Treasury's view of the new fiscal risks


Treasury has gone through the Labour-led Government's policies with a fine tooth comb teasing out where costs will increase, and listed them as "policy change risks."

As a result of the change of Government, and the new policies and promises that will be implemented, it identified new or altered costs that include:

• ACC – The Government has signalled it will review the policy settings of the ACC, with Treasury saying the combined effect could potentially exceed $100 million a year, although it adds that "all of the policy issues identified entail optionality and would require either legislative or regulatory change to generate fiscal impacts and are therefore highly uncertain".

• Increased funding for New Zealand Programming and Journalism – RNZ will be transformed into a multi-platform provider, including a free-to-air non-commercial television service. There will also be a new Public Media Funding Commission. Treasury says the total costs associated with this are still being finalised, although the Government has said it will spend $38 million over 2018/19 to kick start the new public broadcasting system.

• More money for DOC – The new Government has promised a "significant increase" in funding for the Department of Conservation, although it hasn't said exactly how much.

• Fighting climate change – The Government has promised a Government-backed Green Investment Fund of $100 million, with the aim of stimulating up to $1 billion of new investment in low carbon industries.

• Fees-free tertiary study – The Government's promise to provide fees-free tertiary study, extending to three years of study from 2024, is likely to result in a "general increase in demand for tertiary education beyond the forecast period", said Treasury. It said the "behavioural assumptions and therefore the impact on future costs are unquantifiable at this early stage".

• More money for overseas aid – the Government has said it will increase the amount of funding for Official Development Assistance.

• Christchurch regeneration – the Government has committed to setting up a $300 million capital acceleration facility to develop the red zone. "Depending on how the facility is funded, there may be an impact on the Crown's fiscal position", said Treasury.

• KiwiBuild - The KiwiBuild initiative to deliver 100,000 affordable homes will require purchases of housing and land, and other costs. Housing and Urban Development Minister Phil Twyford said the latest forecast "shows an extra $5.4 billion of residential construction investment" over the next four financial years. Treasury warns that the programme is likely to increase the take up of the Homestart grant.

• Healthy Homes – The Government will make available grants towards the cost of insulation, double glazing and heating.

• State housing – The Government's commitments to reduce homelessness and improve access to public housing "is likely to have a significant fiscal impact", said Treasury.

• More refugees – Increasing the refugee quota to 1,500 over three years will incur resettlement costs and flow-on costs in health, education and welfare.

• Judicial review – the cost of promises to improve access to justice and reduce family violence is yet to be finalised, Treasury said.

• More police – the impact of the Government's promise to add 1,800 new police officers will depend on how much it is balanced by a focus on community prevention, greater use of alternative resolutions and a reduction in remand prisoners, Treasury said.

• Provincial Growth Fund – The Government has promised $1 billion per annum for regional development projects.

• Tax – With a Tax Working Group still being set up, it is impossible to know yet what impact the potential tax policy changes will have, said Treasury.

• Welfare system – Throughout the election campaign, the Government focused on the need for a fairer, more empathetic welfare system, including removing sanctions and reviewing tax and transfer settings.

• Transport – The Government says metro rail projects in Auckland and Wellington are a priority, and more investment in public transport generally as well as encouraging more cycling and walking. The costs and scope of projects are still being finalised, Treasury said.

• More money for primary healthcare – The implementation and funding details of the Government's commitments to increase funding to reduce GP fees, to train more GPs and to provide annual free health checks for the elderly are yet to be finalised.

Treasury also identified a number of "cross-portfolio" fiscal risks that are looming, including addressing the gender pay gap in the public service, "changes to the machinery of Government" (including establishing a Climate Change Commission and changing House New Zealand into a public service entity), and promised increases to the minimum wage.

Challenged by Steven Joyce in question time about the high number of increased or changed fiscal risks identified by Treasury, Robertson said it showed "what an ambitious Government" the Labour-led coalition was.