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Budget 2022: The Ghost of Michael Cullen

Home Insights Budget 2022: The Ghost of Michael Cullen

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Published on: May 19, 2022

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Today marks the release of the Government's fourth Wellbeing Budget, this year titled Wellbeing Budget 2022: A Secure Future. Minister of Finance Hon Grant Robertson following in the footsteps of one of his political heroes and mentors, Sir Michael Cullen, outlined in his speech today that Budget 2022 seeks to "build a more secure economy", and "moves further towards a high wage low emission economy, which is at the heart of the Government's economic plan".

Over the coming days there will be various commentators presenting detailed economic analyses of what this years' budget means for New Zealand. While our insights do not traverse the financial analysis in any detail, we provide a high-level update of some key areas of investment which will be of particular interest to many of our clients, and a glance at the legislative and regulatory changes this new Budget ushers in.

As had been extensively foreshadowed, the Government's priorities for the coming year, as reflected in Budget 2022, very much centre around two key areas: Climate and Health. It is also notable (and politically, not surprising) the emphasis placed on supporting New Zealanders with the rising cost of living, with the announcement of more than $1 billion in a cost-of-living package targeted at low and middle income households. It is also worth noting that the COVID-19 Response and Recovery Fund has been closed, with the Government's COVID-19 response now being part of a business-as-usual approach, and $1.2 billion being set aside in a new contingency plan to respond as necessary in the event of a major resurgence or new variant.

MAJOR AREAS OF BUDGET 2022 FOCUS

Climate

As announced earlier this week, the Climate Emergency Response Fund (CERF) has been established with an initial $4.5 billion 'down payment' from the expected cash proceeds from the Emissions Trading Scheme (ETS). You can read Russell McVeagh's Insights analysis of the recent ETS announcement here. Budget 2022 investments are focused on mitigation, particularly initiatives to deliver actions in the Emissions Reduction Plan. CERF investments for Budget 2022, as announced earlier this week, total $2.9 billion, and include a clear focus on investment in transport initiatives, climate-focused energy and industry, the agricultural sector, and forestry.

In the Agricultural sector, climate investments include:

  • $339 million funding for a Centre for Climate Action in Agriculture to support innovation and research to reduce emissions; and
  • $6 million for the implementation of an agricultural emissions pricing scheme, based on the outcomes of the Primary Sector Climate Action Partnership (He Waka Eke Noa).

In the forestry sector, climate investments include:

  • $91 million to reduce the use of coal and other carbon-intensive fuels and materials by increasing woody biomass availability; and
  • $145 million to create large-scale native forests as carbon sinks, to offset emissions in other sectors where abatement is difficult.

Budget 2022 also makes various investments in the maintenance and development of the various regulatory and administrative moderating and reporting bodies in the climate space, including upgrades to the Emissions Trading Register Server, and funds to the Financial Markets Authority to monitor and enforce compliance with the Financial Sector (Climate-related Disclosures and Other Matters) Amendment Act 2021.

The climate-centred emphasis is clear in other, more specific areas of investment in Budget 2022 – perhaps in reflection of the Government's exploration of multi-year funding and the breaking down of agency silos – including in relation to business potential, and continuation with the proposed resource management system reform, discussed further below.

Health

Budget 2022 provides the largest ever investment in the health system, with $11.1 billion in new funding. One of the key changes that the Budget heralds in is a change to a multi-year funding model. This will begin initially with funding being provided for the next two years and then from Budget 2024, a three-year funding cycle will be adopted. The intention is that this new multi-year budget system will provide for better planning and more consistent health services. Health NZ specifically will receive a funding boost of $1.8 billion per annum in year one and an additional $1.3 billion per annum in year two. The intention is that this increase in $1.8 billion will cover:

  • DHB deficits left behind from the 2021/22 financial year;
  • Demographic changes for a growing and aging population; and
  • Improvements to health services as a shift is made to nationwide planning.

The newly established Māori Health Authority has also received $168 million in funding over the next four years for direct commissioning services. These services include:

  • $68 million for te ao Māori population health and prevention programme targeting the wider determinants influencing Māori health and wellbeing;
  • $26 million for specific interventions for Māori whanau at different life stages to supplement and improve current primary and community service models; and
  • $74 million towards a programme to identify, uplift and develop mātauranga Māori services, programmes and resources across health.

A further $20.1 million over four years has also been allocated to the development of Iwi-Māori Partnership Boards.

The other key health focuses are:

  • $191 million two-year funding boosts to PHARMAC, giving it a total funding of $1.2 billion to support increased availability of medicines.
  • Community and primary health will also receive a funding boost with $102 million being provided to community healthcare to identify and treat issues earlier, and GPs in high need areas receiving $86 million of new funding cover to assist with opening hours and appointment capacity. A further $76 million has also been allocated to fund training of the health workforce with a focus on primary care.
  • $100 million will be invested in specialist mental health and addiction services.
  • A streamlining of administration and care delivery with a shift towards a national system supported by connected IT platforms.

Outside of these main points of focus, there are various other areas of funding and reform of interest.

Investment in Business

Budget 2022 includes a new fund to improve access to finance for small and medium sized enterprises (SMEs) to assist in economic security, innovation, and low-emissions growth. This investment is made in recognition of the role that SMEs can play in economic security and New Zealand's transition to a low emissions economy. The Budget has set aside $100 million over the coming year for Crown investment as a minority shareholder in a Business Growth Fund, alongside private banks. Such an investment model reflects similar initiatives already established in the UK, Ireland, Canada, and Australia.

Primary Sector Backing

Funding is also being given to support new integrated advisory services for farmers, foresters and growers with $190 million of funding announced to help these industries adapt practice and increase value growth. This includes $118.4 million for advisory services to support farmers, foresters, growers and whenua Māori owners to increase sustainable land use changes and lift productivity.

Budget 2022 has allocated $40 million total to Primary Industry Transformation Plans (ITPs) that are currently being developed in the food and fibre sector. The Food and Beverage ITP receives $8 million, the Fisheries ITP $5 million, and the Forestry and Wood Processing ITP $27 million. There is also additional funding towards Agritech and Advanced Manufacturing, and Digital Technologies. These areas of investment are intended to further develop Government partnerships with businesses, workers and iwi, and shift industries towards a high wage, low emissions economy.

Critical Infrastructure

Increased infrastructure investment has resulted in funding of $61.9 billion in critical infrastructure from 2022 to 2026. This includes $1.3 billion investment in health infrastructure, with funding highlighted for new hospitals for Whangarei, Nelson and Hillmorton. There is also a focus on education infrastructure with $777 million being put towards capital investment for schools.

A further key infrastructure area is transport. A $349 million investment has been made to the national rail network, to assist in freight transport by rail, and also metropolitan rail as a way to reduce emissions and congestion. Furthermore, there is a commitment to explore the feasibility of Manukau Harbour as a location for a future port and the potential of a dry-dock in Northland.

New Resource Management System

Budget 2022 provides funding to implement the new resource management system, building on progress made since the reform was announced just over a year ago. In June 2021 the Government released an exposure draft of parts of the Natural and Build Environments Bill, which were considered at the select committee. The Government expects to introduce the full Natural and Build Environments Bill and Spatial Planning Bill to Parliament later this year. The key goal of the reform is to make it easier, faster, and more affordable to consent housing, while also protecting the environment.

Budget 2022 investment for this reform is intended to assist with the smooth implementation of the reform, funding an efficient transition via the development of the National Planning Framework, which will combine the many national direction instruments of the current system into a single framework. Funding is also provided to assist councils in developing the first Spatial Planning plans. Combined funding comes to a total of $178.7 million.

There will be opportunity for the public to provide more feedback through what will have to be an exhaustive the select committee process. There is still a lot of work to be done.


This article is intended only to provide a summary of the subject covered. It does not purport to be comprehensive or to provide legal advice. No person should act in reliance on any statement contained in this publication without first obtaining specific professional advice. If you require any advice or further information on the subject matter of this newsletter, please contact the partner/solicitor in the firm who normally advises you, or alternatively contact one of the partners listed below.

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