Key Points from the 2022 Budget

May 20, 2022

Here's the key points from yesterday's Budget 2022. The main areas of spending are: Cost of Living, Health, Housing, Education, Māori, Equity finance for SMEs, Income Insurance and other Allocations.

Cost of Living

A cost-of-living package has been announced. The cost-of-living measures in the Budget are mainly temporary and targeted at those on lower incomes.

New Zealanders aged 18 and over will be eligible for a $350 payment unless they earn more than $70,000 a year or already receive the Winter Energy Payment.

The sum will be paid in three instalments over August, September and October, working out at roughly $27 a week.

This payment, which will be funded out of the money remaining in the COVID-19 fund, is estimated to cost $814 million.

The fuel tax reduction and half-price public transport will also be extended for a further two months. New Zealanders who have a community services card will continue to get half-price public transport permanently from mid-September.

The government will also address the problem of competition in the supermarket sector, with urgent legislation going in tonight to ban the use of covenants, which make it hard for new players entering the market.

Ministers flagged that there will be further announcements in the coming days in response to the Commerce Commission's recent report on the sector.

Health

The health sector is being given $13.2 billion over the next four years.

An initial $1.8b in new spending in the coming year to address historic cost pressures, including DHB deficits.

$188 million for the Māori Health Authority to commission services and develop iwi partnerships.

$102m over the next three years to provide better, earlier GP and community care and to ease pressure on hospitals.

Pharmac will also get an extra $191m over the next two years. It is Pharmac's biggest boost in history to make more medicines and other health treatments available. Pharmac said it welcomed the $191m boost and was already working through the medicine options for investment list. It brings total funding to $1.2b.

More than $166m has been set aside over four years for ambulance services, adding more than 60 vehicles to the road fleet and about 250 more paramedics and frontline staff. Another $90.7m will go towards air ambulance services to replace ageing aircraft with modern helicopters.

The Budget increases dental grants for low-income families from $300 to $1000 in line with Labour's 2020 campaign promise.

A new Ministry for Disabled People is also being established at a cost of $100m.

Housing

The Budget includes more support for first home buyers with funding available for about 7,000 extra first home grants and 2500 more first home loans available every year.

House price caps across regions have been increased in most of the country, for example shifting to $875,000 in Auckland and Tauranga and $925,000 in Wellington and Queenstown.

The income caps remain the same but will be reviewed every six months along with the new house price caps.

A new $350m housing fund has also been set up where not-for-profit developers can apply for grants to build affordable rental accommodation.

Education

Nearly $3 billion is going towards the education sector as it moves away from the decile system and addresses pay parity issues. Replacing school deciles is the single biggest area of new spending for education.

The Budget provides more than $80m a year for the equity index which replaces deciles as the measure of disadvantage in schools.

Most of the money, $75m a year, will go directly to schools, adding to the $150m they currently receive through the decile-based system.

The budget increases school operations grants and tertiary and early childhood education subsidies by 2.75 percent.
There is also $266m over four years to give early education teachers pay parity with school teachers.

In tertiary education, the Budget provides $56m a year to pay for an expected increase in enrolments next year and in 2024.
There is also $40m for modernising polytechnic facilities.

Maori

More than half a billion dollars is being pumped into the Māori Health sector with $579.9 million going towards Māori health and wellbeing.

The new Māori Health Authority, Te Mana Hauora, will receive $188.1m over four years for direct commissioning of services.

$20.1m will go to support iwi-Māori partnership boards, and $30m will be invested into Māori Providers and health workers to provide support and sustain capital infrastructure.

Lack of workforce capability has been identified as a key factor in being able to bolster Te Mana Hauora - and $39 million will be used for Māori workforce training and development to support them within the new health system.

The $579.9 million invested in Māori health and wellbeing is on top of the $11.1 billion health allocation.

Equity Finance for SME's

The Government is planning to team up with retail banks to create a new fund that will invest in small and medium-sized enterprises (SMEs).

It has committed to investing $100 million, alongside banks, in a new Business Growth Fund. The Crown will have a minority shareholding in the Fund, which will be privately operated and independently managed.

The Government has discussed the proposal with the Reserve Bank, which will consult on it publicly.

Income Insurance

The Finance Minister is working towards getting his proposed Income Insurance Scheme underway in 2024.

The Government has committed to providing the Accident Compensation Corporation (ACC) funding to do preliminary work to establish the systems and operational processes for the scheme.

It is allocating $4m towards ACC in 2022 and 2023, and set aside a further $56.5m in "contingency" funding over 2023, 2024, 2025 and 2026.

The proposal is that employees and employers pay levies to the scheme, which would pay a claimant out in the event of job loss due to redundancy or illness.

The value of the pay-out would be equivalent to a certain portion of the claimant's previous income – up to a certain level. The payment would be available for a set time period, after which the claimant would need to go into the regular welfare system if they're still unemployed.

Participation in the scheme would be compulsory. However, the proposed scheme's details are still being worked out.

Other Allocations

$200m towards the first stages of the light rail project in Auckland, feasibility studies for a new port in Manukau Harbour and for a dry dock at Northland's Northport.

< Older Post Newer Post >

Top eight things to outsource in your business

By Ian Fenwick • 16 Sep, 2022

If you’re looking to scale your business, you’ll need to spend more time working on it than in it. Finding ways to leverage your time is critical, and outsourcing your least favourite tasks is a great way to do this. Things you should consider outsourcing in your business: 1. Digital marketing. From your content strategy to your social media accounts, if this is not a strength of yours, outsource it! There are many freelancers who have multiple clients at this level, who’ll likely be more knowledgeable regarding SEO and much more effective and efficient in general. 2. Graphic design. Your brand is a key reflection of your product offering. If you don’t have the skill, software, and time to do this well, you’ll potentially damage your brand. 3. Scheduling and administrative tasks. A ‘Virtual Assistant’ can help you manage anything from your appointments to flights, emails, and beyond (virtually anything admin). At a lower level, consider adopting software that’ll automate or minimise processes, such as self-booking appointment apps where your clients can schedule a meeting with you, e.g., Calendly. 4. Customer feedback. Many businesses miss this valuable opportunity to connect with customers and improve their experience. A ‘Virtual Assistant’ can help, but there are also apps (such as Ask Nicely) that automate the process of asking for feedback; directing positive responses to leave you Google reviews and negative responses back to you to quickly resolve! 5. Inventory management. Too much stock can cause cashflow issues and affect sales price (due to resulting discounting), but not enough equals lost sales. Outsourcing inventory management can help you minimise stock-carrying costs and allow you to focus on more important things. 6. Payroll. This task is best left to the professionals. Outsourcing payroll will minimise the risk of inadvertently getting it wrong, while saving you time and, most likely, reducing the cost of this task. Utilising a payroll product is another great option. 7. Bookkeeping. Do bookkeeping tasks often infiltrate your evenings or weekends? Does the stress of these tasks piling up occupy your mind? Outsourcing these tasks (and the stress) to someone else can be liberating and cost-effective. 8. Virtual CFO. If you find budgeting and forecasting a struggle, a ‘Virtual CFO’ can wear this important hat for you. They’ll monitor the financial health of your business and provide a fresh perspective which will help you make better strategic decisions and improve your results. Tempted to start outsourcing some of your tasks to free up your time? We can help by taking the last three roles off your hands! We work with a number of our clients in this way, allowing them to focus on what they do best. While outsourcing takes a little bit of setting up, it’s worth the short-lived pain for massive gain. We don’t have to be jacks of all trades. In fact, this thinking often leads to begrudgingly doing many things poorly rather than doing a few things really well – and enjoying doing them. Work to your strengths, outsource the rest! Need help? Get in touch.

Five accounting tips to give you more time to focus on your business

By Ian Fenwick • 15 Sep, 2022

Very few people love the accounting aspects of their business. Here are a few ideas to keep your clients and suppliers happy while streamlining processes for yourself. 1. Create realistic estimates. This will help you keep clients happy and expectations in check. Have a look at past projects, add up the costs, and compare to current requirements to get an accurate picture of how much to charge. 2. Simplify time recording. When timekeeping is a chore, it’s hard to keep up with it. There’s now very useful software that makes it simple to enter time and switch between jobs. 3. Get reimbursed for expenses. If there are likely to be expenses on a job, let the client know at the start. Then, when you make sure you’re reimbursed for them, clients won’t mind. 4. Stay on top of cash flow - and get access to credit. Keeping a close eye on your cash flow means you can plan for the future - even when the whims of clients can make that uncertain - and you’re much more likely to have access to lending if the bank and other creditors can see there’s money around the corner. 5. Minimise payroll work for your ever-changing staff and freelance roster. Keeping payroll simple and integrated with your accounts means happier staff and better cashflow forecasting. Freelancers need consistency more than anyone, so pay them promptly to be sure you always have access to top talent. With the right technology in place, many of these tasks can be automated so you can get on with your job. We can help you build a system to manage all of the above.

Is your cost of sales affecting your gross profit?

By Ian Fenwick • 14 Sep, 2022

Do you know how much it costs you to produce each product or service in your range? The better you understand this cost of sales – or cost of goods sold (COGS), as it’s more commonly known – the more ability you have to control your company’s profitability. When you know your COGS, you can set the right price point, control your profit margins and ensure that you’re maximising your gross profit. But to do this, you need to understand COGS and how it impacts on your financial management. Understanding your COGS To take one of your company’s products or services from inception to delivery, you will incur a number of costs. For example, if you’re a manufacturing business, these costs might include buying in raw materials, direct labour costs, the overheads for running the machinery in your factory, the costs of delivering the products, and the sales and marketing expenses needed to sell the product to your target customers. For you to manufacture a finished product and to generate a sale, all these costs are a necessary part of the process. They’re the direct costs of producing your goods for sale. You calculate your COGS number for the period by looking at the value of your opening stock (or inventory), adding the cost you’ve incurred to produce the goods, and then, subtracting the value of the closing stock balance. The COGS formula looks like this: Opening Stock + Purchases - Closing Stock = COGS So, if you started with an inventory of $10,000, this is how you’d calculate your COGS: Opening Stock: $10,000 Purchases: $25,000 Closing Stock: $8,000 COGS: $27,000 Reducing your COGS to boost gross profits The more sales you make at a given price, the higher your revenue (income) will be. Deducting your COGS number from your revenue figure gives you your gross profit – and gross profit is a key metric for tracking the health and profitability of your business. A high COGS number reduces the size of your profit margin, and, in turn, a small margin will start to have a negative impact on your gross profit. Being able to control and manage your COGS, and its impact on your gross profit, is a vital skill for any product-based business. Here are some ideas for improving the profit impact of your COGS: Reduce your supplier costs – If you can reduce the size of the purchases made to produce your goods, that means less expenditure and less impact on your profit margins. Try shopping around for cheaper suppliers, or negotiating better prices with your existing suppliers to bring down costs. Streamline your production process – the more complex your production process is, the more overheads and production expenses there will be. Taking a lean approach helps you to continually evolve your processes and remove the extraneous elements – cutting costs while still delivering a quality product. Increase your prices to boost your margins – if your COGS number is eating into your profit margin, one way to resolve this is to increase your price point. This will help to increase income and boost your margin but does require caution. If prices get too high, this can damage existing customer relationships and make you uncompetitive in the market – so think carefully about any price increases before taking action. Talk to us about improving your gross profit If you want to boost your gross profit and get COGS under control, come and have a chat with us. We’ll look over your expenses and overheads, and will look for the opportunities to reduce your goods-related purchases and push for a better profit margin on your products.