Cost of living: No relief for ‘squeezed middle’ as rates rises gobble up tax cuts

Couples who communicate about finances are more likely to spend responsibly. Photo / 123rf

EDITORIAL

When Finance Minister Nicola Willis unveiled her first Budget in May, one word was front and centre. Relief.

“On July 31 this year, New Zealanders will experience tax relief for the first time in 14 years. This relief is well overdue and will help hard-working Kiwis who have endured a prolonged cost-of-living crisis,” Willis said.

We were told 3.5 million New Zealanders would soon be keeping more of what they earn in their bank account thanks to the Government’s $14 billion tax package. The pressure was going to start to ease a bit for one of their most targeted demographics, the so-called “squeezed middle”.

Unfortunately, just as central government looked to give households some money back, local government decided to hike rates.

One week on from tax cuts taking effect, many Kiwis will in fact find themselves worse off thanks to hefty rates rises hitting at precisely the same time.

Local Government New Zealand calculated in March that the average rates increase was 15% across the country, and that off the back of 9.8% in 2023.

For some, the reality is much worse. In Gore, rates have increased by 21.40%. Rates are up 20% in Central Hawke’s Bay, 19.95% in Napier, and 19.93% in Upper Hutt.

All while households continue to be hit with hefty power bills, rising insurance premiums, falling house values and little relief at the checkout.

It’s a situation that hasn’t gone unnoticed by those in the Beehive, with a clear expectation that local councils start making some tough spending decisions to ease the pressure on ratepayers.

Local Government Minister Simeon Brown said his message to councils was they should be doing a “line-by-line look through their expenditure to keep costs under control”.

He said ratepayers would be “concerned” by continued high rates increases.

Act Party leader David Seymour shared Brown’s concerns and voiced some support for capital recycling from councils – in other words, selling some assets in order to fund infrastructure investment.

”When you’ve got leaky pipes, you, as a council, should be asking why you own an airport,” Seymour said.

Earlier this week it was revealed Wellington City Council officials were recommending the council take on more debt to foot a $312,500 bill for raised pedestrian crossings on Thorndon Quay.

The money was initially coming from New Zealand Transport Agency Waka Kotahi. However, that has since been withdrawn.

Councillor Nicola Young told NZME she was “horrified” by the prospect of the city “taking on more debt”.

”People are really upset about the rates increases and the council has to stop borrowing money,” Young said.

It’s no secret councils are struggling financially and need alternative forms of revenue. Simply continuing to borrow and put the financial burden on residents is unsustainable and unfair.

The Future of Local Government Review recommended various changes to address the issue and ensure councils can survive, including four-year terms, lowering the voting age to 16, amalgamation, and an annual transfer from central government starting at $1b.

However, the Government has said it will not respond to the review’s recommendations and it wants councils to find savings before expecting a handout.

If central government genuinely wants to make life more affordable for residents, then it’s going to need to address the council-sized elephant in the room and both parties have to find some consensus.

Because as it stands, there’s not much left to squeeze out of middle-income earners and there’s certainly no relief.