Finance Minister Grant Robertson specified some construction in yesterday’s Budget, and a notable focus on lifting trades training:
- $570 million to build an extra 8000 homes, split between about 6000 public housing homes & 2000 transitional homes
- $1.6 billion trades & apprenticeships training package
- Expansion of He Poutama Rangatahi, a programme supporting 15-24-year-olds not in education, unemployment or training, who are at risk of long-term unemployment
- A $50 million fund to partner Maori community groups to support Maori employers to take on Maori apprentices
- $19.3 million over 4 years to help thousands of recently unemployed New Zealanders access training & work opportunities in the primary sector – aiming to place at least 10,000 people in primary sector jobs in the immediate term, supporting growth of the primary industries in the longer term
- $3 billion for infrastructure projects, in addition to the $12 billion upgrade programme infrastructure investments
- Rail investment lifted to a record $4.6 billion.
Key economic indicators
For a gauge on overall economic activity going beyond the harshest period of the Covid-19 pandemic, Treasury issued a set of forecasts & assumptions along with yesterday’s Budget.
I’ve commented on only one – the net inflow of migrants surged upward in March and, after discounting for the inclusion of a quite high number of non-migrant travellers, the latest figures show no sign of the Government’s stated intention of reducing immigration.
- In the current year and the next 2 fiscal (June) years, operating deficits will average about $28 billion
- The Government expects net core Crown debt to increase on average by about $35 billion/year, recovering from the June 2023 year
- Net core Crown debt is expected to reach 53.6% of gdp by the end of the forecast period
- The Government has made $62.1 billion available to support the Covid-19 response & economic recovery – $12.1 billion in the economic recovery package & $50 billion in the Covid-19 response & recovery fund
- At 20 April, $10.7 billion of the Covid-19 response fund had been committed to extend the wage subsidy scheme and introduce further tax changes; the $39.3 billion was unallocated
- Under the main forecast, real gross domestic product (gdp) contracts by close to one-quarter in the June 2020 quarter, reflecting the time spent in alert levels 3 & 4
- The Government expects economic activity to recover as restrictions are lifted, so by the end of 2020 real gdp is about 10% lower than in the 2019 half-year economic & fiscal update (ended in December 2919)
- Real gdp is forecast to contract by about 10% through calendar 2020, reaching a low of nearly 12% in the year to March 2021
- By 1 April 2021, all restrictions are assumed to be lifted (including border restrictions), but activity in the June 2021 quarter is forecast to remain about 7% below that predicted in the half-year update
- In the main forecast, the unemployment rate approaches 10% by September 2020, easing only gradually to about 8% by mid-2021
- In the scenario of a slower international recovery, New Zealand’s nominal gdp is forecast to be a cumulative $90 billion lower than in the main forecast.
Key economic forecast judgments & assumptions:
- Net migration falls from about 50,000/year over the second half of 2019 to 4000/year by March 2021 (but in Statistics NZ’s count yesterday, the trajectory was steeply upward)
- As international travel restrictions are lifted throughout the world, net migration gradually increases to 35,000/year by June 2024, the same endpoint as in the half-year update
- Working-age population (15 years of age & over) growth averages 1.3%/year over the 5 years to June 2024, including the contribution of net migration, down from 1.5%/year in the half-year update
- Major export commodity prices have fallen, reflecting weaker international demand; forestry prices have been especially weak, compounding the effects of an oversupply before the pandemic; dairy auction prices have fallen 11% & meat prices 12% since the end of last year; further falls in dairy & meat prices are expected in coming months, but prices should recover as the pandemic fades; forestry exports are also expected to recover over the medium term
- The lower $NZ is providing some offset for commodity exporters
- Global movements in currencies have reflected strong demand for $US, and the $US has appreciated against most currencies; during March, the $NZ fell by up to 16% against the $US from its end-2019 level, but recovered to end April only 9% lower.
Attribution: Government release.