Finance Minister Nicola Willis says the Government won’t repeat the mistakes of past austerity, despite Treasury downgrading its economic and fiscal forecasts for Budget 2024.
Willis gave her first pre-budget speech, to the Hutt Valley Chamber of Commerce, on Thursday and outlined the Coalition’s approach to the budget.
She said it was the first time in 14 years that the first of these speeches had been held outside of Central Wellington — a deliberate signal that this budget would be a “break from the past”.
It has also been 14 years since the last adjustment to income tax brackets. This budget will change that, despite difficult economic circumstances.
Willis said she was facing “significant downgrades” to the country’s economic growth forecasts.
“You only have to look at the government’s monthly financial statements to see the impact: core Crown revenue has been lower than expected with the corporate tax take significantly lower in recent months,” she said.
Figures released by Treasury on Tuesday showed revenue was $1.6 billion, or roughly 1.6%, below forecast in the nine months ended March.
This means the Government will likely face a deeper deficit than had been expected when it was first elected and first formed its policies in opposition.
Willis said while the forecasts haven’t been finalised yet, each update from Treasury has been worse than the one before it.
“Sadly, I’ve learned to dread what comes out of the forecasters’ mouths when they come into my office. Given this, I certainly don’t expect any windfalls before Budget day”.
Willis said it wouldn’t be a “big-spending” Budget, knowing that Crown finances could get worse before they get better, but she wouldn’t “overreact” to worsening forecasts either.
It will not be “an austerity Budget, of the sort suggested by a few commentators seemingly enthusiastic to see the mistakes of history repeated”.
“Our Government knows how devastating it would be if we were to give up on overdue tax relief, to drastically cut-back on investment and public services, and to downsize our ambitions for growing New Zealand’s economy”.
She reiterated money would be invested in key public services, tax bracket adjustments would make 83% of New Zealanders better off, and that the 7.5% savings target had been reached.
Green Party co-leader, Chloe Swarbrick said Willis was reheating austerity politics and chasing trickle-down economics.
Tax cuts were only “crumbs” that come with fewer public services and higher costs for public transport and prescriptions.
“The Reserve Bank told us in their Financial Stability report that the Government’s tax cuts for landlords will only increase house prices. It’s a $2.9 billion receipt of where their priorities are," Swarbrick said.
At the other end of the political spectrum, the Taxpayers’ Union thought the tax cuts, likely to be about $25 per week, were inadequate for working people.
“Anything less than $49 a week is simply a partial reset, keeping taxes much higher than they were 14 years ago while the Government pockets the rest,” it said in a statement.
Social investment fund
Willis announced she would establish a Social Investment Agency which will help the Government assess the impact of its spending using data and analytics.
The idea behind social investment is to use financial sector-type analysis on social programs to redirect money towards programs achieving the best long-term outcomes.
A Social Investment Fund will be set up, for the new agency to manage, which will be able to directly fund private services that are working with vulnerable New Zealanders from 2025.
This fund will allow the agency to assess which community or charities are having the greatest impact on particular social problems and provide them with direct funding.
This new agency will replace the Social Wellbeing Agency, which itself was a rebranded and repurposed version of a previous National Party program.
It will have $50.5 million in new funding and existing staff will be transferred to the stand-alone entity.
We welcome your comments below. If you are not already registered, please register to comment
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.