Budget 2024: Short-term wins for middle-income families; long-term issues still to be faced

ALSO: What does the Budget predict for child poverty rates; and how much weight does "social investment" really have?

Summary: Some are claiming this Budget continues Labour’s addition to spending; others accuse it of being an austerity or slash-and-burn Budget. In fact it is neither. It’s a Budget that’s squarely focused on reducing costs for middle-income families with children, but doesn’t address longer term problems with low productivity and high levels of poverty.

The key points

IDEA’s deep-dive analysis of the Budget is below, but our top-line takeaways are as follows:

• The economy is in reasonable shape short-term, but has major long-term challenges;

• There are large headline increases in spending for education and health, in particular, although just maintaining existing services will chew up most or all of this funding;

• Inflation is tipped to fall to 2.2% next year, and unemployment back under 5% the following year;

• There is little to move the economy onto a more productive, higher-skilled track in the long-term;

• The Budget firmly targeted the “squeezed middle”, with tax cuts worth around $30 a week for two million Kiwis, and childcare rebates benefiting a smaller group;

• Many of these initiatives, however, excluded or did little for the very poorest New Zealanders – and as a result, child poverty is tipped to stagnate or worsen; and

• The much-touted social investment approach gets a modest $51m start.

IDEA has suggested an alternative path that the government could, given its philosophical and pragmatic constraints, realistically follow. Again, more detail is provided below, but the key points are as follows:

• a “bottom-up” government efficiency drive led by front-line staff;

• using social investment to ramp up spending on effective programmes; 

• greater investment in retraining, upskilling and job placement schemes for beneficiaries;

• in the long term, reverting to the previous policy of increasing benefits in line with wages rather than inflation; and

• building tens of thousands of social houses through initiatives like “alliancing” arrangements with developers or greater use of off-site manufacturing.