Budget 2023: The big winners and losers

ANALYSIS: The expectations for the Government’s “no frills” Budget were set low. But there have been some breakout winners who stand to benefit from the $4.8 billion in new spending promised for the coming years.

Young families will benefit from a expansion of childcare subsidies. Game developers will receive a 20% rebate on their expenses, as the Government tries to compete with the Australian sector. Scientists will in the future be working together in a $400m “Science City”.

There are, of course, losers. Trusts are set to be taxed more, a boon for the Government coffers. And if you’re a homeowner, the immediate future is not so good.

Here are the winners and the losers in Budget 2023:

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WINNERS

Young families

The Government has promised to extend a 20-hour-a-week subsidy on early childhood education to children as young as two-years-old. The subsidy has previously only been available to children three- to five-years.

The hope is to reduce an already expensive cost on young families, and help more families afford childcare, which can allow parents to work.

But the policy comes at no small expense: $1.2 billion for the coming four years.

Public transport costs will also be reduced. The fee to catch a bus or train will be entirely subsidised for children between the ages of five to 12-years, and half-price for children and young adults between 13- to 24-years-old. This subsidy will cost roughly $80m a year, totalling $327m in the coming four years.

Prescriptions prices

A co-payment of $5 for the cost of all prescriptions will be scrapped by the Government, making medicine prescriptions cheaper for all. This will cost the Government $170m in the first year, rising each year to make a total expected cost of $706m in the coming four years.

Scientists

A major capital spend in this Budget is $400m for “Science City”, a project to combine science institutions into research hubs in Wellington focused on the following themes: health and wellbeing; oceans, climate, and hazards; and advanced manufacturing, biotech, and energy futures.

In operational spending, $51m has been allocated for this project for the coming four years. A further $55m has been promised to funding more research fellowships and doctorates, as the Government tries to raise spending on research and development to 2% of GDP.

Game developers

The calls of the gaming industry have been answered, with the Government promising a 20% rebate on gamer developers’ expenditure in a bid to compete with comparable, though larger, rebates in Australia. The gaming sector was worth $400m in 2022, and the Government wants to keep the sector growing.

“This will mean that the sector won’s be leaving in the way it was looking to do, because it was so attractive to go to Australia,” said Conor English, a lobbyist for the game development sector.

He said the Government had to intervene to keep the what had become New Zealand’s fastest growing exporter, now larger than the wool sector.

Te Matatini

Te Matatini, the country’s largest kapa haka competition, will receive $34m over the coming two years to help resource the biennial festival. There had been a strong call for funding for the event earlier in the year, and the Government promised to review the funding arrangement at the end of 2024/25.

Cost pressures

A common thread throughout the Budget was a need to keep various agencies and services afloat. The phrase “cost pressures” featured 52 times in the list of new spending, compared to 26 times in Budget 2022.

The Government has sought to alleviate cost pressures across the board, which much of the investment going towards wage cost pressures.

Examples include: $41m for the Ministry of Foreign Affairs and Trade, $13m for the Ministry of Housing and Urban Development, $9m for Parliament’s Office of the Clerk, $36.8m for Inland Revenue, and $20m for Customs.

LOSERS

People with money in trusts

The Government promised no “major” new taxes in the Budget, but Revenue Minister David Parker managed to get tax across the line in the name of “fairness”. The trustee tax rate will be aligned with the top income tax rate of 39%.

This change is expected to earn the Government $1.12 billion in the coming three years, a change to revenue that Robertson said was not “major”.

Anyone over 25years old, without children

There’s little new in this Budget for New Zealanders over 25-years-old who don’t have children. While the change to prescription co-payments is a cost-saver, the public transport and childcare subsidies won’t affect this group.

Homeowners

The forecast for house prices will be a bitter pill for homeowners who have watched the nominal value of their property, or properties, decline since mid-2021.

Treasury’s latest projections, contained within the Budget, anticipated “higher-for-longer interest rates to continue driving house prices lower”.

Prices were expected to decline a further 4.6% to mid-2024, making a total “peak-to-trough decline” of 21.3%.

A balanced Budget

The promise of a Budget surplus has been pushed out by a year, to 2025/26, with net debt as a percentage of GDP expected to peak in the coming financial year at 22%.

“The path we’re on still represents a strong fiscal position,” Robertson said.

He said the Government would return to surplus in the same amount of time it took John Key’s Government after the global financial crisis, after what was arguably a larger economic shock.