Transforming the economy

Ministerial statement
As an outward facing export nation the risks to New Zealand from climate change cannot be underestimated. More frequent and intense weather events will affect the country’s agricultural and horticultural sectors, with flow-on implications for exports and the economy as a whole.

The transition to a low-carbon economy will take time and Budget 2019 is an important step.

It provides funding to ensure the Independent Climate Change Commission can provide the advice, guidance and monitoring New Zealand needs to reduce greenhouse gas emissions in line with our goal of limiting global warming.

Budget 2019 also allocates significant investments into research and development initiatives to develop new ways to reduce emissions.
$8.5 million will be invested in the Global Research Alliance on Agricultural Greenhouse Gases together with an investment of $3.2 million for the Agricultural Climate Change Research Platform. This will support world-class research here in New Zealand to help agriculture deal with the effects of climate change.

The Wellbeing Budget provides more support for farmers and councils to make positive land use changes. A $229 million Sustainable Land Use Package will invest in projects to protect and restore at-risk waterways and wetlands and provide support for farmers and growers to use their land more sustainably.

The Budget provides support to address capability gaps and inconsistent practices across regions in relation to the development and implementation of freshwater rules. This includes improving consistency between councils, better compliance and enforcement, better engagement with Māori, and improving scientific knowledge to inform plan development.

Forestry plays a critical role in improving water quality, reducing carbon emissions and creating jobs. The Wellbeing Budget allocates over $49 million to help transform the forestry sector and support our One Billion Trees programme. Combined with existing funding, this equates to an investment of $58 million in Te Uru Rākau.

Foresters and landowners will have the support they need to increase the value they receive from wood and timber resources.

Budget 2019 invests more than $1 billion over the next two years in modernising KiwiRail. These are the first steps in implementing our Future of Rail programme. This includes $375 million for new wagons and locomotives, $331 million to invest in track and other supporting infrastructure, $300 million from the Provincial Growth Fund for regional rail and $35 million to begin the process of replacing current ferries that are nearing the end of their life.

This year we have shifted to a rolling multi-year capital allowance. In the past, Governments have set a single-year capital allowance for the coming year.

This approach has meant trade-offs were made between initiatives submitted in a single year, rather than based on a medium or long-term view of likely capital requirements. The multi-year capital allowance allows the Government to make better long-term investment decisions and provide greater clarity for the construction sector. We have established the New Zealand Infrastructure Commission, Te Waihanga, funded through this Budget. Its job includes producing an infrastructure pipeline and developing a 30-year strategy to provide certainty about the long-term infrastructure requirements of New Zealand.

Editorial comment
The Budget papers on transforming the economy emphasise the investment in rail foreshadowed in the Budget. It is said that rail projects prevent at least 271 accidents per annum by reducing the number of trucks on the road. In addition, a tonne of freight moved by rail delivers a 66% reduction in carbon emissions compared to trucks.

One aspect that was not referred to was the current discussion on effectively moving the port of Auckland to Whangarei. If that proposal is adopted without adequate support from the rail system, there will be adverse consequences for road accident rates and carbon emissions.
Other measures on rail include:

• $1.4b of capital for the Auckland city rail link
• $35m to start replacement of the interisland ferry services, and
• $35m for electric locomotives operating between Hamilton and Palmerston North.

The Budget papers comment on the land use package aimed at improving New Zealand land use practices. The papers observe that in 2018 the primary sector generated more than $43b in export revenue.
As part of the Budget allocation of Government spending, $229.2m is to be dedicated to investment in projects to protect and restore at-risk waterways and wetlands.

The Budget papers further note that the Provincial Growth Fund has so far committed $1.7b of expenditure. Budget 2019 foreshadows $40m for projects in the waste sector and $40m for projects in the energy sector. A further $300m is allocated to regional rail projects.

On the topic of meeting the climate change challenge, the Budget papers indicate funding being deployed to develop and implement an emissions trading scheme (ETS) auctioning platform. In addition, there is to be a change to the emissions trading scheme to create a cap on tradeable emissions and provide certainty to scheme participants. The cap will restrict the number of units supplied into the ETS, increasing the incentive to reduce emissions.

The Budget papers indicate that $8.5m is allocated to research into the reduction and mitigation of agricultural emissions and $3.2m to help agriculture deal with the effects of climate change.

As part of transitioning to a low carbon future, $27m will be devoted to a National New Energy Development Centre to help create new business and jobs in Taranaki.

These measures perhaps touch on an important point raised by the objective of reaching net-zero carbon emissions by 2050. Achieving that objective could well result in the termination of significant areas of economic activity that currently enable participants to provide a living for themselves. If those areas of economic activity are to be eliminated, alternative means for such people to provide for themselves need to be found.

On that point, the Budget papers indicate the deployment of $122.2m on productive and sustainable land use to enable the transition in agriculture.
This initiative provides funding for: on-the-ground advice to farmers; supporting Māori agribusiness; information, tools and advice to support farmers making the change to more environmentally sustainable and higher value production; improving on-farm emissions data and upgrading decision and regulatory tools; and protecting high value food exports and updating the country’s official assurances system.

The effectiveness of these measures remains to be seen.

The Budget papers add that a climate change response (zero carbon) amendment Bill is intended to create a framework for the adoption of five-yearly emissions budgets, which will each contribute to reaching the 2050 emissions target(s), and for national climate change risk assessments that will inform the Government’s national adaptation plan. It can only be hoped that other Governments around the world are equally earnest in achieving the 2050 emissions targets.

The Budget papers indicate that the the Government is undertaking a two-stage process to reform the resource management system. A Bill will shortly be introduced to Parliament addressing immediate issues with the Resource Management Act (RMA). The second stage will be a comprehensive review of the resource management system, focused on the RMA.
Other measures for transforming the economy that are in the public eye include:

• $20.8m to manage kauri die back
• $183.8m on the One Billion Trees programme, and
• A non-spending initiative to control wilding conifer to protect against future loss of land productivity, loss of land use opportunities, decreased water availability, and increased fire risk. This will prevent irreversible loss of iconic landscapes and biodiversity and support the expansion of the One Billion Trees programme by making more land available for tree planting.