The New Zealand Budget 2020, with the slogan - ‘Rebuilding Together’, looks intent on reinforcing the economy for a
stronger and better comeback on its release on 14 May 2020. The much-awaited budget is just two days away while the
country forges a path to respond and recover from the impact of COVID-19 that arrived as global pandemic early this
year.
Based on the country’s success in flattening the coronavirus curve, the New Zealand Government has been opening up the
economy in phases in order to stimulate a wider number of businesses and to send people back to work. The current low
single-digit new infection numbers in New Zealand in contrast to the steeply rising global records have further given
impetus for an early revival of the economy.
High optimism can be attributed to the NZ Government’s proactive response that has allowed the country to sail smoothly
through the turbulent times. Now, Budget 2020 is slated to be the next big step in shaping the economic future of 5
million New Zealanders.
The Budget, which is to be presented by Finance Minister Grant Robertson on 14 May 2020, has garnered high expectations
given the current COVID-19 scenario and upcoming elections in September 2020. It will be interesting to note how much
the budget greases the wheels of recent government measures for fostering economic revival and greater wellbeing for New
Zealanders.
A reflection on 5 critical factors before the Budget release could shed some light on matters that will facilitate New
Zealand’s road to recovery.Magnitude of Economic Crunch
The Government’s swift fiscal measures have been designed to ensure cash flow to businesses for continuation of their
operations and to revive confidence. The COVID-19 economic fallout is evident in various sectors, with many companies
struggling to get back in the saddle.
In a pre-budget speech to the Wellington Chamber of Commerce, Finance Minister Grant Robertson stated that the upcoming
budget would be “far from business as usual”. Hence, the immediate response to recession would likely be to anchor it to
Budget 2020, which is stated to be built on the principle of recovery and rebuilding.Labour Market
The Ardern Government’s wage subsidy scheme along with a mortgage holiday and other measures have been carefully crafted to
sustain employment relations. The unemployment rate has risen from 4% in the December Quarter to 4.2% in the March
Quarter.
Mr. Robertson indicated the government’s focus on getting people at work in combination with providing sector-specific
support to help boost wider economic confidence.Medium-Term Fiscal Management
The Fiscal implications of the COVID-19 stimulus could be reflected in surging public debt and treasury deficits. The
continuance of the wage subsidy scheme and tax planning remains the key focus for ascertaining the Government’s fiscal
management plans. It will be worthwhile to note if the Government induces any change to the existing tax regime in the
upcoming budget. The conflict, however, remains there to choose among either increasing taxes or lifting economic
growth, or else utilising a combined and more people-oriented investment strategy to advance the economy well through
the crisis over next few months.Risk and Uncertainty
Although New Zealand edges towards the position of a COVID-19 safe harbour, ambiguity persists concerning the global
economic scenario. The reopening of international trade and travel will principally determine trade surplus for the
country in future situations. Meanwhile, the Trans-Tasman travel bubble between Australia and New Zealand opens
prospects for an early restoration of international economic cooperation.Infrastructure Development
Priorities for job security mean that infrastructural development might continue to remain on the agenda. Mr Robertson
has highlighted that the forthcoming budget will establish nation’s direction for the upcoming “responding and
rebuilding” stages. Growth in job opportunities and housing affordability remains the government’s critical focus amidst
the current scenario, promoting its investment in infrastructure projects.
Though the upcoming budget is much awaited, the outcome of Prime Minister Jacinda Ardern’s meeting with cabinet
ministers held on 11 May 2020 has indicated that the country is ready to move to level 2 restrictions as planned i.e. 14
May 2020. With constraints like social distancing and gathering of not more than 10 people, shops, playgrounds, cafes,
gyms, cinemas, and restaurants are set to reopen but are set to face far from normal conditions. Schools will open from
18 May 2020 while bars, which remain the last priority, are likely to start operations from 21 May 2020.
While the outlook remains positive, it will pay to watch developments on the budget front carefully.