Media release - 14 May 2013
KPMG expects Budget 2013 to have two major themes – boosting economic growth and better social outcomes. We see both as urgent priorities for New Zealand.
The National-led Government has had other focus areas in its previous Budgets. Recession, the Global Financial Crisis and Christchurch has meant sustained state sector belt tightening, targeted stimulus spending (predominantly on infrastructure) and the natural stimulus provided by Christchurch recovery spending have been consistent themes.
The pathway to growth and a more balanced economy has been described in previous Budgets, and worked on by officials, but the Government’s fiscal management strategy has not afforded it the funds to invest significantly in these areas.
In 2013, with the Government appearing on track to achieve its long held aim of a return to surplus in 2014/15, and the $1.7 billion from a successful partial IPO of Mighty River Power fresh in its bank account, this Budget will mark out the ground on which the Government wants to fight the next election – its ability to drive economic growth, export returns and job creation and its ability to deliver effective public services to those in need.
As with other recent Budgets, we expect no more than one or two surprises as the frameworks for investment are already well described.
KPMG expects that the phrases “Business Growth Agenda” and “Internationally Focused Growth” will feature heavily in Budget 2013.
The Government has repeatedly signalled its intent to rebalance the New Zealand economy, moving away from consumption fuelled growth and towards export focused sectors and domestic savings and investment. In addition to ongoing support for Christchurch, the six ‘ingredients’ of the Government’s Business Growth Agenda are a useful framework for what to expect:
Budget 2013 will see concrete steps being made to support export markets, with new funding already evident for Tourism initiatives and a likely package of initiatives around support for export-led industries. China will be a big target for both inbound tourism initiatives and as an export destination.
- Infrastructure will continue to be an investment priority for this government. Confirmation of funding from the Future Investment Fund for schools, hospitals and irrigation should be expected to feature.
- Innovation has already seen a boost in the announcement of ten National Science challenges, which will attract an additional $73.5 million over four years
- Funding for the new workplace health safety agency should be confirmed
The remaining ingredients are Capital Markets and Natural Resources. Both are firm priorities in business as usual at present so may not feature specifically as Budget initiatives. Further boosts to capital market depth will be seen through confirmation of the intent to continue with the Mixed Ownership Model listings and which SOE is next.
The drive for regions to consider natural resources opportunities more seriously has been a key message from of the Government following the release of its Regional Economic Activity Report.
Improved social outcomes
Value for money in the delivery of public services is measured in terms of the three ‘Es’ – economy, efficiency and effectiveness. The disciplined fiscal management strategy of the current Government has ensured that economy and efficiency have never been far from the minds of public service chiefs.
The more elusive target has been effectiveness – are we really getting bang for buck from our public services in terms of their actual impact on health, welfare, justice, social housing, education outcomes?
KPMG sees that New Zealand has some way to go on the effectiveness measure. We are deeply involved in trying to create new measurement approaches and delivery frameworks. Despite some encouraging initiatives, particularly in the Social Development and Justice sectors, all too often the public sector still focus on delivering and or contracting for the ‘inputs’ (eg FTEs, meetings, workshops, houses) and aren’t measuring or contracting for the outputs and outcomes.
Outcomes for real people are complex, long term and usually refuse to organise themselves into convenient Government silos. This is why the Government has driven the Better Public Services agenda and why it developed the ten “Results Areas’ at the start of its second term.
The Results Areas have become very real centres of cross-silo activity within the public sector and, as with the Business Growth Agenda, form the guiding framework for understanding social spending priorities within Budget 2013.
We expect Budget 2013 to contain a significant number of initiatives funded by either new money or reprioritised money that align to the Result Areas. Examples already announced include:
- Additional $21.3 million over four years to reduce rheumatic fever rates (Result Area 3)
- $80.5 million over four years to support greater educational achievement, primarily through behaviour improvement programmes (Result Area 5)
- Kāinga whenua infrastructure grants to allow greenfield housing developments on Māori ancestral land (Result Area 1)
- An allocation of $1.5 billion over ten years to Inland Revenue for the upgrade of its computer system (Result Area 10)
KPMG expects to see more announcements in Budget 2013 targeted at reducing welfare dependency, boosting skills and employment, and increasing digital interaction with Government. We expect Education and Health to continue to attract the lion’s share of new funding.
Is enough being done to fuel New Zealand’s prosperity?
KPMG is proud of the contribution we make to the future prosperity of New Zealand. We passionately believe that the flow on effect of our work for our clients in the private, public and community sectors contributes significantly to fuelling New Zealand’s prosperity.
We welcome other like minded organisations to get involved to help deliver a more prosperous New Zealand for all New Zealanders; there are important roles for the private, public and community sectors to play in this.
Whilst we believe that the Business Growth Agenda and Results Areas are very good frameworks for Budget 2013, we would always like to see more done to fuel prosperity for New Zealanders. Some of the things on our wish list for Budget 2013 are:
Our New Zealand economy is fuelled by private enterprise, they make up 97% of the business community, employ 30% of the workforce and deliver 40% of New Zealand’s GDP.
Ongoing improvement in productivity and innovation capacity in this sector is critical. In this sector we would like to see more support for research and development in private enterprise, commercialisation assistance to corral the developed knowledge and package it for the export market.
Two items lend themselves to being key in this sector, getting more of the right talent into the sector, and equally important would be irrigation infrastructure – as highlighted by the drought of 2013. This has awoken the debate that letting precious liquid gold flow out to sea is depriving the New Zealand economy of the most significant productive contribution to prosperity available to the people of New Zealand.
More focus on resource management and infrastructure funding support to enable better catchment of rainfall and distribution to primary sector producers is desperately needed to unlock productivity gains for New Zealand.
In our view, the public sector which accounts for 40% of New Zealand’s GDP, is making great strides in improving how it does business. Continuous and LEAN-based process improvement remains a missing piece of the puzzle and should be a frontline response to permanent budgetary constraint. However, in our view the lack of hands-on experience and familiarity with such approaches in the public sector are formidable barriers to its adoption.
We would like to see support in Budget 2013 for departments that are willing to grasp the nettle, whether through direct resource support from central agencies or a fund to assist in ‘spend to save’ initiatives. We would also like to see more support for contracting reform, in particular increasing support for the purchasing of outputs and outcomes, or avoided cost-based preventative interventions.
In short, more focus on creating long term outcomes by making more informed investment decisions and through better engagement.
For more information, contact:
Marketing Projects Lead, KPMG New Zealand
+64 9 363 3622
+64 21 809308
About KPMG New Zealand
KPMG is one of New Zealand’s leading professional services firms; specialising in Advisory, Audit and Tax services. Our firm of over 800 professionals works with a wide range of New Zealand enterprises – from SMEs, privately owned businesses, to publicly-listed companies, government organisations, and not-for-profit bodies.
KPMG has offices in Auckland, Wellington, Hamilton, Tauranga, and Christchurch. Globally, KPMG operates in 156 countries; employing over 152,000 people in member firms around the world.
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