World Economy

New Zealand unveils spending boost in 'well-being' budget and cuts 2019 growth forecast

Key Points
  • Much of the excitement around the "well-being" budget was dampened after some plans of Prime Minister Jacinda Ardern's government were released earlier by the opposition party.
  • The Labour-led government allocated over a billion dollars each for issues like mental health and child poverty.It also targeted funds towards tackling domestic violence, and for infrastructure projects like rail, hospitals and schools.
  • The budget increases annual operating allowance for new spending to $3.8 billion per year over the four-year forecast period, from $2.4 billion in the previous budget.
Copies of the 2019 Wellbeing Budget on display in Wellington, New Zealand.
Hagen Hopkins | Getty Images News | Getty Images

New Zealand unveiled plans on Thursday to spend up to NZ$3.8 billion ($2.47 billion) a year under its "well-being" approach, which the government has touted as a new way of budgeting that moves beyond measuring just economic growth.

Much of the excitement around the "well-being" budget was dampened after some plans of Prime Minister Jacinda Ardern's government were released earlier by the opposition party.

The Labour-led government allocated over a billion dollars each for issues like mental health and child poverty. It also targeted funds towards tackling domestic violence, and for infrastructure projects like rail, hospitals and schools.

"We are measuring our country's success differently," said Finance Minister Grant Robertson. "We are not just relying on gross domestic product (GDP), but also how we are improving the well-being of our people, protecting the environment and strengthening of our communities."

The budget increases annual operating allowance for new spending to $3.8 billion per year over the four-year forecast period, from $2.4 billion in the previous budget.

The operating allowance for budget 2020 has also increased to $3.0 billion from $2.4 billion.

The Treasury department downgraded its gross domestic product forecasts to 2.1% in the year ending June 30, 2019, compared to 2.9% predicted in December, hurt by a cooling global economy and slowing domestic consumption.

GDP was forecast at 3.2% in fiscal 2020, and was seen averaging at about 2.6 percent over the forecasted four-year period.

Robertson said the economy faces continuing risks from the U.S.-China trade disputes and Brexit.

The budget forecast an operating surplus of NZ$3.5 billion for the year ending June, up from NZ$1.7 billion forecast in December.

The country's debt is forecast to drop to 19.9% by 2022.

Goals missed

Despite enjoying a "rockstar" economy for years, some New Zealanders have felt left behind due to the rising inequality.

Ardern, the popular 38-year-old Prime Minister, came to power in 2017 with an agenda of social justice and promising to make the economy "work for all New Zealanders."

Some questioned whether the budget had lived up to the government's stated goals to transform the economy and pointed out that the spending increase was still relatively modest as the government stuck firmly to its targets of paying down debt.

"They have spent on their priorities that they stated they would but I just don't get the sense that its the transformation that we have been promised," said Ganesh Nana, chief economist at Wellington economic think tank BERL.

Critics, many in the Labour's left-wing base, already felt the government has already missed key opportunities to fulfill its transformative goals.

Ardern made a surprise U-turn in April by ruling out a capital gains tax during her tenure, long a Labour policy to tackle wealth inequality.

Tens of thousands of New Zealand teachers staged the country's largest strike on Wednesday, and doctors, nurses and others also threatening industrial action this year for higher pay and shorter hours.