New Zealand


  • Service: Advisory, Management Consulting, Tax
  • Type: Business and industry issue
  • Date: 24/05/2012

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Budget 2012 - Social policy implications 

Budget 2012


Education and health at $512m and $1.5bn respectively are the two main reasons for the ‘almost’ in front of Bill English’s ‘zero’ Budget for 2012.


The Government has been signalling since the election that it wishes to improve the performance of New Zealand’s schools and provide more support for health services.


Today’s announcements come as no surprise:


  • Disability services will receive the greatest amount of new spending with $132.7m for the sector to include home and community support, residential support and assistance such as wheelchairs, hearing aids and hoists.
  • $48m over four years to increase the number of elective operations by at least 4,000 per year and $16m for new IT systems to speed up test results.
  • $33m over four years to provide patients with faster access to cancer specialists and treatment.
  • $20.5m to maternity services and PlunketLine and WellChild.
  • Up to $1bn on redeveloping Christchurch’s schools and tertiary education infrastructure.
  • $83m boost in operating grants given to schools.
  • $60m to improve the quality of teachers and principals.
  • $51m for ultrafast broadband (UFB) in schools.
  • $7.6m over the next four years will be spent creating Enviroschools.
  • $48m to increase participation in early childhood education to 98 percent.


The health spending will be partly funded by increasing the prescription charge from $3 to $5, the first rise to prescription prices in 20 years. This is forecast to raise $20m in the first year and $40m in subsequent years. It is reflective of the wider Government approach: a focus on a suite of minor revenues and expenditure savings which, collectively, fund the major initiatives. 




Welfare has received ‘spend to save’ funding to implement the first phase of the announced reforms.  Budget 2012 has provided $287.5m over the next four years and this is expected to be supplemented with a further $232.5m in Budget 2013. The Ministry of Social Development are required to deliver $1bn of savings over four years through the reforms, from the annual welfare spend of $7.6bn.


The reforms were a key part of National’s election promises and are intended to turn the welfare system into one which helps people into work and supports the vulnerable.


The Government has stated it is concerned with long-term welfare dependency and inter-generational dependency. The reforms will see extra investment and intensive case management focused on beneficiaries who are more likely to rejoin the workforce, in an attempt to avoid the benefit costs that will otherwise accrue over the long-term.


Changes have already been announced such as new expectations of when sole parents will rejoin the workforce and a new work focused benefit called Jobseeker Support. Budget 2012 has provided funding to support the implementation of the reforms:


  • More support for early childhood care – $80m.
  • Dedicated Work and Income staff to support those on the Jobseekers allowance and sole parents into work.
  • Support for unemployed youth to help them gain the skills they need to participate in the workforce: budgeting and parenting courses, youth providers working across both the education and welfare systems and $37.7m for tertiary-based training.
  • $104m for the Social Housing Fund to support community housing groups and $11m for insulating homes.




New Zealand has some of the highest incarceration rates among developed countries. We were pleased to see the Government is taking a sophisticated approach to the justice sector through additional spending on early intervention.


$65 million over the next four years will be spent on programmes to reduce reoffending - more drug and alcohol treatment, more prisoner education and employment training and more community support provided by probation officers. The new programmes are all part of the plan to reach the Prime Minister’s target to reduce reoffending by 25 percent in five years. A focus on supporting offenders to improve their lives will bring substantial social outcomes and long term should reduce the fiscal cost of the justice system.

Press releases - KPMG press releases. 
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