Independent analysis of 2018 budget shows two competing visions for government spending
Analysis by Victoria University of Wellington’s School of Government, Institute for Governance and Policy Studies (IGPS) and the New Zealand Institute of Economic Research (NZIER) shows that the Labour-New Zealand First-Green Government plans to spend almost $1000 more per head in real terms by the end of 2021 compared with the 2017 Budget.
The Labour-New Zealand First-Green Government plans to spend almost $1000 more per head in real terms by the end of 2021 compared with the 2017 Budget plan set by the previous National-led Government, with the largest shares of this sum going to welfare, health and education.
The Labour-New Zealand First-Green Government plans to spend almost $1000 more per head in real terms by the end of 2021 compared with the 2017 Budget plan set by the previous National-led Government, with the largest shares of this sum going to welfare, health and education.
Analysis by Victoria University of Wellington’s School of Government, Institute for Governance and Policy Studies (IGPS) and the New Zealand Institute of Economic Research (NZIER) shows that, after accounting for population increases and inflation, total core Crown expenditure is now planned to increase from $16,173 per person in 2018 to $16,870 in 2021. The 2017 Budget had planned spending of $15,917 per person in 2021.
The areas of spending seeing the biggest real per capita increase over this period above National’s plans are welfare ($277 per person), health ($166) and education ($145) (see Table 1).
This increase is partially enabled by a falling share of government spending going to interest repayments on public debt, which falls by just over $50 per person between the two Budgets.
Table 1: Labour versus National coalition differences in real annual planned spending per head by 2021 (a positive figure is higher planned spending by the Labour coalition compared with the National coalition plans, a negative is lower spending by the Labour coalition than National coalition plans, based on the value of the dollar in 2016.) | ||||
| 2021 | ||||
Core government services | $130 | |||
Defence | $18 | |||
Education | $145 | |||
Finance costs | -$52 | |||
Health | $166 | |||
Law and order | $48 | |||
Welfare | $277 | |||
NZ super | $68 | |||
All other | $155 | |||
Total core Crown expenses excluding losses | $954 | |||
“The previous National-led Government’s Budget planned total core Crown expenditure to be broadly stable in real per capita terms between 2017 and 2021. This approach can be understood as government holding the line in terms of adjusting for population growth and changes in prices, but not adjusting upwards for real per capita GDP growth. Thus this strategy delivered a falling government share of the economy” says Toby Moore, Teaching Fellow at Victoria University’s School of Government.
“What we see in Budget 2018 is that government expenditure is now planned to increase in line with the overall economy. Productivity gains that we make as a country are matched by increased spending on the goods and services that government provides—such as a social safety net, health and education”.
“What we see here is two competing political visions for the size of government relative to the economy. One—National’s—might be described as incrementally radical, reducing the relative size of government. The other—the Labour-led Government’s—might be seen as inherently conservative, maintaining its relative size,” says Simon Chapple, Director of the Institute of Governance and Policy Studies.
Approach
This analysis has been produced on the basis of adjusting all areas of core central government spending for the consumer price index (CPI) and projected population changes. All data reported above is in 2016 dollars. Researchers caution that this approach does not directly address differential cost pressures in specific areas of spending, or the changing patterns of demand for government services within the population. Researchers are not commenting on outputs, or the quality of government spending.
Wherever possible, the figures, projections and assumptions have been taken directly from government sources and applied to the new spending information in Budget 2018.
The NZIER’s analysis was supported by its Public Good programme.
Download the spreadsheet to view data and interactive visualisations.