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Financial News: New Zealand "WellBeing" Budget Boosts Spending

New Zealand "WellBeing" Budget Boosts Spending

05/30/2019 - 04:01:00 (RTTNews)

(RTTNews) - New Zealand's government raised its expenditure plan amid slower growth outlook in the 2019 budget, dubbed the "Wellbeing Budget."

"In this first Wellbeing Budget our priorities are focused on tackling the long-term challenges facing New Zealand," Finance Minister Grant Robertson said in his speech on Thursday.

The government has given utmost priority to mental health, child well-being and education. The minister unveiled a NZ$1.9 billion package for mental health and another NZ$320 million package was announced to improve child well-being.

As rail has huge benefits for New Zealanders' well-being, Robertson announced a more than NZ$1 billion investment in modernizing KiwiRail over the next two years.

"The Government has delivered the critical investments needed to help address the long-term challenges facing New Zealand, while remaining in line with our self-imposed Budget Responsibility Rules," Robertson said.

The annual operating allowance was raised to NZ$3.8 billion for each year from NZ$2.4 billion over the next four years. The operating allowance for Budget 2020 has also increased to NZ$3.0 billion from NZ$2.4 billion.

The economy is forecast to grow at 2.6 percent on average over the next five years to June 2023. Gross domestic product is expected to expand 3.2 percent next year from an estimated 2.1 percent this year. Citing a mix of weaker business investment and export growth, the projection for 2019 was lowered from 2.9 percent.

The budget forecast an operating surplus of NZ$3.5 billion for the year ending June, which is set to fall to NZ$1.3 billion in 2020. Government debt is expected to drop to 19.9 percent of GDP in 2022 from 20.1 percent estimated for 2019.

Anne Boniface and Michael Gordon, economists at Westpac, said they see downside risks to the Treasury's growth forecasts, which were unfazed by the weaker than expected starting point for the economy.

This could have implications for the affordability of the Government's spending plans in later years, the Westpac economists noted.

The unemployment currently at 4.2 percent is set to remain at around 4 percent across the forecast period, Robertson said.

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