MYOB Enterprise Insights Report.

For this reason, the Budget introduces a new fund worth $300 million for the New Zealand Venture Investment Fund as a way to fill the capital gap for startups.

Economic Development Minister David Parker says the fund will help keep more startups in New Zealand for longer and support the proportion of New Zealand ownership.

“New startups are well-served but mid-sized ones, between about $2 million and $15 million in size, are not well supported,” said Parker.

“The world is in the middle of a technological revolution and we need to chase down as many of these commercial opportunities as possible.

“We also want to increase the amount of technology that gets commercialised and to lift the level of innovation in New Zealand.”

Further investments: transforming the economy, land use and infrastructure

Climate change was called out in the New Zealand Budget in a way that hasn’t been seen across the ditch in Australia, with funding announced for a number of climate change related initiatives.

“$8.5 million will be invested in the Global Research Alliance on Agricultural Greenhouse Gases together with an investment of $3.2 million for the Agricultural Climate Change Research Platform,” Robertson announced.

“This will support world-class research here in New Zealand to help agriculture deal with the effects of climate change.”

While mitigating the impacts of climate change are sometimes viewed as a burden for farmers in particular, the Wellbeing Budget sets aside funds for pastoralists to transition to greener land use practices without having to sacrifice their profits.

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“A $229 million Sustainable Land Use Package will invest in projects to protect and restore at-risk waterways and wetlands and provide support for farmers and growers to use their land more sustainably,” said Robertson.

$49 million was also announced to “help transform the forestry sector and support our One Billion Trees programme”.

Finally, another key initiative of interest to business owners was the announcement of a modernisation fund for KiwiRail, which is part of a $1 billion over the next two years for rail, hospitals and other facilities upgrades. In it, funding has been set aside for new trains, ferries and track upgrades.

“It is great to see the substantial investment in infrastructure announced today,” said Ingrid Cronin-Knight, MYOB NZ Country Manager.

“It not only provides the construction and infrastructure sectors with certainty for work over the long term, but it also provides a boost to employment and the related sub-contractors, particularly for KiwiRail and the new Hospitals program.”

Verdict: Wellbeing Budget positive spin does little for business growth

“While the government is to be commended for tackling broader societal issues under its wellbeing framework, and focusing the Budget in this area, it is disappointing to see a limited focus on driving business growth,” said Cronin-Knight

“A healthy society requires a commitment to helping the vulnerable and at the same time, to investing for economic growth so that all can benefit.

New Zealand’s small and medium businesses comprise more than 97 percent of all businesses in the country and they contribute nearly a third of the entire GDP.

“They’ve recently been slugged with imposts that reduce their profitability and in turn impact the ability to invest in their business, whether its buying new equipment, expanding operations, paying wages and hiring more staff,” said Cronin-Knight.

“Many SMEs are feeling the pinch with the increase to the minimum wage and the Auckland Regional Fuel Tax putting pressure on the bottom line of the business.

“Incentives to offset these imposts would have provided the vote of confidence SMEs are seeking from the government and allowed them to further invest in their businesses.

“We encourage the government to ensure local businesses can access work opportunities through the infrastructure program, support skills and training and continue with the regional economic program.”