Government has room for 'pre-election sweetener' in health, Infometrics says

Wednesday 15th March 2017

The government's better-than-expected books give it scope for a "pre-election sweetener" to boost spending on healthcare, a sector seen as ripe for rapid jobs growth over the next four years, says economic consultancy Infometrics.

The Wellington-based researcher expects to see an extra 30,900 jobs in healthcare and social assistance over the next four years as an ageing and expanding population creates extra demand for medical services.

However, its regional perspectives report shows employment growth in the sector has lagged behind the rest of the economy, averaging a 2.1 percent annual increase between 2013 and 2016 compared to a 2.4 percent pace, reflecting a contraction in government spending on health to 6.2 percent of gross domestic product from 6.7 percent, even as it increased on a nominal basis by $1.1 billion.

"In terms of the fiscal environment and political environment, we believe there is room for the government to increase its health spending, maybe as a pre-election sweetener," economist Garth Kiernan told a briefing in Wellington. "It never hurts when the political race is looking a little bit tight to throw a little bit more money at health or education, so we think health is one area where we think there could be announcements in the upcoming budget."

Prime Minister Bill English has locked in this year's election for Sept. 23 and has already announced $503 million of extra funding for police in this year's budget to be delivered on May 25. Since then, English and Finance Minister Steven Joyce have said tax cuts are in the mix for the budget.

The government last year boosted health spending by $2.2 billion over four years, the bulk of which was earmarked for the district health boards to cater to an expanding population after a prolonged period of belt-tightening, and included extra money for drug-buying agency Pharmac, which often finds itself at the centre of lobbying appeals to pay for new and expensive treatments.

The Crown's latest accounts showed a bigger operating surplus than expected in the seven months through January, of which health spending rose 4.3 percent to $9.44 billion, just over a fifth of core government expenses which were 4.8 percent higher than a year earlier.

Infometrics said increased spending on healthcare would acknowledge some of the pressures that have stretched areas of the system, and lead to increased capacity for the sector, including a lift in overall employment. Healthcare and social assistance industries account for about 5.9 percent of New Zealand's economy and 9.9 percent of the workforce.

Kiernan said the ageing population would lead to increased demand for aged care and residential home services, and while technological advances and automation may limit the additional number of extra workers needed, those gains are still likely to run ahead of the national average.

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