Earthquakes could delay 'family package' tax benefits says PM John Key

Prime Minister John Key Photo / Nick Reed

Prime Minister John Key has hinted at a tax package targeting families, referring to a "family package" but warning the latest round of earthquakes could mean a delay in offering them.

Key said the cost of the earthquake and any resultant economic hits could affect the ability to offer a tax cut programme in the short term, "but probably not in the medium term".

In addressing the issue, Key referred repeatedly to a "tax or family package" - hinting it would not be simply tax cuts on offer.

LISTEN: Caution from Finance Minister Bill English over tax cuts

"[The earthquake] is a factor that could have some impact on the decisions we make and we can't say that it wouldn't. But nor would it completely render us not in a position to be able to consider a range of things that we would want to either campaign on or carry out if we got a fourth term."

He said forecast surpluses were up to $8 or $9 billion by 2019/20 and if the earthquake recovery cost $2 billion that was "not material".

The earthquake recovery would be a one-off cost whereas a tax package would be a recurring cost.

Key said the Government was waiting to see the Half-Yearly Economic and Fiscal Update at the end of the year because it would include a fuller assessment of what the earthquakes would cost.

"I don't think the earthquakes, as they currently stand, will, over the medium term, stop us wanting to do other things."

"We've identified from our own perspective, if there was more money where would be the kind of areas we want to go. Not what is the make-up of a tax or family package, but what is the make-up of the expenditure we want." He said more money had already to be put into areas such as Corrections and ACC.

He said it would result in one-off capital spending as well as a possible impact on economic growth such as a slow down in tax revenue.

Kaikoura represented less than 1.5 per cent of New Zealand's tourism activity "so it's not going to be significant".

However, the outlook for Wellington was a different question.

Finance Minister Bill English told Mike Hosking Breakfast a family and tax package had always been on the Government's list.

The package would likely be rolled out next year, if the financial conditions were right.

But the Government's "overriding concern" was to get debt down.

Dairy and tourism were up, but the earthquake, pressures on defence and the prison system, and the need to rebuild classrooms were costs going forward.

When Key was asked what he meant by a "family package", he said he believed there was room to try and lift the incomes of New Zealanders on top of ordinary wage increases.

"I've made it quite clear I think we should be moving forward over time on trying to find ways to make sure New Zealanders get more of what they earn.

Tax is one vehicle for doing that. It's not always the most effective vehicle for doing that for particularly lower income families. So there is a range of things you want to consider."

He would not confirm he was looking at Working For Families as well as tax cuts, but indicated he was targeting lower income families.

"There's always options available and you can always be creative."

He said wage growth was part of lifting incomes. "But making sure they can keep more of what they earn or get a little bit more back through a variety of mechanisms is always something we can consider."

He said the last tax cuts in 2010 had involved a combination of threshold changes and changes to Working for Families. Tax cuts were expensive and typically delivered less to lower income households.