Budget 2018: Not bad, but not much for manufacturers to get excited over

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The Manufacturers' Network on Budget 2018, released today by the Finance Minister, Grant Robertson, ticked some boxes for the economy, particularly around health, with some investment in infrastructure, education and R&D spending. There was, however, little else for the manufacturing sector to get excited about and not much focused on addressing productivity and skills shortages.

“Health sees the largest level of additional spending in the Budget, while addressing infrastructure deficits and housing also see some spending, some of which had already been announced. However, the spending on infrastructure and housing lack the scale and supporting policies to be major forces of change as yet.” says Dr Dieter Adam, CE, The Manufacturers’ Network.

“Investment in infrastructure and addressing housing will be a key component of creating a more productive economy. Infrastructure, particularly in transport, currently acts as a productivity bottle neck, and the cost and accessibility of housing puts pressure on households and wages. This Budget is only a start to addressing these long term challenges and the Government’s Tax Working Group will have a significant role to play in getting the policy settings right. The Government also needs to get its procurement policies in order to ensure New Zealand manufacturers and companies can get a fair shot at being a part of future projects, increasing the benefits to our economy of any such spending.

“The highlight for manufacturers is the investment in R&D spending, which will come in the form of the proposed R&D Tax Credits. The Budget puts these at $1b over four years, though the policy is still in the consultation stage. This policy has the potential to widen accessibility for R&D support when compared to the current system. The key will be, however, getting the policy rules and definitions right to ensure manufacturers doing critical process innovation can receive support.” Says Dr Adam.

“We are pleased to see the education sector receive additional spending, of nearly $2b over four years, however, this needs to be paired more focus on shaping our education sector to provide people with the critical skills that our economy needs now and into the future, such as skilled trades people. The Government is showing willingness to focus on the complex issue of skills challenges and we are looking forward to contributing to its Future of Work project to achieve some real policy change.

“Overall, despite some initiatives and areas of spending that manufacturers can be relatively pleased with, there is nothing that is a major game changer. Our main concern remains the changes to workplace regulations under the proposed Employment Relations Amendment Bill, which carries a real risk of negating potential productivity improvements suggested in this Budget. Says Dr Adam.