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May 23, 2011 | by  | in News |
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Aha! Budget!

Whether you care about it or not, the 2011 Budget will affect you or the people you know in some way.

Minister of Finance, Bill English, announced the 2011 Budget last Thursday. The Budget is the Government’s way of planning and estimating how they will spend their money for the financial year.

This year’s Budget was known as the ‘zero Budget’ due to the announcement earlier in the year that the government would be introducing no new spending. The Budget is reducing existing spending over the next five years by $5.2billion. This means there is $1.2 billion a year over the next four years for new spending.

The $5.2 billion reduction in spending has meant a number of funding cuts in key areas.

The student loan scheme has seen a number of changes. Students over the age of 55 will no longer be able to access the living costs component of the loan. Part-time students will also be unable to receive course-related costs funding.

Many changes also reflect the government’s goal to encourage students living overseas pay back their loans. Students who have $500 or more in overdue loan repayments for more than a year will have loan access frozen and the current three-year loan repayment holiday for overseas debtors will be cut to a single year. New loan applications must also have a “contact person” to help track down debtors.

These changes will create $450 million savings from the student loan scheme over four years. Of these savings, $150m will be reallocated within the tertiary sector, which has no new funding in this year’s Budget, and about $300m will return to the Government.

The New Zealand Union of Students’ Associations believes the changes will disadvantage many students.

“Thousands more potential students were shut out of tertiary education in an enormously short-sighted budget today, and the students deliberately targeted today will be heavily disadvantaged,” NZUSA co-President Max Hardy says.

Government savings were also made in the successful Kiwisaver scheme. The Member Tax Credit was halved, from $1 to 50 cents for every dollar a member contributes. Employer contributions to the scheme will no longer be tax-free. After decreasing the employee and employer contributions to two per cent (from four per cent) in the 2009 Budget, the government has raised these to three per cent.

The popular Working for Families scheme has also been targeted with an estimated 7000 families no longer eligible for the programme. Abatement thresholds have been adjusted, meaning wealthier families will no longer receive Family Tax Credits.

The Government also outlined its plans for the partial sale of its assets. It plans to reduce its share in Air New Zealand and research will be conducted into the partial privatisation of energy companies Mighty River Power, Meridian, Genesis and Solid Energy.

Health and Education were the biggest ‘winners’ on Budget day, receiving $1.7 billion and $1.3 billion increases respectively.

The Government also announced the Earthquake Kiwi Bond as a way to help meet the $5.5 billion of government funding allocated to re-build Christchurch. The bond will act like a term deposit and allow New Zealanders to contribute to the costs of the re-build.

The Budget ran a $17.6 billion deficit. It is predicted it will return a surplus again in 2014.

The Labour Party has criticised the Goverment’s Budget for lacking any real planning.

“We needed a vision for a better future and a plan to get us there. We got neither,” Labour leader Phil Goff stated in his post-Budget speech.

“Today’s Budget does nothing to address the real problems facing our country—high debt, low wages, low productivity, high unemployment and poor economic growth.”

After the Budget was announced on Thursday afternoon, Parliament sat in Urgency for the remainder of Thursday, Friday and Saturday for the Budget to be debated and voted upon.

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