Budget 2024: What you need to know about tax cuts, Government spending and savings - The Front Page

Finance Minister Nicola Willis is adamant her first Budget won't be inflationary and that the government has not borrowed for tax cuts. Photo / Mark Mitchell

The majority of New Zealanders are due for a tax cut before the end of the year - but debate is expected to continue over whether the Government is borrowing to pay for it.

A $14.7 billion tax package was at the heart of the coalition Government’s first Budget, unveiled in Wellington yesterday. Amongst that package is $3.7 billion in tax cuts that take effect on July 31.

Before the election, Finance Minister Nicola Willis said the Government would not e borrow to pay for the cuts, an argument that sparked debate amongst economists.

NZ Herald Business Editor-at-Large Liam Dann told The Front Page that the figures announced on Thursday are unlikely to quash that debate.

“I don’t think much has changed in terms of how people are going to argue this point. Nicola Willis is adamant they are not borrowing for tax cuts, but the government will be borrowing $12 billion more over the next four years.

“They’ve got a program of tax cuts of about $14 billion over the next four years.

“Different pools of money, apparently, that’s what they’re saying. So they’re borrowing for some other stuff, not the tax cuts, but they will have less money because of the tax cuts.”

He said that in the big picture of Government spending, the spending cuts are balanced out by the tax cuts.

As part of the tax package, brackets will be adjusted for the first time in 14 years, and Dann said most tax experts he has spoken to agree that is a good thing to do.

The question remains over the timing of these cuts amongst the current economic pressures.

“Labour did different things with the cost of living crisis, they cut petrol taxes and things. But when you do that, it’s inflationary.

“It keeps the economy ticking over, which normally is a good thing in a recession. You want to stimulate, but we’ve had so much stimulus through Covid. We’ve got this high inflation.

“That means the Reserve Bank is going to be looking at it very closely, doing the maths on them, whether it really balances out.

“Because the balancing force in all of this is the cuts to public services. So that comes out of the economy, and it should be a disinflationary force, and Nicola Willis has said they’ve got that finally balanced so that it won’t be inflationary. She’s quite adamant about that.”

• So what are economists saying about this Budget?
• Who’s missing out on any benefits from the tax cuts?
• What does the Budget have to say about spending allowance and public sector savings?
• And will there be a payoff for National from this Budget?

Listen to the full episode for more from Liam Dann about Budget 2024.

The Front Page is a daily news podcast from the New Zealand Herald, available to listen to every weekday from 5am. The podcast is presented by Chelsea Daniels, an Auckland-based journalist with a background in world news and crime/justice reporting who joined NZME in 2016.

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