More tax from landlords to help fuel Budget spend-up - economist

An economist is predicting there will be a big spend-up in this year's Budget, as the Government looks to deliver on its promises of future-proofing the economy.

Finance Minister Grant Robertson on Tuesday morning outlined what to expect in the May 20 Budget, his fourth and the second in the era of COVID-19.

"It's about transition, moving towards a more renewables economy," economist Cameron Bagrie told The AM Show on Tuesday.

"There will be a big, strong focus on Maori and Pasifika, the future of work. Those were the priorities detailed in the Budget Policy Statement, and we'll just be looking [forward to] who gets what."

In February, Robertson's Budget Policy Statement said the Government's goals for the next few years are "continuing to keep New Zealand safe from COVID-19", "accelerating the recovery and rebuild from the impacts of COVID-19" and "laying the foundations for the future, including addressing key issues such as our climate change response, housing affordability and child poverty".

Since taking the reins in 2017, Labour has overseen massive growth in house prices. Its KiwiBuild programme failed to fire, and a private sector construction boom of the likes unseen since the 1970s has to date also had little effect at keeping prices in check. 

The Government in March announced new measures designed to turn speculators and investors towards new builds, rather than competing with would-be owner-occupiers and first-home buyers for existing stock.  

"Sixty percent of New Zealanders think housing is the biggest problem and it is the biggest problem, so they'll need to turn the dial a little bit more on that in the Budget," said Bagrie.

But he's not sure how much there will be to spare, with other high-profile areas - such as Pharmac's budget, child poverty and homelessness - also desperate for more funding, not to mention the usual line items which take up the bulk of each year's spending. 

"If you look at some of the areas of Government expenditure - health, a classic example. You need to be throwing anywhere from $500 million to $800 million a year on health just to keep the wheels turning. So of that $2.6 billion they'll allocate in the Budget, my suspicion is it could end up being closer to $3 billion because they've got a little bit more tax money off the landlords. Typically... health and education chew up about 50 percent. They're big thirsty beasts that need to be fed."

With interest rates at record lows, the Government wasn't afraid to borrow to ease the economy through the COVID-19 crisis. 

"There's certainly no shortage of money being thrown around and the Budget will be pretty chunky... but they're typically about how much," said Bagrie. "The focus for me going forward now is the how. How are we actually going to get those jobs done? Glass half-full, maybe that team which is being set up will help in defining the how, and making sure that we get on with it." 

To that end, the Department of Prime Minister and Cabinet is putting together an 'implementation unit', Stuff reported on Tuesday, similar to one once set up by UK Prime Minister Tony Blair to keep an eye on how policies and programmes are being rolled out, and intervene if they're not going well. 

"It's going to be interesting in regard to what comes out of that group," said Bagrie. 

Prime Minister Jacinda Ardern spent time working in Blair's Cabinet office in the 2000s.