The 2023 Budget: What you need to know

New Zealand's Labour Government yesterday unveiled its 2023 budget, which Finance Minister Grant Robertson said primarily focused on assisting families and households coping with the rising cost of living.

The good news is that Treasury figures indicate the economy is projected to grow by 3.2% in the year to June 2023. It predicts the country will successfully avoid recession, in part due to the economic boost generated by reconstruction endeavors following Cyclone Gabriel and recent flooding.

However, the unemployment rate currently stands at 3.3%, and is projected to reach up to 5.3% by mid-2024. Additionally, the Reserve Bank's measures to restore inflation to its target range of 0-3% will result in rising mortgage rates for numerous households in the following months. 

To alleviate financial pressures on Kiwi households, the budget allocated $2.6 billion for several measures, including:

1. Cheaper public transport for individuals under 25 and free travel for children under 13.
2. Expansion of the 20 hours early childhood education (ECE) program to cover two-year-olds.
3. An expansion of the Warmer Kiwi Homes programme, which will now install heating and insulation in approximately 100,000 homes. It will also provide 7,500 hot-water heat pumps and distribute 5 million LED light bulbs.
4. Removal of the $5 co-payment for prescription medicines, reducing the costs of prescription medicines. 
5. Changes to the KiwiSaver scheme to establish a matching KiwiSaver "employer" contribution for paid parental leave recipients.

The budget also acknowledged the ongoing challenge of housing affordability. In a bid to address this, the government has committed to investing $62.7 billion in infrastructure projects over the next five years, including a new National Resilience Plan with a focus on Cyclone Gabriel rebuilds, and long-term solutions to prevent more damage from future extreme weather events. More specifically, the budget commits to building 3,000 new public housing places by June 2025. They have also committed to increasing the trustee tax rate from 33% to 39% in 2024; by increasing the trustee tax rate, it is likely the use of trusts will become less popular. 

Despite inflationary pressures, Finance Minister Grant Robertson remains optimistic, stating that New Zealand's economy is ‘in a strong position.’