GDP figures out this morning are a reminder of the importance of focusing on policies that create and sustain economic growth, Finance Minister Steven Joyce says.
New Zealand's GDP grew a slightly lower than expected 0.5 per cent in the March quarter, taking New Zealand's growth rate for the year to 3.0 per cent.
"Moderate GDP growth over the last six months is a reminder that every economic gain is hard-won in what is still a challenging international environment,” Mr Joyce says.
"This is not the time to rest on our laurels and start considering policies that would damage growth in key sectors or across the economy."
Growth in the quarter was across 11 of 16 industries, including:
• Agriculture, forestry and fishing (up 2.8 per cent)
• Manufacturing (up 1.0 per cent)
• Retail, trade and accommodation (up 1.8 per cent)
• Healthcare and residential care (up 1.6 per cent)
These were partially offset by weaker growth in the transport and construction sectors.
“Construction fell in the quarter, by 2.1 per cent, but the annual construction figure increased by 9.3 per cent for the year ending March 2017,” Mr Joyce says. “These figures move around from quarter to quarter, but we remain in one of the biggest building booms New Zealand has ever seen.”
Today’s GDP figures followed on from the release of New Zealand's external accounts for the March year yesterday, which showed a current account deficit of 3.1 per cent, which is the same as the March 2016 year.
"The international liability position – a measure of our indebtedness to the rest of the world – is down again to 58.5 per cent of GDP, compared to over 80 per cent when the current government came into office," Mr Joyce says.
"The improving external accounts show the benefit of a strong economic plan that delivers steadily improving economic results relative to the rest of the developed world.
"The Government will continue to take the right steps to encourage businesses to invest and grow more jobs for New Zealanders."
The Government has released the Major Projects Performance Report for the period November 2016 to March 2017, covering 55 complex major projects across government with a whole of life cost of $38.5 billion.
“The Investment System is continuing to mature with an increasing focus on realising the benefits of investment, and addressing risks before they turn into issues,” says Finance Minister Steven Joyce. “The portfolio as a whole continues to perform as expected.”
“Through this regular assessment, the Treasury aims to improve visibility of challenges and potential risks on projects where significant public funds are being invested,” says Mr Joyce. “It is my clear expectation that the public sector continue to focus on lifting productivity as a result of these investments so we can do more to help New Zealanders.”
The portfolio continues to perform well with 91 per cent of projects rated Amber or better, over half of the major projects are rated Green or Amber/Green, only nine per cent is rated Red or Amber/Red over this period.
The Red or Amber/Red rated projects are:
· Māori Land Service Programme – Te Puni Kokiri (Red)
· ANZAC Frigate Systems Upgrade – Defence (Red)
· 2018 Census Programme – Stats NZ (Amber/Red)
· Lincoln University/AgResearch Joint Facility – Tertiary Education Commission (Amber/Red).
Major projects are a collection of the most challenging projects Government agencies are currently undertaking. A red or amber/red rating is not uncommon during the life cycle of these large scale projects and highlights that there are issues or risks that are either being addressed or need to be addressed to ensure the project is delivered successful. Project governance teams are working with central government agencies to resolve those issues.
The interim report can be found at http://www.treasury.govt.nz/statesector/investmentmanagement/publications/majorprojects
Finance Minister Steven Joyce has today welcomed the release of the Reserve Bank's consultation document on the use of Debt to Income ratios for mortgage borrowers as an additional macro-prudential tool.
"The document is a comprehensive summary of the pros and cons of adding Debt to Income ratios to the Reserve Bank's toolkit of regulatory options,” Mr Joyce says.
"The use of Debt to Income ratio restrictions would be a significant intervention in the housing market, so it's important that all interested parties have their say during this consultation period."
The Reserve Bank has been using Loan to Value ratio (LVR) restrictions since 2013, and they were re-calibrated in 2016.
"The Reserve Bank's analysis suggest that LVR's have helped moderate demand in the residential housing market, particularly in Auckland where prices have been flat to falling over last ten months,” Mr Joyce says.
"The Reserve Bank has stated that even if DTIs were available now, they wouldn't be using them currently. That gives us all time to consider their possible future use carefully."
The consultation runs for 10 weeks and closes on 18 August 2017.
The Reserve Bank’s consultation document is available here.
The Government and Auckland Council have agreed on Terms of Reference to establish a project to investigate smarter transport pricing in Auckland.
“Alongside our current multi-billion dollar transport investment in Auckland, we need to look at new ways of managing demand on our roads to help ease congestion. Smarter transport pricing has the potential to be part of the solution,” Finance Minister Steven Joyce says.
“Work undertaken last year by the Government and Auckland Council found that smarter transport pricing could help make a big difference in the performance of Auckland’s transport system,” Transport Minister Simon Bridges says.
“Smarter transport pricing could involve varying what road users pay at different times and/or locations to better reflect where the cost of using the roads is higher (i.e. where there is congestion). This could encourage some users to change the time, route or way in which they travel.
“It is essential that we carefully consider the impacts of pricing on households and businesses. A key factor will be the access people have to public transport and other alternatives.
“The Government has also made a clear undertaking that any form of variable pricing will be primarily used to replace the existing road taxes that motorists pay. This is about easing congestion, not raising more revenue,” Mr Bridges says.
The Smarter Transport Pricing Project will undertake a thorough investigation to support a decision on whether or not to proceed with introducing pricing for demand management in Auckland. Officials from the Ministry of Transport, Auckland Council, Auckland Transport, the New Zealand Transport Agency, Treasury and the State Services Commission will work together and engage the public to develop and test different options.
The first stage of the project, which will lay the groundwork for assessing pricing options, is expected to be complete by the end of 2017.
“Any decision on the use of a demand management tool like road pricing is still some years off,” Mr Joyce says. “We look forward to receiving advice from officials as this work progresses. The Government and Auckland Council will then consider the project’s findings.”
Auckland Congestion Pricing Project Terms of Reference are available at www.transport.govt.nz/smarterpricing
A renewed Policy Targets Agreement (PTA), which sets out specific targets for maintaining price stability has been signed by Finance Minister Steven Joyce and incoming Acting Reserve Bank Governor Grant Spencer.
“Earlier this year I announced that Deputy Reserve Bank Governor Grant Spencer will be appointed as the Acting Governor of the Bank for six months, following the expiry of current Governor Graeme Wheeler’s term on September 26 this year,” Mr Joyce says.
“Mr Spencer and I have agreed that there will be no change to the existing Policy Targets Agreement for the period that he will be acting Governor.”
Under the existing agreement the Reserve Bank is required to keep future CPI inflation outcomes between 1 per cent and 3 per cent on average over the medium term. The Bank is also required to focus on keeping future average inflation near the 2 per cent target midpoint.
The Policy Targets Agreement takes effect on 27 September 2017, after Reserve Bank Governor Graeme Wheeler completes his term on 26 September 2017, and will apply from 27 September 2017 until 26 March 2018.
“The existing PTA has served New Zealand well and there are benefits in maintaining consistency in the agreement,” Mr Joyce says. “The renewed agreement will maintain continuity and stability in the monetary policy target over the election period and during the period of appointment of a new Governor.”
The renewed Policy Targets Agreement is available here.
The Government accounts for the ten months to 30 April 2017 show a surplus of $2.5 billion, although about $1 billion of that is due to timing differences that are expected to reverse out in May, Finance Minister Steven Joyce says.
“While the accounts for the year-to-date are $1.6 billion stronger than was forecast at the Budget Economic and Fiscal Update, the bulk of this change is due to a timing difference of company taxes,” Mr Joyce says. “Treasury and Inland Revenue expect most of that to reverse in May, and at this stage Treasury expects the 2016/17 accounts to be broadly as forecast.”
Core Crown revenue was $1.1 billion higher than expected for the ten month period, while Core Crown expenditure was $400 million less than what was expected.
Net debt is currently at 24 per cent of GDP.
“It is important not to take too much from a single month’s figures particularly because of the timing differences noted by the Treasury,” Mr Joyce says. “However the accounts overall do underline the Government’s improving fiscal position as a result of our strong economic plan.
“It is only by having this strong economic plan that we get to make the sort of choices we were able to make in the recent budget, and only a strong economic plan will give us the capacity to make more positive decisions into the future.”
Finance Minister Steven Joyce has released the Productivity Commission’s terms of reference for their new inquiry into State sector productivity.
“As part of Budget 2017, I announced that the Government is asking the Productivity Commission to conduct an investigation into measuring and improving the productivity and efficiency of core public services in the State sector,” says Mr Joyce.
“I have asked that the inquiry has a particular focus on core health, education, justice and social support services – it is my expectation that public services continue to focus on lifting productivity so we can do more to help New Zealanders for each additional dollar of taxpayers’ money.”
“It is important that those delivering core public services maintain a constant focus on lifting the productivity of their sectors.”
Minister Joyce also welcomed two initial Productivity Commission research reports into aspects of public sector productivity.
The Quality Adjusting Sector-Level Data on New Zealand Schools report considers how to measure productivity at the education sector level, focusing on approaches to and challenges of capturing education quality.
The second report titled Social Sector Productivity: a Task Perspective highlights a framework for considering different types of public service and the different measurement issues that apply.
The Commission is due to report back on its inquiry into State sector productivity to Ministers by 30 August 2018.
Earthquake Commission (EQC) levies will increase from 1 November to help rebuild its Natural Disaster Fund (NDF), which has been depleted following the Christchurch and Kaikōura earthquakes.
“EQC has provided huge support to New Zealanders following the Christchurch, Seddon, and Kaikōura earthquakes, but in the process it has exhausted its reserves,” Finance Minister Steven Joyce says.
“EQC has a Government guarantee and $4.7 billion in re-insurance cover, so homeowners will be covered if there is another natural disaster, but we need to start the process of replenishing the fund so it is available to contribute to future natural disasters.”
Insured homeowners currently pay 15c per $100 of insurance cover, up to a maximum of $207 a year, as part of their insurance premiums. From 1 November homeowners will pay 20c per $100 of insurance cover, with an annual cap of $276.
“This is an increase of up to $69 per homeowner per year, including GST,” Mr Joyce says.
Minister Responsible for the Earthquake Commission Gerry Brownlee says the levy rise is needed to ensure EQC is on a sustainable footing into the future.
“It would currently take more than three decades before the NDF reaches EQC’s reinsurance excess of $1.75 billion – and that’s in the absence of any significant natural disaster like the Kaikōura earthquake. The new levy rates mean we will be well on the way to restoring the Fund to this level within 10 years,” Mr Brownlee says.
The Government’s review of the EQC Act more generally continues to progress.
“I expect that Cabinet will make decisions on the EQC Act Review in the coming months, however this is not expected to have any further impact on levy rates,” Mr Brownlee says.
The Government’s $2 billion per year Family Incomes Package will make changes to tax thresholds, Working for Families and the Accommodation Supplement to help Kiwi families get ahead, Finance Minister Steven Joyce says.
“It is important that Kiwi families directly share in the benefits of New Zealand’s economic growth,” Mr Joyce says. “The Family Incomes Package is carefully designed to especially assist low and middle income earners with young families and higher housing costs.”
The Budget 2017 Family Incomes Package benefits around 1.3 million families in New Zealand by, on average, $26 per week.
“The measures in this budget are expected to lift 20,000 households above the threshold for severe housing stress, and reduce the number of children living in families receiving less than half of the median income by around 50,000,” Mr Joyce says.
From 1 April 2018, the Package:
- Increases the $14,000 income tax threshold to $22,000, and the $48,000 tax threshold to $52,000.
- Discontinues the Independent Earner Tax Credit.
- Increases the Family Tax Credit rates for young children to the level of those for children aged 16 to 18, while increasing the abatement rate and decreasing the abatement threshold.
- Increases the Accommodation Supplement maximum amounts, and updates the Accommodation Supplement areas to reflect 2016 rents.
- Increases the weekly payments of the Accommodation Benefit for eligible Student Allowance recipients by up to $20.
These changes mean, for example, a couple with two children under 13 and one partner working earning $55,000 will gain $41 per week plus any increase to their Accommodation Supplement.
Mr Joyce says that as wages have risen over the last seven years, people on lower and middle incomes have been faced with higher marginal tax rates.
“The Budget 2017 Family Incomes Package will provide better rewards for hard work by adjusting the bottom two tax thresholds and lowering the marginal tax rates for low and middle income earners,” Mr Joyce says. “At the same time it will start simplifying the tax and transfer system by removing the separate Independent Earner Tax Credit which is claimed during the year by less than one third of those eligible.”
The tax threshold change provides a tax reduction of $10.77 a week to anyone earning more than $22,000 per annum, increasing to $20.38 a week for anyone earning more than $52,000 per annum.
People who lose the Independent Earner Tax Credit will be compensated in full by the lifting of the lowest income tax threshold from $14,000 to $22,000.
“The Family Incomes Package will also help lower income families with young children meet their living costs through changes to the Family Tax Credit, and it will improve the incomes for those with higher housing costs,” Mr Joyce says.
Some of the biggest gains in the Package are for people on lower incomes with young children.
“Family Tax Credit rates increase by $9.25 a week for the first child under 16, while credits for subsequent children increase by either $17.75 or $26.81 per week depending on the age of the child,” Mr Joyce says.
Similarly there are significant increases for people on low incomes with high accommodation costs.
The maximum Accommodation Supplement rate for a two person household increases by between $25 and $75 a week, while the maximum for larger households increases by between $40 and $80 a week. In addition, changes to the Accommodation Supplement areas will provide further gains for some families.
The Accommodation Benefit, which is paid to Student Allowance recipients who experience housing stress, will also increase by up to $20 per week.
The Package will have flow-on effects, with around three quarters of a million superannuitants benefiting because of the link between New Zealand Superannuation and after tax wages. The couple rate for superannuitants will increase by $13.12 per week on 1 April next year in addition to the normal adjustments.
“Budget 2017 is about delivering for New Zealanders. This Family Incomes Package is the first step in allowing Kiwi families to spend more of their own money, so they can make the decisions that are best for them,” Mr Joyce says.
The Family Incomes Package Calculator is available here: www.budget.govt.nz/budget/2017/family-incomes-calculator