Government signals boring Budget as it looks to rebuild the economy - The Front Page

Finance Minister Nicola Willis highlighted the economy’s fragility in her Budget Policy Statement at the end of March. Photo / Mark Mitchell

The Government has homed in on rebuilding the economy as a priority for the coming months.

The sentiment is peppered through Prime Minister Christopher Luxon’s new 36-point action plan, with promises to deliver a Budget that reduces wasteful spending, delivers tax relief and invests in frontline services.

There’s now a June 30 deadline for the likes of introducing legislation around personal income tax relief and a FamilyBoost childcare tax credit.

The plan also prioritises the restoration of the controversial Three Strikes law, establishing the $1.2 billion capital infrastructure fund for the regions, and putting some detail around increasing the housing stock via council planning for the next 30 years.

“We want to find the balance, actually – balancing wasteful spending so that we can protect frontline services [while providing] tax relief and growing the economy,” Luxon said. “That’s the key thing that we need to land this quarter.”

The announcement of the latest plan comes days after Finance Minister Nicola Willis highlighted the economy’s fragility in her Budget Policy Statement, in which she emphasised the extent to which economic growth was expected to be slower.

She told Newstalk ZB: “The Budget is looking like a Budget that will bring together the small crumbs we have at the back of the cupboard.”

Consequently, the Government’s tax take is likely to underperform, meaning it won’t get its books back into surplus by 2026-27, as it expected in December and as National campaigned to do before the election. The books are still likely to be in the red in 2027-28.

NZ Herald Wellington business editor Jenée Tibshraeny told The Front Page the books were still in good shape globally.

“You don’t want to be so hellbent on getting back into surplus that you don’t invest in infrastructure, you don’t invest in people and you go back as a country. It’s a really, really tough balance to strike.”

Speaking to the Herald, Luxon said the Government was looking to get the “balance right” in next month’s Budget without going into “full austerity mode”.

Tibshraeny said: “I think full austerity mode would mean really, really drastic cuts to the public sector so it’s a positive thing that Christopher Luxon has said they don’t want to do that, because they can’t do that.”

However, when it comes to the big Budget reveal, we shouldn’t be expecting fireworks.

“I think in previous years, we’ve become used to there being some kind of interesting little policy that might help us out, like a cost-of-living payment or removing prescription fees. I don’t think there’ll be anything like that.”

Listen to the full episode to hear more about NZ’s uphill economic struggle and whether tax cuts are still on the horizon.

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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