Research & development is one of few winners in the “no frills” budget, with three new science hubs, an investment boost for tertiary education, and support to grow the tech sector.
Funding for climate change, infrastructure, and transport are rolled together in many places – like new EV charging hubs, free public transport for children, and community renewable energy projects.
The plan to cope with an overloaded health sector includes more than $1b to increase workforce pay rates and attract more staff, while patients will see an end to the $5 copayment charge for prescription medicine.
The SMC asked experts to comment on:
- Science sector
- Tertiary education
- Climate change, infrastructure, transport
- Health
- Tech sector
- Teaching
- Budget overview
Science sector
Professor Nicola Gaston, Co-Director, The MacDiarmid Institute for Advanced Materials and Nanotechnology, comments:
“I have been justifying the lack of new funding for science and research in recent successive budgets, on the basis of the sector reform process, Te Ara Paerangi, being a work in progress. This year, with redundancies continuing to wreak havoc across our university sector in particular, the priority has had to be getting new funding into the system – the opportunity cost of not doing so has simply gotten too large.
“I am massively relieved to see the 5% increase of tertiary education funding from 2024. This is late, and yet as Minister Tinetti says, the largest increase in 20 years. I am also absolutely delighted to see further funding for the Training Incentive Allowance (though this was originally reinstated in Budget 2021).
“Minister Verrall’s announcement focuses on Fellowships, Collaborative Centres around Climate, Health, and Technological Innovation, and funding for our previously announced association with the EU Horizon initiative. These are all known pieces of work; both the Horizon funding and the Wellington-based collaborative centres align well with the stated aims of Te Ara Paerangi to increase collaboration and break down silos among New Zealand’s research institutes and universities. The research themes of the Collaborative Centres are a natural reflection of Wellington-based expertise that is important to New Zealand; while we seem to have no more comment on research ‘Priorities’ that are expected to be developed through Te Ara Paerangi, I would say that this kind of reflection of existing strength is one of the more useful ways they could be defined.
“I am also very relieved to see a renewed commitment to the target of getting R&D expenditure to 2% of GDP, however, I remain unclear as to exactly what extent this Budget has moved the dial. Around $80M of National Science Challenge funding is coming available, and needs to be stacked up against the ca. $140M in operating costs announced as the headlines in the RSI portfolio. This is simply not enough; there has been a $150M year-on-year deficit accumulating since 2019 and future budgets will have to tackle this head on.
“More and more I feel that the fundamental mistake that has been made over decades in funding research in New Zealand has been to put the cart before the horse by trying to fund outcomes rather than researchers. So many of the issues that we recognise in our research system – the lack of connectivity, barriers to collaboration, a lack of diversification – are simple consequences of the fact that it is too small. We have a very sparse network of researchers trying to cover a wide range of areas of expertise, which of course makes collaboration and connectivity hard.
“Get the 2% of GDP into the research system first, and THEN look to fix these issues – science and research are the sail that Aotearoa needs to take us into the future, and we need to build that sail from canvas, not by stitching together tissue paper.”
Conflict of interest statement: “I am the co-Director of the MacDiarmid Institute for Advanced Materials and Nanotechnology, a NZ Centre of Research Excellence funded by the TEC.”
Dr Andrea Byrom, Environmental Consultant, comments:
“There are some interesting and significant investments for science, innovation and tech in Budget 2023, with major funding for science infrastructure, and a significant play to engage in Horizon Europe.
“It’s heartening to see meaningful targeting of some of these investments towards addressing long-recognised inequities, for example dedicated fellowships and awards for Māori and Pacific people, a boost to provision of Mātauranga Māori in the tertiary sector, and applied postdoctoral fellowships.
“Geographically, Wellington is the big winner with three new multi-institution research hubs aimed at tackling significant global issues.
“A boost to tertiary education will see nearly 30,000 new FTEs into the tertiary system in the next two years.
“Trialing apprenticeship training in the tech sector is a great initiative, and should enable financial support whilst undertaking training for those who otherwise might have been unable to access it.
“Direct investment in research funding – other than through the research hubs – is minimal this time around with the exception of the welcome support for early-career researchers with investment in research fellowships and PhDs. The historical gap in funding for these types of fellowships, particularly at postdoctoral level, has resulted in much of Aotearoa New Zealand’s best and brightest talent heading offshore – sometimes never to return. Hopefully these fellowships will stem that flow.”
No conflict of interest.
Professor Travis Glare, Director, Research Management Office, Lincoln University, comments:
“The 2023 Budget is a bit mixed for the University sector and research.
“The increase in Tertiary subsidies and increases for te reo Māori and mātauranga Māori provision are welcome, for a sector that is really struggling to provide quality education in the face of increasing costs. Support for increased enrolments in tertiary education also is a positive. These increases are not enough to keep up with the increasing costs, but at least help.
“There are also specific increases in funding for PhD and research fellowships, which will improve the pathway for emerging researchers. Again this is welcome, but there needs to be a similar increase in research funding to allow these newly trained researchers to continue with their careers.
“The government is acknowledging that it needs to move investment in R&D to 2% of GDP, a target that the country is still well short of.
“The specific funding for an innovation park based outside Wellington will contribute to the growing advanced manufacturing and biotech sector development. It is hoped similar parks can be established in other areas with clusters of research and education capability.”
Conflict of interest: “I am with Lincoln University.”
Professor Graham Le Gros, Director, Malaghan Institute, comments:
“The Malaghan Institute is welcoming today’s budget announcement of more than $450M in New Zealand science and innovation.
“The investment recognises the value that research, science and innovation brings to our nation’s resilience and prosperity.
“It is thoughtful, tightly-linked and breaks down silos that have been operating between institutions for many decades
“From building resilience in the face of future pandemics to investing in biotech, innovation and talent to help move New Zealand to a high-wage economy, we can rejoice in some much needed infrastructure so that all New Zealand scientists have a place to really focus their energy and attention.
“The multi-institutional research hubs will increase collaboration and productivity, allowing us to work together to tackle some of New Zealand’s most pressing challenges and opportunities.
“This is bigger than Wellington, it brings together expertise and capability from across the country to work together collaboratively with a real future focus.”
No conflict of interest declared.
Professor Richard Blaikie, Deputy Vice-Chancellor (Research and Enterpise), University of Otago, comments:
“We will need to analyse the announcements in more detail to be able to fully understand how Budget 2023 helps deliver the government’s commitment to increasing R&D expenditure to 2% of GDP to help drive economic growth and to contribute to solving critical issues for our society environment and the wellbeing of our communities.
“Good progress was recently reported with growth of business investment in R&D, incentivised by the R&D tax credit scheme, but increasing government investment in public-good research and basic research is also vital. Hence it is disappointing to see no new investments announced for core contestable research funds, such as Health Research Council, Marsden and the MBIE Endeavour Fund, or for underpinning research investments into the tertiary sector such as Performance Based Research Fund and Centres of Research Excellence.
“But the Budget announcements today of investment in key research infrastructure in the capital and investment in new fellowships are positive signs for which the government needs to be congratulated; these, together with the Te Ara Paerangi-Future Pathways programme of system realignment, signal a commitment to ensuring the research sector is well placed to accept significant future investment.”
Conflict of interest: Richard Blaikie is the Deputy Vice-Chancellor (Research and Enterprise) at the University of Otago.
Anthony Scott, Chief Executive, Science New Zealand, comments:
“The $400 million capital expenditure and $51m operating expenditure for the multi-institution research and delivery hubs in the Wellington region has regional, national and global significance.
“The better facilities, purpose-designed for modern scientific and innovation needs, will enable greater cooperation across the educators, researchers and end-users that make up the research, science and innovation community. There will be significant economic benefits to the region and nationally from innovative businesses likely to emerge or be strengthened by these initiatives.
“The investment recognises that attracting and keeping the top talent New Zealand needs, requires top-class facilities. These need to be true hubs of excellence. We look forward to more detail.
“Science New Zealand members will enthusiastically support the development of the new fellowships and applied doctorates. Research careers are no longer linear. They need support throughout early, mid and late stages, and for people coming from different life experiences. CRIs already mentor or co-supervise about 500 PhD and Masters students, providing a non-academic research environment, working with industry and other end users, and on New Zealand needs.
“The commitment to fund New Zealand’s access to Horizon Europe research and innovation will have immediate and enduring benefit to New Zealand researchers. This enables our research and innovation communities to be part of a top-flight global community, influence the global agenda, and to do it from New Zealand.”
Conflict of interest statement: “Science New Zealand members are the seven Crown Research Institutes (AgResearch, ESR, GNS Science, Manaaki Whenua – Landcare Research, NIWA, Plant & Food Research, and Scion) with Callaghan Innovation as an associate member. Collectively, the members employ more than 5000 staff across 50 sites around New Zealand, often co-located with other research organisations and industry, and revenues of close to $900 million.”
Dr Axel Heiser, Chief Scientist, AgResearch, comments:
“Overall, it is pleasing to see significant new investment going into science and a continued push towards greater collaboration and sharing of resources and expertise through the new “Science City” hubs. As has been signalled in the process so far for Te Ara Paerangi – Future Pathways programme, a small country like New Zealand needs to focus its energies on what it can achieve collectively, rather than operating in silos and organisations fighting over every research dollar. That greater collaboration is where Crown Research Institutes like ours are already moving, but more investment certainly helps that process.
“Investment into future talent is critical and so the funding announced in the Budget for research fellowships and to train more PhD students is welcome. We hear regularly from our own PhD students how challenging it is for them to participate and build towards a science career in the current economic climate. Efforts to encourage more young Māori and Pacific researchers is also to be applauded as we badly need that greater diversity in our science and research sector.
“Having access to the Horizon Europe research programme, supported by funding in the Budget, presents opportunities to work alongside leading international scientists and to be part of some important science globally. Getting access to funded projects in the programme will be challenging, but there will be New Zealand researchers excited about the prospect.”
No conflict of interest.
Drs Karly Burch, Ritodhi Chakraborty and Louise Hennessy, Co-Chairs, Early Career Researcher Forum, Royal Society Te Apārangi, comment:
“Early career researchers have been advocating for investment into research pathways over the past few years, so we are excited to see the government respond by investing into pathways that retain and develop our researchers.
“Aotearoa New Zealand’s researchers operate behind the scenes to develop new technologies, address pressing social issues, and build new industries. Investing in researchers and sustainable research pathways is an investment into New Zealand’s future.
“We look forward to seeing how these fellowships are developed in ways that secure a more equitable science and research system that provides benefits to New Zealand through providing clear pathways for all of our researchers.”
No conflict of interest.
Tertiary education
Dr Sereana Naepi, Principal Investigator, Te Punaha Matatini; and Rutherford Discovery Fellow, comments:
“This investment in tertiary education comes at a much needed time. We have consistently heard that our sector is underfunded and we have seen the impact of this under-funding in the ongoing announcements of staff redundancies in our sector.
“Our overreliance on international student fees to subsidise under-investment by government became apparent during COVID and this budget recognises the importance of investing into our sector.
“There are significant issues in our sector such as high levels of precarity and I am hopeful that our sector leaders will invest this funding into ensuring that our learners have excellent, permanent lecturers teaching them.”
No conflict of interest declared.
Professor Cheryl de la Rey, Chair of Universities New Zealand; and Vice-Chancellor of the University of Canterbury, comments:
“This increase comes at a time when the university sector is under significant financial pressure and is a step in the right direction.
“University funding is an investment in the future of Aotearoa New Zealand. It has been proven to deliver myriad positive returns to both individuals and the country.”
Conflict of interest: Cheryl is Chair of Universities New Zealand.
Chris Whelan, Chief Executive, Universities New Zealand, comments:
“While we acknowledge the increase to tuition funding in Budget 2023, the situation for universities remains precarious.
“Factoring in inflation forecasts for 2023 and 2024, CPI will have gone up 34% over a ten-year period. With today’s announcement, average student funding will have risen by 16% over the same period —a drop in real terms of 18%. These are striking statistics that, as we have seen, have real world consequences for university staff, students and our wider communities.
“Looking just at this year and the next two years, actual and forecast inflation for 2022, 2023, and 2024 will be around 15.5%. With today’s announcement tuition funding will only be increasing by 9% over the same period. We are continuing to slip backwards in our funding per student.
“Government controls nearly 80% of university funding. Government decisions around funding determine the extent to which universities can continue delivering high quality teaching and generating useful research. Adequate government funding also allows New Zealand’s universities to maintain their excellent international rankings which is key to our universities being able to attract and retain world-class teachers and researchers and to attract international students.
“Our hope is that as the economy recovers, the Government will see that further investment in our universities is actually an investment in this country’s future.”
Conflict of interest: Chris is CE of Universities New Zealand.
Climate change, infrastructure, transport
Associate Professor Nicolas Lewis, Faculty of Science, Environment, comments:
“The budget is very much a pre-election affair – a largely uncoordinated set of gifts and inducements to strategically selected groups. To be fair to a government in the grip of a cost-of-living crisis and a global stagflation that is not of its making, there is little room for anything too ambitious. The floods of early 2023 have further tied its hands and directed its favours – spatially and sectorally.
“What is disappointing, however, is the lack of an underlying vision – especially one that imagines a nation for the climate to come. This is very much a growth-led, business as usual budget as far as economic development is concerned – albeit tempered by some valuable initiatives to support certain sectors.
“What is missing, is a serious attempt to put New Zealand on a more radical economic and social development pathway. There is investment in recovery from climate-related disasters but no commitment to producing an economy or society for a world of climate change. The definition of just transitions used restricts important considerations of investment in green finance to a narrow range of initiatives. Commitments to new science are again targeted at more of the same.
“So-called industry transformation plans are very much about stimulating more of the same, especially those that talk of scaling up.
“There is no sense of commitment to redistributive economic policy other than closing a loophole that is overdue fixing. What about tackling the justice of family trusts more generally? Or the use of trusts in sectors such as education that disguise and subsidise businesses that in some cases are even going global.
“Perhaps now would be the time to see serious commitments to cooperative or community owned businesses and the business models and investment infrastructure that might underwrite them. Climate action funding centred on reducing emissions or green energy through subsidised research or finance may prop up our science-industrial complex but will not help us to live well differently in the future. Gestural investment into an ultimately impossible infrastructure fix is similarly questionable.
“What might be done instead, is to fund restorative or regenerative initiatives (or the financing thereof), a serious rethink of taxation policy, initiatives to encourage community owned business and scaling-down to focus business would reveal the vision necessary to address well-being. Funding a research centre that explore these possibilities would be a great first start.”
No conflicts of interest.
Professor Bronwyn Hayward, Department of Political Science, University of Canterbury; and Core writing team author of the IPCC, comments:
“Here at UC, a study of Christchurch children and youth, led by Dr Kate Prendergast with the Centre for Sustainable Prosperity in the UK, recorded reactions from local children who “hoped” buses could be free but “never imagined it could happen”.
“In this budget, it just happened.
“Investment in children’s use of public transport is a transformative step. Research tells us that the impact of free public transport for children is less about immediate increase in bus use and more about the far-reaching effect such policies have on family budgets and long term behaviour change.
“There is more good news for climate in this deceptively simple budget, which signals a long-term shift towards joined-up thinking that has been missing in both climate policy and often in our climate reporting too.
“Critics of the government will rightly point out there is now less money available to spend on climate resilience due to the crash in carbon pricing, and yet a sizable new spend of 1.9 billion has been allocated in this budget for climate resilience alongside the 1 billion pledged for cyclone recovery. This, together with spending on retrofitted housing, new homes, prescription charges and school lunches all contributes to the social infrastructure that communities will badly need when facing ongoing climate risk.
“We need to join the dots when we talk about climate budgets and see how many of the wellbeing initiatives are also very real investments in climate resilient futures too.
“Similarly the effort to integrate science agencies based in Wellington is important. But here a glaring omission in this new science, skills and tech focused vision which is a lack of investment in arts and imagination. Science matters, but science alone won’t drive the creative transformation that our society and economy so desperately needs. Back in 2012, the ecological economist (and our CUSP collaborator) Prof Tim Jackson wrote about a Care, Craft and Creative economy. This kind of economy nvolves greater investment in care industries, (like nursing and teaching), which are low emissions jobs that support high wellbeing outcomes. It also involves investment in high end manufacturing and creative arts that spark imaginative thinking.
“In bleak times it’s easy to forget how much we need the arts as well as sciences. The climate crisis will bring repeated, cascading and compounding weather events that will test our resolve and tear at the fabric of our society. These are not challenges which can be fixed by science or investment in infrastructure alone. We need the arts, alongside sciences to help imagine a low-carbon economy in fair and just ways. While government could justifiably argue its attention to digital screen industries is a creative investment in “a high-wage low emissions and creative economy” we also need a wider vision for the deeper integration of arts and sciences, one which helps us imagine new ways we might yet flourish in a climate challenged world.”
No conflict of interest.
Dr Timothy Welch, Senior Lecturer, School of Architecture and Planning, University of Auckland, comments:
“The 2023 budget will focus on returning our infrastructure to where things were before the round of extreme weather events earlier this year. But this isn’t going to be enough to make the country resilient to the more intense and frequent storms we expect in the future.
“The spending we are deferring with this budget will only mean more rebuilding costs down the road and a greater cost of resiliency in future budgets.
“The budget holds good news for people struggling with the recent increases in the cost of living, with permanent free fares for children 5-12 and half-price fares for youth under 25 and Total Mobility Passengers. This is an essential step towards making our transportation system more equitable.
“New funding for maintaining public transport service and workforce development is important, but we need more funding to expand our public transport networks and help drive down transportation emissions.”
No conflict of interest declared.
Health
Professor Robin Gauld, Director, Centre for Health Systems and Technology comments (via The Conversation):
“With each budget we can expect a boost in support for health. This year is no exception. There is significant new spending, with $2.6 billion allocated over two years to respond to inflationary and other cost pressures on the health system – the costs of meeting ever increasing demand, for example.
“This new funding should account for some of the inflationary pressures but it’s unlikely to be adequate. Too many people are missing out on treatment and there is a significant level of unmet need in the community for secondary healthcare and other health services.
“There has been no measurement of this in any systematic way and we really don’t know how many people suffering in the community are in need of an elective procedure and have been denied access or are being treated by their GP instead.
“Today’s budget includes $1 billion allocated to health sector staffing and wages. This is very important but it is coming very late in the day. Funding for 500 new nurses has also been provided. This will take time to deliver on.
“The big win is $618 million to eradicate pharmacy co-payments. No one should face a financial barrier to accessing prescribed medicines. It is very good that the government has followed the evidence showing cost barriers are prohibitive for many. That said, a bold government would also have allocated funds to scrap patient charges to see a GP as well.”
No conflict of interest declared.
Tech Sector
Associate Professor Alex Sims, Department of Commerical Law, School of Business, University of Auckland, comments:
“Innovation and Technology, particularly in the digital technologies sector was a key area of the budget’s focus, which is a welcome move. The digital technologies sector is growing significantly faster than the rest of the economy. And, as the digital technologies sector is a relatively “weightless export”, growth in this sector will assist with New Zealand’s need to reduce its environmental footprint. While the government will continue to fund some private R&D, more importantly, funds will go to training and upskilling New Zealanders in practical IT and tech skills and developing researchers’ capabilities.
“The creation of new multi-institutional research, science and innovation hubs in the Wellington region is of particular note. However, it would have been good for some hubs to be located in other regions rather than concentrating in one place. The downside of this centralisation can be ameliorated somewhat by ensuring participants from other regions attend the hub in person for decent periods of time. Thus the funding will need to cover travel and accommodation costs. While the hubs are relatively narrowly focussed, ie on health and wellbeing; oceans, climate and hazards; and advanced manufacturing, biotech and energy futures, it makes sense to concentrate our relatively limited resources, rather than dissipating them amongst too broad a range of areas.
“The funding of research fellowships and an applied doctoral training scheme is welcome. However, the devil is always in the detail. Funding in New Zealand for PhD scholarships is relatively low. In some other countries, including Israel and Hong Kong, a PhD scholarship not only pays the student’s fees but also covers their living expenses. Serious consideration should be given to funding scholarships at a higher level than is currently the case, even if fewer PhD students are funded.
“The $27 million for a Digital Skills package is a welcome initiative. Businesses constantly complain about the lack of skilled IT people. The Digital Skills package aims to develop pilot programmes, similar to traditional apprenticeships for trade, including paying part of the trainee wages and employer support and guidance. As with the trades, there will be integration with NCEA and employers. If the pilot programmes are successful, they need to be rolled out as soon as possible, with increased funding to match.
“The targeted funding for the gaming sector is a sensible move. The gaming sector is growing on average by 20 to 30% each year and is on track to become one of New Zealand’s biggest exports. Qualifying game development studios can claim a 20% rebate to a maximum of $3 million yearly to individual studios. This is a strategic response to Australia’s recent moves to attract and support the gaming sector by offering very attractive tax rebates. While New Zealand’s rebate is not as high as Australia’s, it is sensibly backdated to 1 April 2023.
“Finally, the current 15% tax credit for eligible R&D expenditure has been retained. In addition, businesses can obtain an interest free government loan to cover the R&D costs when costs are incurred, which is the time when smaller businesses need the money. This is likely to see an increased spend on R&D.”
Conflict of interest statement: Alex is employed by a university, and is a member of the Executive Council of BlockchainNZ (member of NZ Tech Alliance).
Teaching
Dr Paul Heyward, Associate Dean and Head of Initial Teacher Education, University of Auckland, comments:
“The 2024 Wellbeing Budget has provided increased funding for Initial Teacher Education (ITE) enrolments. Given the steady decline of those entering university ITE programmes over the last decade this is welcome news for the sector and vital given the Government’s recent commitment to reducing class sizes through the employment of 320 more teachers in Years 4-8.
“While it is pleasing to see a commitment to smaller class sizes, I have observed various commentators asking if the small reduction in the student to teacher ratio (from 1:29 to 1:28) will make any difference to student outcomes. My response is an unequivocal yes! If good teachers have smaller class sizes, they will have more time to help children succeed.
“An analogy might be useful here. Imagine you are in a retail clothes store wanting to buy a garment and the store is packed and understaffed. It is more likely your customer experience will be poor in a busy store compared to a quiter store as the retail assistant will not have the time to give you advice on size, style, availability of items in other stores etc. The less busy and more staff available, the more attention you will get.
“Of course, if the retail assistant provides the same level of service whether busy or quiet an increase in staffing would make no difference to your customer experience. Therefore, a reduction in class sizes needs be coupled with effective differentiated teaching approaches. The less children in a class the more time available for effective differentiation.
“We are fortunate in Aotearoa to have quality kaiako in our schools and kura that are skilled in how to differentiate the curriculum to cater for the learning needs of the diversity of ākonga in their classrooms. This type of differentiation involves professional decisions regarding the modification of what individual children will learn, the process of learning they will engage in, and the ways they can demonstrate their learning. The reduction of one child from a class provides more time for this complex decision-making process. While the additional time for differentiation may seem minimal on a daily basis, the difference over a year of learning will be significant. The Government are to be applauded in this first step towards reducing class sizes. I look forward to this policy trend continuing.
“While the boost in funding for teacher supply to ensure reduced class sizes is good news for ITE providers there is no guarantee that people will apply for the extra places unless the Government addresses the unreasonable costs that student teachers need to bear. Unlike other university degrees, student teachers need to spend a significant part of their programme on professional experience placements otherwise known as practicum. For one-year programmes this equates to 80 days in schools or centres and for three-year programmes 120 days needs to be spent in educational settings. While on practicum student teachers are expected to be on site from 8.30 a.m. to 4.00 p.m. and take full responsibility for teaching responsibilities for sustained periods of time. The time and energy commitment needed for succeeding in practicum courses is best achieved if student teachers are free from part-time employment and caring responsibilities.
“Unfortunately for many of our less economically advantaged students the advice they receive from their lecturers to take a break from part time work and cover caring responsibilities while on practicum is impossible to follow, particularly in a cost-of-living crisis. Furthermore, once our student teachers graduate, they are required to pay $464.37 for a practicing certificate to begin their teaching career.
“While the Government deserve accolades for reducing class sizes and funding an increase in teacher supply, they need to do more to attract potential applicants into ITE.
“There are two obvious initiatives to increase teacher recruitment. Firstly, provide student teachers with a living allowance while they are on practicum to offset the financial losses incurred by taking a break from part time work and covering caring responsibilities. Secondly, cover the costs of registration into the profession.
“As a society we need more quality people to join the hugely rewarding of profession of teaching. Making initial teacher education a financially viable option for all would be a good start.”
Conflict of interest statement:”I am Head of Initial Teacher Education at the University of Auckland’s Faculty of Education.”
Budget overview
Professor Matt Roskruge, Associate Dean, Māori, Massey Business School, Massey University, comments:
“Budget 2023 was talked down repeatedly by the government, citing inflation figures and a desire to be responsible fiscal managers. While election years often include plenty of treats, this one was very much a ‘bits and bobs’ budget with few big ticket or eye catching spends.
“The big winners perhaps reflecting our new prime ministers’ passions were education, especially early childhood (ECE), and infrastructure, ‘Green’ initiatives and urban centres.
“Headline announcements included 20hrs fees-free ECE for 2 to 3 year olds, scrapping the $5 prescription copayment and free public transport for under 13s, then half price up to 25.
“There was precious little for the regions outside of cyclone recovery, with trade, agriculture, fisheries and other core areas of the economy not getting a mention. In fact, many sectors were left out and it is unlikely anyone will feel like all their priorities were met.
“Law, justice and health were very quiet – surprising, given the issues our courts and Corrections are facing. I was especially disappointed to see nothing going towards addressing our mental health crisis. It was also disappointing to hear GST off fresh kai is still a long way off the menu.
“Māori got a massive win with an extra $34m over two years for Te Matatini, but otherwise it was a quiet year for Māori priorities. One might question if Te Matatini announcement hid a lack of spending in other areas, though it will make a huge difference to insuring and developing what is a huge part of modern māoritanga.
“So, did this budget deliver relief to the cost of living? No, though it was restrained and may well take some of the heat out of inflation through thst restraint. Those who have or plan to have young kids and those doing it really tough especially in urban areas do have some reason to celebrate though.”
No conflict of interest declared.
Associate Professor Lara Greaves (Ngāpuhi, Pākehā, Tararā), political scientist, Victoria University of Wellington, comments:
“It goes without saying that this budget is an important one. It is set against the backdrop of what National has successfully framed as a “cost of living crisis”, and indeed many New Zealanders are struggling financially. We have also seen infrastructure issues highlighted with recent weather events. Public opinion polling shows that both of these issues are important to voters. This is also Chris Hipkins’ first budget as Prime Minister, and obviously it is an election year, so more people will be watching than usual. The polls are also very close, and many are watching the mythical “median voter” or “swing voters” to see what they will do.
“However, it is important to keep in mind that very few people will be paying a huge amount of attention to the details of the budget. Our collective commentary can be influential in the opinions of voters – as members of the media or as commentators. There are also a couple of areas that are important to this potential voter sway.
“Regardless of Labour’s intent, childcare subsidies target those voters who were more likely to have switched to Labour in 2020, many who were likely swing voters. Analyses of the 2020 election study show that those who switched to Labour were more likely to be under 40, and women – who tend to be Labour voters in higher numbers anyway. Targeting childcare clearly helps to appeal to these voters, who are also some of those most hit by the costs of living and interest rate increases. We have seen National target childcare policies at parents of young children too – we can expect to see more policy promises for these groups in 2023.
“The idea, that has been expressed throughout this budget campaign, that it is a conservative or “balanced” budget helps to counter the narrative that Labour are spending big. National have been hammering home the point that Labour are tax-and-spend over the past couple of budgets, since Luxon and Willis took charge. Perceptions of Labour’s economic nous are something consistently shown as a weakness for them when public opinion surveys ask voters who they think are best to deal with economic issues, such as recessions. The idea of this budget as more basic and restrained, may disappoint left-wing voters but may help to alleviate the perception that they are “addicted to spending”. All of this is important with a very close election ahead.”
Conflict of Interest: Lara is a member of the independent panel for the Independent Electoral Review and director of a small research company (Demos and Data Ltd).
Professor Adrian Sawyer, University of Canterbury, comments:
New Zealanders were led to believe prior to 18 May 2023 that the 2023 Budget, delivered on 18 March 2023, was one to be ‘back to basics with no frills’ – a ‘bread and butter affair’ in the eyes of the Prime Minister.
From my perspective the budget is certainly one within the ‘bread and butter’ of a Labour Party that is preparing itself for an upcoming election, while seeking to balance this with what it sees as immediate needs for fiscal support. Furthermore, it is one where the Labour Government believes it needs to send a message to voters that it has their best interests at heart and is dealing appropriately with the cost-of-living crisis.
The approach taken in Budget 2023 of large increases in expenditure (and associated fiscal deficits and large government net debt increases), but with forecasts for reducing inflation, is hard to reconcile.
Much has already been said about who are the winners (and losers), the fiscal position going forward, and the choices that have been made in terms of targeted additional expenditure. Notwithstanding the cost-of-living crisis, no effort was made to relieve this in part through revisiting the personal income tax thresholds that have been unchanged since 2010 leading to substantial ‘bracket creep’. Indeed, the only tax change (which is not a total surprise) is the increase in the trustee tax rate from 33 percent to 39 percent (the top individual marginal tax
rate), on the premise of ‘tax sheltering through trusts’, effective from 1 April 2024. More about other tax matters not directly highlighted in Budget 2023 budget will follow later.
So how did skills, science and infrastructure fare? While many initiatives may have an indirect effect on these areas (I am not considering cost-of-living initiatives, for example, that will indirectly support this area), the major targeted initiatives that directly affect these areas are as follows:
Cyclone Recovery and Infrastructure
In addition to the $889m already announced prior to the budget, another $609m operating and $195m capital expenditure will be made available to support areas affected by Cyclone Gabrielle. An additional $130m operating for business and community support and $120m for greater community flood resilience was announced.
These amounts pale into relative insignificance with $71b allocated to new and existing infrastructure investments, in addition to funding set aside for projects that are still in the planning stage. No firm details of how this will be applied are provided. Alongside this, $6b has been allocated to the development of a National Resilience Plan.
The immediate funding to affected communities is welcomed and justified, and will probably prove to be insufficient. The grandiose commitment of $77b could be seen in part as ‘virtue signalling’ and while it might look good, the expenditure is likely to significantly increase government debt, with no indication of targeted priorities, etc.
Within the climate change sphere, over $0.5b is being put into electric vehicle charging infrastructure, increasing private sector investment in lower emissions, greater energy resilience for NZ, improved data collection on climate change impacts, and decarbonising had to abate sectors. Given the Government’s stated commitment to reduce emissions, the funding is relatively miserly.
There are also additional funds to support Māori and Pasifika, including housing and infrastructure, and education, employment and wellbeing.
Science and technology
Budget 2023 contains some important initiatives, including support for NZ’s gaming sector through a 20 percent rebate (expected to cost $160m in the first year). While this appears to be less generous than Australia (our major competitor), early comments from the sector indicate that the approach is broader, and they are happy with it. That said, more support may be needed going forward for this sector.
A total of $400m capital and $51m operating is to be put towards investing in scientific research centres. While this expenditure is welcome, the fact that it can only be in the Wellington area (the so called new “Science City” of New Zealand) is not only reflecting a potential bias, but ignores the fact that hubs do not need to be physically located in the same area. A targeted vote gathering approach, perhaps?
A relatively small amount of $38m operating is to be invested in building international research partnerships through funding for New Zealand to join the European Union’s Horizon Europe initiative. This is welcome and further funding should be considered going forward.
Further funding of $75m is allocated to support for industry transformation as part of the Government’s goal to make NZ a high-wage, low-emissions economy in targeted sectors – a positive initiative, but will it succeed?
Education
A further $3.6b operating and $1.3b capital expenditure is allocated to education generally, including initiatives to boost skills, improve achievement, reduce class sizes, and increase teacher pay. This investment includes $1 billion for contributions to early childhood learning, school and tertiary providers’ operating costs; keeping disengaged students in school; extending the Apprenticeship Boost programme; and new classrooms and schools for 6,600 additional student places.
A big question here is whether this is sufficient to enable the education sector to keep up with the growing costs of education service provision.
Taxation
In addition to the trustee tax rate increase, Budget 2023 saw the tabling of two tax bills (with associated commentary and regulatory impact statements):
- Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Bill (an omnibus bill that will go through the usual select committee consultation process with submissions); and
- Taxation Principles Reporting Bill.
The latter was signalled in April 2022 by the Minister of Revenue, although this bill is being couched as proposing a statutory framework for the reporting of tax information based on core taxation principles.
How this bill will progress is unclear at the time of writing. It will be interesting to see if the bill is altered through the debates in Parliament, and it is also unclear whether the public will have a chance to make submissions as should occur via the select committee process. Also, assuming the bill is enacted (largely as tabled), what will happen if a tax proposal in another bill fails on one or more of these principles? Will it be permitted to proceed, or will this proposed bill be mere window dressing?
No conflicts of interest.