Capital Markets Report: Quick takes on Nicola Willis’ first Budget

Finance Minister Nicola Willis (centre) with (from left) Christopher Luxon, Chris Bishop, Shane Jones (obscured), David Seymour and Winston Peters, on the way to the debating chamber for the reading of Budget 2024. Photo / Mark Mitchell

OPINION

When push comes to shove, what voters want from a Budget is what the Government they voted into power had promised they would do in order to get those votes.

They will pocket those tax cuts. They might even suggest they are not enough. But all up, Nicola Willis’ first Budget has done exactly what she had put on the tin.

Claire Trevett, Political Editor, NZ Herald

It was “not so much a tax cut, as a tax scratch” which would not fix the underlying, ongoing problem of fiscal drag.

Brian Fallow, veteran economics columnist

New Zealand’s official fiscal projections have proved too optimistic in recent quarters, with the projected return to Obegal surplus being pushed back several times since December 2022 amid worse-than-expected economic and Budget performance. The latest slippage largely reflects the weaker economic outlook, significantly lower-than-expected tax revenues and the impact of recent tax policy changes, though the Government is partly offsetting these through savings on the expenditure side.

FitchRatings

Leading up to its first Budget, the coalition Government dismantled environmental protections and introduced new legislation to support economic growth. Environmental advocates have called it “a war on nature” and some have compared the pace and magnitude of reform under way to the “Think Big” mistakes of the 1975-1984 National Government.

Willis was notably silent about the environment in her Budget speech, only mentioning a continued $2.6 billion investment in existing climate initiatives, and the growing importance of the Emissions Trading Scheme.

A preliminary assessment of Treasury documents shows a reduction in overall funding across most environmental protection domains over the next five years.

Julia Talbot-Jones, senior lecturer – environmental economics, Victoria University

Honestly, who would want to be Nicola Willis at this point?

The effect of $14.7 billion of tax cuts is going to mean a dramatic rethink on New Zealand expenditure in the long term, and about what sort of public services we expect. The Government’s cut-it-back strategy appears focused on the next four years, not a longer horizon. The tax cuts spread a little over a lot of people. And you have to ask, will $50 or $100 a fortnight really make a difference if interest rates stay high and the ability of the Government to pay for core services reduces?

The IMF and OECD would have preferred the Government to focus on paying down debt to get to a surplus faster. To do that, they have suggested New Zealand introduce a tax on capital – but this Budget avoids such big questions.

Craig Ellife, Professor of Law, University of Auckland