New Zealand Budget 2016: Winners and Losers

  • New spending for health, education to tackle population growth
  • Smokers targeted by annual 10% tax on tobacco over four years

New Zealand Finance Minister Bill English released an annual budget Thursday that keeps a tight rein on spending in order to meet the government’s debt reduction targets. Here are the winners and losers:

Winners

Entrepreneurs

The government is trumpeting a NZ$761 million ($511 million) innovation package to encourage entrepreneurship, skills and economic growth. It will boost investment in science and innovation, tertiary education and apprenticeship programs.

Hospitals, Schools

The bulk of new spending goes to health and education to help cope with population growth. The government will spend NZ$883 million to deliver 480 new classrooms and nine new schools. Some NZ$2.2 billion has been earmarked for extra health spending over the next three years, including a national bowel screening program.

Disadvantaged Children

The government announced a NZ$652 million social investment package targeted at disadvantaged children. It aims to help the most vulnerable by intervening early, and will also seek to help youth who are at risk of long-term welfare dependency.

The Fire Service

NZ$303 million over five years to modernize the fire service.

Small Businesses

A new pay-as-you-go option will give up to 110,000 small businesses a way to pay tax as they earn income from April 1, 2018. Use-of-money interest will be eliminated or reduced, contractors will be able to choose a withholding tax rate that suits their needs, and the ongoing 1 percent monthly penalty will be scrapped from April 1 next year for new debt.

The Kiwi

The government has allocated NZ$20.7 million to help fund the largest pest control operation in New Zealand’s history. This autumn, around a million tons of beech seed will drop to the forest floor. This will provide a food bonanza for rats, causing their population to boom and threatening native birds, including the flightless kiwi.

Losers

Income Earners

There is no mention in the budget of tax cuts. English had already taken tax cuts promised for 2017 off the table, only for Prime Minister John Key to say they are still a possibility for next year’s election campaign, when he will seek a fourth term in office.

Smokers

Starting Jan. 1, the government will increase the tax on tobacco by 10 percent each year for the next four years, as part of a package of measures aimed at making New Zealand smoke free by 2025. The price of a standard pack of 20 cigarettes will likely increase to around NZ$30 in 2020 from NZ$20 today, generating an extra NZ$435 million in tax revenue.

Criminals

The government is boosting spending on the justice sector by NZ$837 million over the next four years, including NZ$356 million to Corrections to deal with a rising prison population.

Pollution Emitters

The government is phasing out over three years a subsidy in the emissions trading scheme that allows some businesses to pay one emissions unit for every two tons of pollution they emit. The move will help New Zealand meet its target of reducing emissions to 30 percent below 2005 levels by 2030, the government said.

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