Jacinda Ardern mulls lifting incomes with tax credits, but tax cuts could be a while away

Prime Minister Jacinda Ardern says the Government will be looking at cost of living measures on a “rolling basis”, and not just at the election - although policy will come then too.

Speaking to the Herald before Christmas, Ardern was asked whether Labour would look at tax cuts next year in light of the fact core Crown tax revenue is 30.2 per cent of GDP, higher than at any point since 2008.

Ardern suggested the Government would be looking at income support measures, but these might come through the tax credit system - like Working For Families, which supports 55 per cent of families with young children. The Government has already announced and funded tax credit increases, which will kick in next year.

She poured cold water on the idea Labour would match National’s roughly $1.9 billion income tax cut package, which she said would be inflationary.

“We tend to have a bit of a view that easing the [cost of living] pressure is solely about some of those blanket moves that you can make.

“We’ve said using things like a tax credit system, which does give support out to families - 60 per cent are reached ... can provide more support, more targeted and less inflationary,” Ardern said.

From April 2023, the Family Tax Credit will increase by $9 a week for the eldest child to $136 a week, and by $7 a week for subsequent children to $111 a week.

Best Start payments will also lift by $4 a week to $69 a week.

Ardern said measures to help people’s incomes were always under review.

“It can’t just be about what you do come the election. Our job as Government is to do something now and that is where we have focused,” Ardern said.

But might Labour look to offer more?

Social Development Minister Carmel Sepuloni is reviewing welfare settings and Working for Families. Packages are being put together which are understood to be going close to going to Cabinet.

Ardern would not be drawn on whether these changes would be an area where Labour might look to boost people’s incomes ahead of the election.

Ardern did not shut down the prospect of tax cuts, but suggested that any promise made at the election to cut tax might trigger later in the term so that the tax cut did not exacerbate inflation.

Inflation is still meant to be 3.8 per cent in 2024 - the first year any election promise tax cuts are likely to apply. That is above the Reserve Bank’s target range of 1-3 per cent.

“I’ve said timing does matter because we don’t want to do anything that makes it worse,” Ardern said of possible tax cuts.

“We recognise the need to support people. We recognise the need for our low- and middle-income earners and that is what we are doing, but as it stands for future policy that’s obviously down the track,” Ardern said.

Ardern touched on the big events of the year, including the protest at Parliament.

The Parliament occupation divided the nation. Photo / George Heard

She agreed that the Prime Minister’s job was to try to bring people together after a divisive event like the protest.

“It is a Prime Minister’s job or a leader’s job at any given time to address where there are issues, whether it is misinformation, whether it is anxiety about issues that is always your job,” she said.

Ardern said the Government had been “very careful” to have “conversations with people and to try to gently move through” issues like vaccine hesitancy, but it was still a “fractious issue” for some.

As New Zealanders looked to heal the division caused by the protest and the anti-vaccination movement, Ardern had a message for the small number of people who still felt disenfranchised.

“Regardless of the position, people’s intentions have always been right.

“It’s always been about how we best look after people.

“Those who may have very strong feelings about, for instance, vaccines, that might have been their starting point - that was ours too.

“We always were focused on how do we best look after people - so let’s start from the point we’ve shared and find ways so where we don’t agree, to accept that,” she said.