Budget 2016: Solid, practical generally underwhelming

5:57 am on 27 May 2016

Power Play - The Finance Minister's eighth Budget did not deliver the whizz-bang surprise governments generally love to unveil on the day, but rather a wide-ranging Budget that spreads new money across a number of portfolios.

Finance Minister Bill English delivers his Budget 2016 speech to Parliament.

Bill English delivers his Budget speech to Parliament yesterday. Photo: RNZ / Elliott Childs

In fact, the greatest moment of excitement during the lock-up at Parliament was when journalists and analysts were told Bill English was delayed from arriving because of a security situation under way at Parliament.

Unaware of the drama unfolding on the forecourt, those in the lock-up pored through the Budget document searching for the surprise big announcement - the "Business as Usual Budget" as RNZ's Business Editor Gyles Beckford declared.

RNZ staff work in the media lockup at Budget 2016.

RNZ staff work in the media lockup at Budget 2016. Photo: RNZ/Jane Patterson

There were nuggets however: a policy that unapologetically hit smokers hard in the pocket - year on year tax increases that will mean a packet of 20 cigarettes will cost $30 by 2020.

There was also a $10 million a year funding boost for the SuperGold card for seniors, but that has not placated outspoken New Zealand First leader Winston Peters, who quickly dismissed it as "an exercise in deception" designed to mask the fact the government was not meeting the full cost.

The most random announcement was $16m to eradicate invasive wilding pines. And perhaps one of the most surprising, a significant funding increase for the intelligence and security agencies - nearly $180m over four years.

The government said the new money was needed to ensure the agencies "remain effective"; it will allow them to recruit more staff to fulfil the government's requirement to better "respond to the threat from foreign terrorist fighters".

A large chunk of the money was also earmarked to upgrade the infrastructure run by the Government Communications Security Bureau that ensures government communications are secure, something the government will be very keen to ensure in the current digital environment.

Andrew Hampton

GCSB director Andrew Hampton, who was appointed in March. Photo: RNZ / Jane Patterson

There was a one-off $100m to buy surplus Crown land in Auckland so Building and Housing Minister Nick Smith can continue to roll out new builds in that city.

But as the government is repeatedly reminded, that is not a quick fix and it will take some time for that money to produce material benefits.

Another $258m is to provide housing for those with "pressing housing needs" in Auckland.

However, the total housing package presented in the Budget essentially extended the track the government was already on and will be widely regarded as an insufficient response to the pressures in the residential housing market - in Auckland in particular.

Housing construction in an East Auckland suburb

The housing measures extended the track the government was already on. Photo: RNZ / Claire Eastham-Farrelly

Mr English's "social investment" approach is very apparent in this Budget, based on the belief it is better to directly target funding to individuals and families most in need. One example was zero increase to schools' operational funding, but specific money for schools which have more children from beneficiary families.

The first steps of a major overhaul of Child Youth and Family had money committed to it, but minister Anne Tolley said that was only very initial funding for the new model, as recommended by the review led by Paula Rebstock. Mrs Tolley said the bulk of the money would be contained in Budgets to come.

There is money across several key portfolios, including funding for police pay rises and for building Defence Force capability. Funding for health and education will help relieve some pressure but opposition parties say spending is not enough in both sectors.

This leads to the question of what the government will do for its 2017 election-year Budget.

Prime Minister John Key mused about possible tax cuts, but on reflection and no doubt in consultation with his Finance Minister, came to the conclusion the $1billion available would not deliver a high enough return to be worth it.

Mr English is keeping his options open for tax changes next year, but at a cost of potentially $3bn, he warns there will be plenty of other demands on that money.

This has been a classic mid-cycle Budget - take care of the less exciting, but worthy, spending this year, and prepare to woo voters the next.

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