Budget 2022 and the home fires burning

A budget is a great planning tool. Katrina Shanks scans Labour’s 2022 Budget for spending priorities that might help households to better manage their own financial position.

Last week’s Budget showed that New Zealand’s books are in reasonably good shape, though we are borrowingmore 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 regardingwages, which are expected to keep going up, there are concerns about the cost of living, with inflation likely to continue to rise well into next year.

Some of the numbers are mindboggling: $6.1 billion in new operating spending for 2022-26; $30.6b total operating expenditure for 2022-24; and we will spend $61.9b for infrastructure upgrades for 2022-26.

I know those numbers are beyond the comprehension of most people, but they’re all part of keeping the lights on, the welfare systemworking, and the police, education and transport services operating.

They’re as essential to keeping the country running as our (miniscule by comparison) personal 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 (including tax), food, electricity, transport, and rent or mortgage payments.

Income

One of the big news itemswas a $350 payment for 2.1 million people to help counter rising inflation and dampen the cost-of-living crisis.

This consists of threemonthly $117 instalments for every adult earning less than $70,000 a year. The payment works out at $27 aweek.

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 that wage growth is forecast to outpace inflation again next year as unemployment drops to 3%.

Also, a change to child support payments means 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.

Climate changemeasures, including a Clean Car Upgrade and a vehicle social leasing scheme trial, are designed to bring down the cost of living.

Food

Therewas little in the way of relief from rising food prices, but there were moves to stop supermarkets from hoarding land.

The idea is to encourage a thirdmajor chain to enter the market, but thiswon’t happen quickly, if at all, so any relief on prices is a long way off. But it’s a start.

Electricity

The winter energy payment of $31 aweek for beneficiaries is continuing, but those getting this are not eligible for the $350 cost-of-living payment.

Direct savings will be available to 26,500 homes in the form of $73m more for insulation and heating retrofits for lowincome homeowners to help cut their electricity bill.

Transport

The fuel tax cut of 25 cents per litre and the road user charge cut, and half-price public transport, have been extended by twomonths till August, when they cease – except for the half-price public transport, which continues permanently for Community Services Card holders.

A Clean Car Upgrade programme will provide targeted assistance to lower- and middle-income households to encourage them shift to low-emission alternatives upon scrapping their old vehicle.

A vehicle social leasing trial, which will lease low-emission vehicles to lowincome people, will make it more affordable to transition to cleaner options.

Rent/mortgage

First-home buyerswill find it easier to access first-home grants in major cities.

Price caps in Auckland will be increased to $875,000 for existing and new properties (up from $625,000 and $700,000 respectively), while the Wellington caps have been raised to $750,000 and $925,000 for existing and new properties (up from $550,000 and $650,000 respectively).

Time for a review?

So, what difference will Budget 2022 make to you? It will be different for everyone, depending on your income and your age.

Just as the Governmentmust look at its Budget for the next year and further out, so do we all need to update ours as circumstances change and income increases or decreases. A regular, maybe annual, look at these helps you meet your goals or savings targets.

It’s easy for increases in income to disappear if you don’t have a plan and are living from payday to payday. A regular review of your budget will help that.

I review my budgets when I amonmy summer break and have some head space to think about the year ahead.

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.