New Zealand has significantly lifted welfare benefit rates and promised billions of dollars towards addressing long-term challenges in its 2021 budget, while forecasting a stronger than expected economic recovery from the COVID-19 pandemic.
The budget for the 2021 fiscal year, revealed on Thursday, allocated funds towards housing, healthcare, education and infrastructure, while also targeting issues like child poverty, climate change and Maori welfare.
The highlight, however, was a hike in the weekly benefit rates by up to NZ$55 per adult, which the government said was the largest income increase in a generation.
"Not only will this give a sense of dignity and hope to those who receive that boost in income, it will also help reduce inequality and provide ongoing stimulus to the economy," New Zealand Finance Minister Grant Robertson said.
Reducing child poverty is Prime Minister Jacinda Ardern's signature issue, but she struggled to make an impact across key wellbeing indicators during her first term in office.
The government claims the welfare reforms - which will eventually grow baseline benefits by up to $NZ55 a week, change student support and include abatement changes - will help up to 33,000 children out of poverty.
However, the Child Poverty Action Group described the increase as "useful if insufficient", as 180,000 children would be left in poverty under the best case modelling.
"This is not yet the transformation (we) anticipated," CPAG spokeswoman Innes Asher said.
Underpinning the benefits bump is a vastly better set of books than a year previously.
The government will run a deficit of $NZ15.1 billion ($A14 billion) this year, fighting the urge to borrow at Australian-style levels.
New Zealand's debt will hit $NZ114 billion ($A106 billion) this year, peaking in 2023/24 at $NZ184 billion ($A171 billion) just below 50 per cent of GDP.
"In the face of this one-in-100 year shock, the New Zealand economy has proved to be remarkably resilient," Mr Robertson said.
"New Zealanders have weathered the storm of COVID-19. Today we take the next steps in our recovery together."
Mr Robertson said on these numbers, the impact of the COVID-19 recession on New Zealand would be smaller than the Canterbury earthquakes and global financial crisis.
He had delivered the 2020 budget less than a month out of a nationwide lockdown, forecasting unemployment above nine per cent and three years of deficits above $NZ27 billion ($A25 billion).
The budget is still in the red, and debt is still mounting, but none of those deficits have been realised.
The 2019/20 deficit was realised at $NZ23.1 billion ($A21.4 billion), this year will be $NZ15.1 billion ($A14 billion), and next year is forecast at $NZ18.4 billion ($A17.1 billion).
Unlike Australia, which is forecasting a decade of deficits, a return to the black is forecast in 2026/27.
Growth is forecast at 2.9 per cent this year, growing to 4.4 per cent in 2022/23.
Unemployment, which currently sits at 4.7 per cent, is forecast to hit 5.0 per cent next year, falling to 4.4 per cent in 2023.
The budget also contains a $NZ3.8 billion ($A3.5 billion) investment in housing, $NZ1.4 billion ($A1.3 billion) towards COVID-19 vaccines - both of which were already announced - and a $NZ306m ($A284 million) redevelopment of the country's Scott Base in Antarctica.
The opposition has decried the budget, which has no tax relief, as "a budget for benefits, not jobs".
"How about a bit of ambition for our country?" National leader Judith Collins said in her parliamentary reply.
With Reuters.
