Author Katrina Shanks, CEO Financial Advice NZ Article originally published on Stuff.co.nz.
Last week’s Budget showed New Zealand’s books are in reasonably good shape, though we are borrowing more and our interest repayments are mounting, meaning we will return to surplus later than was earlier indicated – in 2025.
And though there is good news around wages, which are expected to keep going up, there are concerns around the cost of living, with inflation likely continue to rise well into next year.
Some of the numbers are mind-boggling: there is $6.1 billion in new operating spending for 2022-26, $30.6b total operating expenditure for 2022-24, and we will spend $61.9 billion for infrastructure upgrades for 2022-26.
I know those numbers are beyond the comprehension of most people – apart from economists – but they’re all part of keeping the lights on, the welfare system working, and police, education and transport operating.
They’re as essential to keeping the country running as our (miniscule by comparison) budgets are essential to keeping our homes running and our lives comfortable.
Budgets are a great planning tool that allow us to understand the state of our financial position – our income, our expenditure, and our must-haves and like-to-haves.
Exactly the sort of things the Government has to consider when it is doing its figures.
So what, if anything, did the Government deliver in its budget to help us manage ours a little bit better?
Let’s take the five major expenses in any household: income (includes tax), food, electricity, transport, rent/mortgage.
One of the big news items was a $350 payment for 2.1 million people to help counter rising inflation and dampen the cost-of-living crisis.
This consists of three monthly $117 payments for every adult earning less than $70,000, which works out at $27 a week.
It starts in August but lasts for only three months, though the Government said it could be extended. Those hoping for changes to income tax thresholds were disappointed.
Other good news is wage growth is forecast to outpace inflation again next year as unemployment drops to 3%.
Also, a change to child support payments will mean sole parents will get the full amount from child support, something the Government says will lift 14,000 children out of poverty. And dental needs grants increase from $300 to $1000.
A range of climate change measures, including a Clean Car Upgrade and a vehicle social leasing scheme trial, is designed to bring down the cost of living.
There was little in the way of relief from rising food prices, but there were moves to stop supermarkets hoarding land to stop competitors opening nearby.
The idea is to encourage a third major chain to enter the market, but this will not happen quickly, if at all, so any relief around food prices is a long way away. But it’s a start.
The winter energy payment of $31 a week for beneficiaries is continuing, but those getting this are not eligible for $350 cost of living payment even if their income is below $70,000.
Direct savings will be available to 26,500 homes in the form of $73m more for insulation and heating retrofits for low-income homeowners to help cut their electricity bill.
The 25c per litre fuel tax cut and the road user charge cut, and half-price public transport, have been extended by two months till August, when they cease – except for the half-price public transport which continues permanently for Community Service cardholders.
A Clean Car Upgrade programme will provide targeted assistance to lower- and middle- income households to shift to low-emission alternatives upon scrapping their old vehicle and make their transport cheaper.
A vehicle social leasing scheme trial, which will lease low-emission vehicles to low-income New Zealanders, making it more affordable to transition to cleaner options.
First-home buyers will find it easier to access first-home grants in major cities, with price caps in Auckland lifted to $875,000 for existing and new properties (up from $625,000 and $700,000 respectively), while the caps in Wellington have been raised to $750,000 and $925,000 for existing and new properties (up from $550,000 and $650,000 respectively).
So, what difference will the Government’s Budget make to yours? It will be different for everyone, depending on how much you earn and your age.
Budgets are important and need a trigger, and as Government must look at its budget for the next year and further out, so we all need to update ours as circumstances change and income increases or decreases, and outgoings change.
A regular, maybe annual, look at these helps you stay on top of things, so you can meet your goals or your savings targets.
It’s easy for increases in income to disappear and not be used to get ahead because you don’t have a plan, and you’re living pay to pay. A regular review of your budget will help that.
I review my budgets when I am on my summer break and have some head space to think about the year ahead and my aspirations for the future.
As my financial adviser says, by simply doing a budget you are doing more to review your spending than many people.
Sticking to a budget is optimal, but the essential start is having one.