Budget 2023: Government targets assistance to families with cheaper education, health and transport

The Government is using Budget 2023 to target assistance to New Zealanders with young families, expanding its early childhood education subsidy and making public transport fares free for all under 13-year-olds. 

An estimated three million New Zealanders will also no longer need to worry about the cost of collecting medication as the Government abolishes the $5 co-payment for prescriptions. Last year, more than 29 million items were dispensed with such a payment.

The Government is touting these measures as forming a "balanced and targeted approach" to the cost of living crisis currently impacting New Zealanders.

But it also announced a number of mega infrastructure initiatives important to "building for tomorrow". They include a huge $6 billion plan to improve the resilience of our country's infrastructure, something Cyclone Gabrielle has demonstrated the need for.

Budget 2023 is not only being delivered against the backdrop of the cost of living crisis - inflation is at 6.7 percent - but is being released less than five months out from a hotly contested general election where Kiwis will be looking for answers for their immediate needs and futures. 

"It's tough for families right now," Prime Minister Chris Hipkins said. "This Budget builds on the cost of living support we have put in place to date by introducing a number of new targeted measures that will also deliver long-term results."

Hipkins took a jab at his opponents, arguing the Government's package would address cost of living challenges without exacerbating inflation pressures "as tax cuts would".

"It's a carefully calibrated package that deals with the here-and-now pressures, while also laying the foundation for real long-term benefits. Benefits like better access to ECE, removing barriers to accessing medicines, reducing greenhouse gas emissions, and delivering warmer healthier homes."

Budget 2023 has net new operating spending of $4.8 billion per annum, which is lower than the $5.9 billion in Budget 2022. However, it is higher than the $4.5 billion signalled in last year's Budget Policy Statement, recognising the Government needs to spend more off the back of the weather events.

Budget 2023's key measures

Early childhood education (ECE) is at the forefront of the Government's cost of living package.

Currently, there are 20 hours of free ECE for Kiwi kids aged between three and five. But that's being expanded to also include two-year-olds - an extension that is costing $1.2 billion over four years and which is expected to start from March next year.

Based on average costs so far this year, the Government is estimating that families who were not previously receiving the childcare subsidies will save about $133 per week if a two-year-old child attended ECE for at least 20 hours per week.

"This is a win-win for families with young children; it will reduce costs, remove barriers to early learning and allow parents to return to work or take on more hours if they can," said Education Minister Jan Tinetti.

"It also recognises the fact that children who are involved in quality early learning benefit in many ways including later in life."

The rate of the subsidy is also being increased, with additional conditions added. The Government says this will mean the full value of the subsidy is being passed on to parents and they will have greater fee transparency.

There's also $322 million available for ECE services to lift the pay of their teachers to move towards parity with their kindergarten counterparts. In some circumstances, this could amount to increases of $14,762 and will be available to services that opt-in from November.

This builds on $587 million already provided to education and care services for pay parity across the past three Budgets. As of March 2023, 54 percent of education and care centres have opted into extended parity funding rates and 36 percent into parity funding rates.

Education Minister Jan Tinetti.
Education Minister Jan Tinetti. Photo credit: Getty Images.

Young families will also benefit from the decision to make public transport fares - for buses, trains and ferries, free for children aged between five and 12, and half-price for all passengers aged between 13 and 24. 

This kicks in in July as the Government removes the fuel discount and the wider public transport subsidy. The scheme has an operating allowance of $327 million.

It's estimated that the free fares for children will save $30 per week for the average household of two children. The half-price fares for under-25s, as well as the community service card holders and total mobility users will help more than 1.6 million Kiwis save money.

"Transport is a big cost for Kiwi households. It's why we provided relief at the pump when petrol prices spiked following the invasion of Ukraine, and it's why we are now providing ongoing cost reductions for children and young people," said Transport Minister Michael Wood.

Transport Minister Michael Wood.
Transport Minister Michael Wood. Photo credit: Newshub.

On the health side, about three million Kiwis are expected to benefit from the Government removing the $5 co-payment for prescription medicines from July. This will cost $619 million over four years.

"The $5 charge can be a barrier to some New Zealanders getting the medicines they need, and this is especially the case at a time when people are facing increasing pressures on household budgets," said Health Minister Dr Ayesha Verrall.

Dr Verrall said patients sometimes do not collect their medication because of the cost, particularly low-income, Maori and Pasifika peoples, and disabled Kiwis.

"Free access to medicine will also relieve pressure on the health system. Removing the co-payment charge will help reduce the demand on hospitals and other health services."

The Government also wants to keep more Kiwis warm by doubling its Warmer Kiwi Homes programme to include tens of thousands more homes and deliver 26,500 insulation and heating retrofits.

To help with energy costs, the Government's reducing the upfront costs of LED light bulbs and enabling the purchase and installation of around 5 million LED bulbs over four years.

These schemes to make energy bills cheaper are expected to cost $403 million.

Health Minister Dr Ayesha Verrall.
Health Minister Dr Ayesha Verrall. Photo credit: Newshub.

Resilience is a big theme of Budget 2023, as the Government sets aside funds to help New Zealand build back better from the recent Auckland floods and Cyclone Gabrielle.

At the heart of this is a National Resilience Plan, which is being allocated an initial $6 billion.

"This investment will initially focus on building back better from the recent weather events," said Finance Minister Grant Robertson.

"It will also include future-proofing road, rail, and local infrastructure wiped out by the extreme weather as well as telecommunications and electricity transmission infrastructure."

These were all devastated in February by Cyclone Gabrielle, which tore apart roads, took down transmission lines and caused damage to schools and other key infrastructure.

"Addressing vulnerabilities in our infrastructure systems to function during adverse conditions and quickly recover after an event is fundamental to the wellbeing of communities," said Robertson.

"I expect to continue to build on the plan over many years to reduce severe infrastructure deficits that have held New Zealand back," Robertson said.

He said the change to a debt ceiling - 30 percent of GDP - allows the Government to use its balance sheet "more effectively to support long-term productive investments such as this programme".

On top of the National Resilience Plan, the Government is repurposing the Christchurch rebuild agency into a new infrastructure delivery agency, Rau Paenga, to help Government organisations deliver on projects. It is being allocated $100 million over five years.

An Infrastructure Action Plan has also been published setting out the Government's response to the New Zealand Infrastructure Strategy.

Other parts of Budget 2023 at a glance:

  • $1 billion to increase health worker wages and staff numbers - including $63 million for progressing safe staffing and allowing for an additional 500 new nurses, $76 million for over four years to develop the health workforce, $118 million to reduce waiting lists

  • $120 million over four years to expand the network of EV chargers to up to 23 hubs, each with 20 chargers

  • $30 million over three years for a fund to provide grants for the purchase of low emission heavy vehicles

  • $279 million state highway investment package for slope stabilisation, culverts, rockfall protection and other measures to make the main roads more resilient

  • $825 million Maori Budget package, for housing, cyclone recovery efforts, Whanau Ora, Maori education, and Maori tourism

  • $77 million extension to the Apprenticeship Boost scheme to the end of 2024

  • Hiking the trustee tax rate from 33 percent to 39 percent to align it with the top personal rate to stop some taxpayers from circumventing the system

  • Expanding a 'circuit breaker' programme targeting repeat child offenders to Hamilton, Christchurch and Auckland City

  • A 20 percent tax rebate for game development studios to retain talent in the quickly growing industry

  • Three new multi-institution research hubs, focused on climate change and disaster resilience, health and pandemic readiness, and technology and innovation

  • $55.2 million for research fellowships and to train more PhD students