Budget 2024: What we know one week out and will Kiwis get the tax cut they were promised? - The Front Page

Minister of Finance Nicola Willis speaks at a pre-Budget breakfast in Wellington. Photo / Marty Melville

The countdown until Budget 2024 is on - and we’ve already been warned there’ll be no bells and no whistles.

The Herald’s business editor at large Liam Dann told The Front Page it hasn’t been shy about the fact the Crown accounts aren’t in great shape.

“They inherited an economy in recession and argue that it’s now worse than they expected,” Dann said.

“This is a ‘tightening-up’ Budget. If you think of it like a household, this is the one where you’ve got to shave off your excess spending, sort out that gym membership that you’re not using, all that sort of stuff.

“If the guttering needs fixing or you need to invest in fixing the roof, you’ve got to do that. These are big structural things that no Government can avoid. So there’s a bit of that, but not too much in the way of frills or payments that will necessarily go into the pocket of the average New Zealander.”

Dann said the determination to still offer tax cuts has garnered criticism from economists from right across the political spectrum.

“They say they can balance these tax cuts with spending cuts and it comes out neutral, but if you didn’t do the tax cuts, you could either cut spending less or pay down debt faster.

“I’ve argued that it’s a little bit like trying to get the books back into shape with one hand tied behind your back and that maybe right now isn’t the right time for tax cuts.”

In a pre-Budget speech, Finance Minister Nicola Willis promised 83 per cent of New Zealanders over 15 – and 93 per cent of households – would benefit from tax relief that National has promised since the election campaign.

Likewise, Prime Minister Christopher Luxon has doubled down, saying the Government was elected on a promise to lower taxes.

“We were elected on a platform of delivering tax relief to those families and I don’t plan on breaking that promise,” Luxon said in a pre-Budget speech to business leaders in Auckland.

“Kiwis struggling with the cost of living – the squeezed middle – deserve support,” he said.

Last month, the Organisation for Economic Co-operation and Development (OECD) issued a stark warning that tax cuts should be “fully funded” by spending cuts or new sources of revenue, not debt.

Willis has continued to argue the promised income tax cuts won’t be debt-funded, something Labour’s Barbara Edmonds and the Greens’ Chlöe Swarbrick continue to challenge.

The crux of the disagreement hinges on whether it’s fair to ring-fence one type of spending – ie, on tax cuts – and say any savings or new types of revenue are used specifically to cover that cost, all the while other types of new spending are at least partially debt-funded.

“I’m not aware of a single economist who doesn’t see this as effectively borrowing for tax cuts,” Dann said.

When asked whether it’s like not using your credit card, but instead using your cheque account to buy shoes, while using credit to purchase groceries, Dann said “that’s economics”.

Budget 2024: what we know so far

• Mike King’s Gumboot Friday counselling service for young people will receive $24 million over four years as part of the Government’s upcoming Budget.
• Budget 2024 will allocate $140 million in new funding for 1,500 new social housing places to be provided by Community Housing Providers (CHPs), not Kāinga Ora, thanks to savings found by ending the First Home Grant.
• The Family Boost policy will let parents and caregivers claim back up to 25 per cent of childcare costs, from July: 21,000 families will qualify for a maximum $75 a week.
• Coastguard New Zealand and Surf Life Saving New Zealand will get $63.6 million in the budget over the next four years.
• Associate Education Minister David Seymour said the Government has ring-fenced $150 million to set up 15 new charter schools and convert 35 state schools next year and in 2026.
• Police Minister Mark Mitchell and Police Commissioner Andrew Coster say a new National Gang Unit is being established to combat gang harm. The specialised unit will have 25 to 30 people and up to seven ring-fenced officers in every police district.
• Transport Minister Simeon Brown announced plans for a new Roads of Regional Significance programme that will sit alongside the already established Roads of National Significance scheme.
• Defence Minister Judith Collins announced there’ll be $571 million more funding over four years for defence - $163 million will go toward improving workers’ pay. The money will also help upgrade the military’s NH90 helicopter fleet, replace dated military vehicles and improve our maritime detection systems.
• A new standalone Social Investment Agency, effective from July, has been allocated just over $50 million. It aims to understand who the Government will invest in, what works for those people, and how progress is measured.
• Free school lunches will get $478 million in the Budget for an interim model over the next two years, while the initiative is redesigned.
• The Government’s injecting $1.9 billion into Corrections – to establish more than 800 extra beds at Waikeria Prison – and 685 more frontline Corrections staff, including 470 prison officers. Meanwhile – $78 million of the funding will allow rehabilitation services to be extended for the 45 per cent of prisoners on remand.
• Education Minister Erica Standford has announced the Government is putting $67 million from the Budget into bringing the “structured literacy” learning method into state schools by the first term of 2025.

Listen to the full episode to hear more about how low-key Budget 2024 will be and what areas we should keep an eye on.

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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