21 May 2021

Budget 2021 expectations vs reality: What you need to know

2:47 pm on 21 May 2021

Analysis - Finance Minister Grant Robertson has revealed the government's Budget for 2021, including a core benefits increase.

In the aftermath, does it all match up with the hopes and expectations of the public?

RNZ is here to clear it all up.

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Photo: RNZ / Vinay Ranchhod



Ahead of the Budget, poverty and inequality was being called a crisis with many calling for further increases to benefits.

That included solo mothers who were struggling to get by; and Te Puea Marae in Auckland - which stepped in as a housing provider five years ago - and the people living there saying benefits were not keeping pace with increases in rent.

Child poverty in particular has been on the government's agenda. With stats showing more than a third of children were living in unaffordable housing, Auckland's City Mission said a major increase in benefits was needed to make a dent.

The government did increase benefits and the minimum wage this year, but that was criticised by advocates as not enough.


Robertson thanked Social Development Minister Carmel Sepuloni for her help and criticised the 1991 "mother of all Budgets" by National's then-Finance Minister Ruth Richardson in his speech for a Budget that promises to raise benefits by between $32 and $55 a week.

Those benefit increases were the cornerstone of this year's spending in a true Labour Budget unshackled by coalition deals.

Opposition leader Judith Collins criticised the move, saying National would have focused on jobs instead, and putting it down to a lack of confidence in the economy.

New Zealanders RNZ spoke to had mixed opinions. Some welcomed the increase, some feared it would be wasted, and others said it wasn't enough.

Indeed, Victoria University of Wellington's Michael Fletcher noted the increase did not account for price increases in the three years since the Welfare Expert Advisory Group's report on which the increases were based, nor address Working for Families tax credits or the Accommodation Supplement.

BusinessNZ welcomed the welfare boost - and said they could have been bigger - and even right-leaning commentators like Brigitte Morten criticised what she called an outdated, 'blunt tool' approach to welfare that would fail to target intergenerational and growing inequality.



The government had several big health items to deal with.

These include its major reform of the health system, but also the vaccine rollout (with $1.4b already announced); demands for funding Pharmac and dental health; screening for cervical and bowel cancer; deteriorating hospital buildings, and more.


As expected, one of the big spending items in the health portfolio was the health reforms.

Pharmac did receive the promised $200m boost to funding, but it fell short of the amount campaigners had been pleading for. Patient Voice Aotearoa chair Malcolm Mulholland said it amounted to a funding decrease considering inflation, population growth, and the addition of medical devices to the drug-buyer's remit.

Before DHBs are done away with in the reforms, they will get $700m in capital investments for new assets, and $2.7b more for handling cost and volume pressures.

Other initiatives include $7m a year for increased availability of cochlear implants, $99m a year for disability support services, $3.4m a year extra for bowel screening, $900,000 per year extra for family planning, and a $53m HPV screening programme.

See also, Māori health spending and the response to it, in the targeted Māori spending section below.



Housing has been a vexed topic for years now but the price increases don't seem to stop. Lately it has led to calls for the building of more affordable houses with prices increasing more than 20 percent this year, and the need for emergency housing continuing to cause problems.

A buoyant construction sector may help a bit - though it is afflicted by supply problems and high costs - and some banks are beginning to offer financial help for new builds.

However, the government warned little further spending on housing was expected excepting Māori housing, perhaps hoping its moves so far would be effective. There were some signs they could be starting to have some effect - though first-home buyers and renters have feared it would not be enough.


The Budget did include the promised housing package and boosting investment in infrastructure by $3.8b.

The other main new spending was, as promised, on Māori housing (see our Māori-targeted funding section below).

The Treasury Budget Economic and Fiscal Update forecast house price increases would peak at a 17.3 percent rise in June this year (considerably higher than the 8.5 percent predicted in December) but settle back to 0.9 percent increase over the course of the following year thanks to the government's housing interventions - below interest rates.

Robertson says it was a necessary fall in growth, and told RNZ's Nine to Noon today it had been a problem "decades in the making, it will take time to solve - houses just can't be fathomed up".

Deloitte's chief executive warned that the housing market had moved in unexpected ways in the past (including defying expectations of a Covid-19 fuelled collapse and offering no reprieve to first-home buyers), but said price rises would be expected to halt "at some stage".

Housing Minister Megan Woods told media the money announced was exactly what the government had planned to do, and they would be monitoring house prices very closely. She said banks had told her they were seeing an increase in first-home buyer applications, and there were no plans to further extend the bright-line test as Treasury suggested.



Activists have warned the need for government investment to curb climate change has never been greater, and that efforts so far have fallen short.

Climate marchers have also called for action, with the government's own data showing total emissions have continued to rise. Though Covid-19 seemed to put a small dent in emissions (the government's official emissions data has a bit of a delay), that appears to have been short-lived.

The government has been investing in converting old coal boilers and hinted at plans for tackling transport but talk of a "national conversation" suggested that could be longer-term.

Indeed, Climate Change Minister James Shaw warned the government was still waiting for the Climate Change Commission's climate roadmap due at the end of the month, and substantial funding would not be allocated until next year.


The government's climate and environmental spending largely targeted rail and electric vehicles, with KiwiRail getting $1.3b over four years, and a $300m investment fund for low-carbon technology, EVs and low-emission public transport.

Another $300m was set aside to subsidise EVs. Some $60m was allocated for helping farmers move to greener practices and

Climate groups called it a fizzer, a failure, profoundly disappointing, and nothing but loose change, a paltry amount that matched their low expectations for climate action from a government whose leader called the issue her generation's "nuclear-free moment".

Rail investment included an $85 million allocation to Dunedin rail wagon assembly plant], allowing the workshop - which effectively closed in 2012 with 90 people losing their jobs - to scale back up production and build 1500 rail wagons.

ACT Party leader David Seymour criticised that as "a '70s union fantasy" which even North Korea would not be bold enough to do, while Otago locals and the government said it would boost jobs and produce superior products compared to cheap overseas options.



Many other sectors directly affect Māori, but Māori are disproportionately affected in statistics including health, Corrections, housing, education and more.

Iwi and Māori businesses have been urging more investment into training and employment for rangatahi.

As part of its health reforms, the government is also to set up a separate Māori health authority, and has been facing calls for a similar body for housing.

The National Party - particularly its leader Judith Collins - has also been putting pressure on over the He Puapua report, claiming it shows the government has a separatist agenda.

National's views on exactly what should be done to target funding towards Māori appear to diverge however. Ngāi Tahu has also rejected a further claim from Collins it will take over 50 percent ownership of South Island water, and Collins' popularity has fallen.


Labour's Māori caucus celebrated the Budget's $1.1b increases to Māori-targeted funding, largely in health and housing.

It includes $380m for 1000 iwi- and hapū-built whare, and $98m for setting up the Māori Health Authority (only to set it up, not to run it), as well as $126m for hauora Māori services. There is also $27.72m in the Corrections budget for housing and other reintegration initiatives.

Architectural designer Jade Kake (Ngāpuhi, Te Arawa, Te Whakatōhea) wrote that the overall verdict from Māori housing advocates was that the government had listened, although continued funding for the Māori and Iwi Housing Innovation (MAIHI) - at $10 million a year - seemed light given the amount of work that would be required.

However, it came at the expense of Whānau Ora social and health services, with North Island Commissioning Agency chair Merepeka Raukawa-Tait saying they had been let down. Māori primary healthcare advisor Lance Norman said it did not make sense for the government to invest in health and housing without putting money into Whānau Ora.

Whānau Ora Minister Peeni Henare said focusing on it at the expense of health and housing would silo it, and it had always been clear the increase in last year's Budget was to be over two years, but Te Paati Māori co-leader Debbie Ngārewa-Packer said that was a shocking excuse to not invest in such a successful model.



Some schools have been struggling with building maintenance, and principals wanted more funding to support high-needs children.

That's on top of a planned reform of school funding which aims to dump deciles by 2022, and moves towards pay parity for early childhood, kindergarten and school teachers.

The tertiary sector has faced the Covid-19 driven dearth of international students, and asked for more money as domestic enrolments increased.


In education, the Budget allocated $1.7b on school and early childhood education and $470 million on tertiary education.

A 13.4 percent increase in subsidies for vocational education and training accounted for more than half the new tertiary education spending over the next four years.

School property would get a $684m increase over four years, while $23m over four years would pay for the promised decile reforms.

A large chunk, $277m, would be used to compensate staff underpaid under the Holidays Act - a worry Education Minister Chris Hipkins said had been known about for some time and did not come as a surprise.

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