What is the Budget and why should I care?

Finance Minister Grant Robertson has announced that New Zealand’s Budget 2021 will be delivered on Thursday, 20 May. What does that even mean?

The word “budget” can fill people with dread: you might find it hard to stick to yours, or put off drawing one up because it just seems like too much work. But the Government has to make a Budget and try its best to stick to it, every single year.

And Budget time is exciting! It’s when all of the Government’s investments for the next year get planned out – and it’s also when the Government explains why its Budget is the way it is.

This is important: Kiwis need to know what our money is being used for, what the Government thinks is most important and why, what our financial situation is like generally, and what the Government hopes the result of this spending will be.

A Government Budget is an annual (or regular) estimate of national revenue and expenditure put forward by the Finance Minister. It’s a great way for people to get an idea of the Government’s policy intentions, priorities, and follow-through for the year.

The Budget lays out the state of the economy (now, and expectations going forward) and gives estimates about incoming and outgoing funds. In New Zealand, the Budget is always announced in May.

Believe it or not, there is a long process and a lot of work and kōrero behind every Budget. It’s one of the biggest decisions a Government makes each year, and all ministers play a role. They need to agree on the overall Budget strategy and spending priorities, and figure out the specifics, so these can be communicated to Parliament to be debated and voted on.

There are five main phases in the development of any Budget:

  1. Strategy: From June to December, the ministers figure out the overall strategy, choosing priorities and spending targets. The Government agencies (like the Ministry of Defence, or the Ministry of Agriculture) help by developing and updating their four year plans. The Government needs to deliver a Budget Policy Statement on the basis of this work by 30 March.
  2. Decisions: From January to April, the Treasury looks over the ministers’ proposed Budget initiatives, preparing recommendations on which projects ministers should support. This advice is then shared with ministerial groups and considered by the four key Budget ministers: the Prime Minister, the Finance Minister, and the two Associate Ministers of Finance (now Megan Woods and David Parker). These ministers put together a Budget package, including the projects they’ve decided make the cut, which they present to Cabinet for a final decision.
  3. Production: The Treasury and Government agencies prepare the Budget documents that will need to be presented on Budget day. These documents include, but are not limited to: a general economic and fiscal update, the Government’s fiscal strategy (basically its plan for managing its finances), a summary of all the Budget initiatives, and the Finance Minister’s Budget Day speech. That’s a lot!
  4. Legislation: The Government always needs to get parliamentary support for its Budget. On Budget Day – the day the Budget is announced, which this year is 20 May – the Budget documents are supplied to Parliament and the Finance Minister gives a speech outlining the Budget and the Government’s priorities. This is followed by a 15 hour (!) debate. Some of the Budget spending might be approved the same day – anything that’s urgent or that everyone agrees on. For the rest of the Budget, Parliament’s select committees have two months to examine the amount of money allocated to each specific area or department Ministers might have to appear before the committees to defend their spending plans. The committees report their findings to the House, which then votes on the different elements of the Budget. This debate takes 11 hours! Finally, the Budget has its third reading and becomes law. (Unless it doesn’t: if MPs can’t agree on the Budget, the Government must resign and an election is held. This has never happened in Aotearoa.)
  5. Making it happen: Once the Budget is passed, the Government and all its agencies need to get going, to start rolling out the projects and programmes they had decided were important enough to merit support.

Basically, the Budget lets the government organise its finances to support the programmes and projects it wants to carry out – just like your personal budget allows you to think about how much you want to allocate to each area of your life to promote things like your health, your whānau’s wellbeing, and future prosperity.

Right now, the Government’s priorities are to keep Kiwis safe from COVID-19, accelerate our economic recovery – supporting New Zealanders as the effects of the crisis continue to be felt – and tackle long-term challenges like housing, climate change, and child wellbeing.

The Budget process makes sure that money is being spent on these areas that the Government thinks are most important. It allows the Government to set objectives around the money coming in and going out, and our debts and investments. It helps us plan for the coming year and beyond – and it also ensures that Parliament has oversight and the power to debate and approve spending.

Yes! All Kiwis are impacted by the way the Government organises its spending. If you received a wage subsidy in the past year, or if your local motorway has been fixed, or if your Winter Energy Payment came through, or if you’ve accessed mental health services at your GP practice – your life has been directly touched by a past Budget.

If none of those apply to you, there are any number of others ways these kind-of-boring-sounding financial decisions show up in your life. And the transparency of the Budget process – the way we get to observe what’s happening, and the requirements for Parliament to approve all spending – is a really important part of a democratic system.

You’ll have to wait and see: details will only be released in full on Budget Day, 20 May. But Finance Minister Grant Robertson has said that Budget 2021 will be a Recovery Budget. Even though the scale and urgency of the response differ from last year, Budget 2021 will recognise that the health and economic impacts of COVID-19 are still being felt and will be for some time to come.

The Government’s top priorities, which will be reflected in the Budget, are to keep Kiwis safe from COVID-19, accelerate our economic recovery, and address housing affordability, climate change, and child wellbeing. With the Government playing such a big role to support the economy, this year’s Budget will establish an Implementation Unit to make sure that we are getting value for money.

The Budget will align with the Government’s careful approach to money management, making sure investment goes where it is needed most. This will make sure we can take big strides on key priorities as we recover and rebuild, working towards a productive, sustainable and inclusive economy.

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