Is the seat belt sign illuminated?The Budget and the public sector

IPS/ IPANZ series

John Yeabsley NZIERJune 2009

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Where is this going - key points

► Back to basics – what would a first budget do?

► What did you expect at this time?

► Public sector flexibility – contradiction in terms?

► What’s likely to be ahead?

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First budgets …► Work within the economic situation ► Show what the new government means► Adjust the priorities

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What’s happening?Core Crown revenue and expenses

Sources: The Treasury

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What’s pushing up the curve?

Forecast change in core Crown expenses in the June 2009/10 year

Source: The Treasury

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Having your own way?

Table 2 - New operating initiatives

$ million, June years 2008/09 2009/10 2010/11 2011/12 2012/13 Total

Economic Development 312 280 (18) 299 304 1,178

Education (97) 304 348 393 389 1,337

Government Administration 42 36 (8) (30) (5) 34

Health (102) 692 712 720 728 2,750

Infrastructure 27 201 - - - 228

Law and Order (12) 211 291 299 307 1,097

Research, Science and Technology

(1) 29 29 29 29 114

Social Services 26 114 133 152 162 586

Line by Line Review Savings

(154) (301) (553) (591) (549) (2,147)

Other Savings and Adjustments

29 (101) (140) (152) (177) (542)

Contingency - 254 336 313 262 1,165

Total Budget 2009 Initiatives

70 1,719 1,130 1,431 1,450 5,800

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So what do we take from these?

► Relatively limited shifts in spending patterns – so stand by…

► Outlook for big ticket items (Health & Education) seems very tight – knock ons coming

► Overall, no sign budget position going to change quickly – value for money rules

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Implications

► All agencies need to be more oriented to their “value add” – for the government

► All agencies need to tune their flexibility – have had ups and downs over last 20 years

► Management needs to look through this stress & build quality – focus on people both at front line & back office

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But: looking ahead in the labour market

Employment & Unemployment

-6

-4

-2

0

2

4

6

1988 1991 1994 1997 2000 2003 2006 2009 2012 2015

An

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al %

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0

2

4

6

8

10

12

% o

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Employment Growth, LHS

Unemployment Rate, RHS

Source: Statistics NZ, NZIER

Forecasts