Budget 24: Good Business Sense

Today’s first Budget of the National-led Coalition is one of the most significant political milestones of the year.

It provides an insight for business on the outlook for the year ahead and beyond. We’ve all been well briefed in the lead-up to the Budget with Ministers across the Coalition repeating the mantra that we all need to continue to tighten the belt.

What we can foresee is a highly competitive commercial environment for consumers and corporates alike. Now more than ever is the time to be investing in relationships with your stakeholders, including your employees, customers, government, partners, communities, and shareholders. As we know, a trusted brand can better withstand economic headwinds and will reap greater rewards as the market improves.

The Government is looking for greater business confidence. That is the goal of the Budget, alongside the previous policy announcements to reduce red tape and support investment into major new projects through the fast-track process.

There were no real surprises in this Budget. The established pattern of pre-budget announcements continued this year when we were told of the scrapping of the First Home Buyers Grant in favour of more spending on social housing, increased funding for Pharmac, $24 million for Mike King’s Gumboot Friday mental health programme, and extending on-the-job training programmes for teachers.

Today we found out more, as the Government delivered on its election promises: some tax relief for the "squeezed middle"; reducing borrowing to return to surplus faster than previously projected; and finding operational departmental savings. This Budget is as expected and makes sense from a business point of view. There are no frills and that is not likely to change soon.

There are some new spending initiatives in infrastructure, transport, health, education, defence and law and order that will likely be welcomed across New Zealand. Some will question what hasn’t been funded more than what has. The Minister of Finance has delivered a Budget she has coined ‘the Goldilocks Budget’ for being ‘just right’ in an economic environment of stubborn inflation and Budget deficit.

Some of the areas of interest to the business community in Budget 24 so far include:

• The continuation of funding the Apprenticeship Boost Programme providing subsidies to employers taking on eligible apprentices costing $65 million over four years

• A $1.2 billion Regional Infrastructure Fund, including investment in new and existing projects and $200m into flood resilience infrastructure

• $2.68 billion transport funding in roads, rail, and public transport including $1 billion to accelerate 17 new roads of National Significance

• Changes to the Waste Disposal Levy to fund a broader range of projects supporting environment and climate change mitigation through proposed changes to the Waste Minimisation Act 2008 (the levy on municipal and construction and demolition landfills will increase later than previously proposed and at a slower rate).

Today is the Government’s day to celebrate their first Budget. Tomorrow the opposition will continue to have their chance for rebuttal. The real test of the success of the spending constraints from the Minister of Finance will be the response of the Reserve Bank through the next Official Cash Rate due in July. For business, the key question is does this provide enough predictability to enable them to set their direction. The modest tax cuts may have a minor positive impact on your employees and consumers.

In summary, our take on Budget 2024 is that given there is a general consensus that it will be a slow climb out of recessionary conditions. We must maintain a focus on building loyalty with stakeholders - our people, customers, suppliers, business partners, communities and shareholders. In a challenging economic environment, it behoves business to focus on their core and protect its relationships. This is about trust – open, two-way dialogue with stakeholders in order to build strong and respectful relationships.

There is also a role for greater collaboration between business and government. Government will be looking for ways to deliver efficiently alongside business partners. Also in this environment, where government spending is constrained, business has an opportunity to show leadership in key areas such as sustainability and innovation to progress the economy and improve productivity.

Our trust research provides insights in how to build closer relationships with stakeholders, we would love to share this with you. If you would like a further session on what Budget 2024 means for you, please get in touch.