Budget 2022 Special
Here’s our summary of the employment law elements in/aspects of today’s Budget:
$100 million of capital funding has been set aside to contribute to a Business Growth Fund being developed alongside New Zealand’s major banks. The Government is looking to partner with those banks to grow the scale and reach of the Fund. This Fund is for SME owners to retain majority control of their businesses, while allowing them to grow, to create new jobs and increase their contributions to economic and regional development.
$60 million of total operating funding has been set aside to support progress on the continued design of the proposed Income Insurance Scheme – for a description of this Scheme click here: https://www.bartlettlaw.co.nz/proposed-new-zealand-income-insurance-scheme/
Unemployment remains low, with growth in wages to support cost of living pressures. The unemployment rate is at a record low of 3.2% in the first quarter of 2022. It is forecast to reach 3.1% in the current June quarter, to rise to 3.3% by mid 2023, before rising up to 4.8% in mid 2025. Treasury has assessed that inflation will be at 6.7% for the June quarter, 5.2% in the June 2023 year, and it is not expected to fall below 3% until 2025. The tight labour market and high inflation are expected to drive up wage growth to 6.3%. In the medium term, as higher interest rates have an impact and economic growth slows, wage growth is predicted to gradually fall to 4.6%. From 2023, wages are forecast to outpace inflation again. We note that fair pay agreements are also likely to have an impact of wage growth, in terms of further increases.
For 2022, the easing of border restrictions and robust investment are forecast to support GDP growth. However, with rising interest rates growth is expected to slow over time. Treasury is forecasting GDP growth of 4.2% in the year to 30 June 2023, down from the 4.9% forecast in December 2021. It is then expected to drop sharply to 0.7% the following year, down from the 2.2% forecast in December 2021, before climbing to 2.5% over the following two years to June 2026.
Penelope Carolyn Andrea Suzanne
(Posted 20 May 2022)