WELLINGTON (New Zealand) (AP)... Months before an upcoming election, New Zealand’s government offered modest financial relief on Thursday to many people, by making the majority of prescription drugs free and increasing subsidies in child care and public transport.
The government's budget plan for the year was notable because it did not include any major new initiatives. Since assuming office in January, Prime Minister Chris Hipkins promised to take a "back-to-basics" approach, and has canceled many of Jacinda Ardern's more ambitious plans.
Grant Robertson, the Finance Minister, said that the budget is all about getting the basics right.
Robertson stated that the budget was 'pragmatic, practical, and appropriate for this time'. "Were there things else I wanted to accomplish?" Robertson asked. Did ministers have other goals? There was absolutely no doubt. But now is not the time to do all those things.
According to polls, Hipkins' liberal government and the opposition conservative led by Christopher Luxon are on a very close race for the elections in October.
New Zealand's economy is cooling, according to a new Treasury forecast published Thursday. The forecast predicts a rise in unemployment, but also anemic growth.
Budget plan of the government comes after the nation experienced an economic setback in early this year, when extreme weather conditions, such as flash flooding in Auckland and a Cyclone, caused billions in damages to homes and infrastructure.
The plan eliminates the small copay for most prescription drugs, extends child care subsidies to preschoolers, including 2-year-olds and provides free bus and train rides for all children below age 13.
Hipkins' plan must be approved by legislators, but this is a formality as Hipkins and his supporters hold a majority in the Parliament. The budget is implemented when the fiscal year starts in July. However, not all initiatives will be implemented immediately.
Luxon, leader of the opposition, said that the government is addicted to spending.
Luxon stated that Grant Robertson had promised a budget for the everyday man. What he delivered was an extravagant spending spree that will cause massive deficits to grow and the debt to continue climbing for many years.
Treasury's forecast indicates that inflation will drop rapidly from its current 6.7% level to around 3% by next year. This indicates that the benchmark interest rate of the central bank has already reached its peak in the current upward cycle, at 5.25%.
Treasury's forecast shows that the economy will grow 1% in the first half of the year, and then 2.1% the next year. Treasury forecasts that the unemployment rate will increase from 3.4% to 5.3% at the end of the year, before dropping.
The government expects to return to a surplus in 2027, after a period of deficits following the pandemic coronavirus that began in 2020. The government expects that the debt of the federal government will peak at 22% of GDP and then begin to decline.