The National Party has released a fiscal plan which would reduce New Zealand’s public debt by about $3.4 billion by 2028.
It includes lower the operating allowances than Labour used in the pre-election update, increasing benefit rates more slowly, and means testing the free prescriptions policy.
National would cut about $300 million off each of the next four operating allowances ($400m in 2025) to save $3.3 billion, which would be used to pay down debt.
The operating balance would return to surplus in 2027—the same year as Labour—but would be $800 million bigger. The following year’s surplus would be $1.4 billion bigger.
This lower debt track doesn’t make much difference to net debt as a percentage of gross domestic product. It would be 19.1% instead of 19.8% at the end of 2028.
But Nicola Willis, the party’s finance spokesperson, said even a small reduction in spending would result in a better fiscal position over time.
“Small savings now build up to be significant savings over time — the opposite is also true,” she said.
The plan leaves $9.9 billion of unallocated money in the operating allowances to spend on unforeseen costs, other new initiatives, or demands from coalition partners.
National’s lower spending track has been made possible by indexing most benefit payments to the rate of inflation instead of wage growth.
This will save about $2 billion across the forecast period and would continue to accrue overtime. Superannuation, the largest benefit, would still be indexed to wage inflation.
Another $317 million in savings would come from targeting the free prescriptions policy.
The biggest cost cuts were announced in the Back Pocket Boost tax plan and remained unchanged in the fiscal plan.
Adjusting income tax brackets is the party’s biggest policy, at a cost of almost $9 billion across the four years or a little over $2 billion each year.
It will save the median wage worker $25.50 each week and the average household $51 a week.
Restoring interest deductibility for landlords would cost $2.1 billion across the forecast period, or about $525m.
Government departments would be asked to cut 6.5% of their budgets, saving an estimated $8.3 billion across four years. This would be used to help fund $14.5 billion in tax cuts.
The other half of the funding comes from new revenue initiatives, including the foreign buyers tax which has been questioned by economists. It was unchanged in the fiscal plan.
If the tax revenue did fall short by $500 million each year, as alleged, that would wipe out almost two-thirds of the $3.4 billion debt reduction National has promised.
Assuming all the revenue did arrive as forecast, then net debt would peak at $102.8 billion in 2025 and finish the forecast period at $97.6 billion — only slightly lower than Labour.
Willis said this comparison presumed that Labour would stick to its spending commitments, something she likened to “believing in the tooth fairy”.
The party has kept most of Labour’s funding precommitments and estimates of cost pressure increases.
121 Comments
The counter position is that poverty and inequality have worsened in the last 6 years at a rate not seen since the great depression.
Housing costs including rent as a percentage of disposable income, number of people dependent on Government grants, emergency accommodation....
The irony is a rabid right winger like myself has made more money under Labour than I thought possible hence retirement early next year. Wonder how it's working for a family with 4 kids in Sth Auckland. Labour, the workers friend. Go figure.
Poverty will increase regardless of who is in power.
Every day there is less remaining planet.
Every day, there are more people.
Every day there is more per-head consumption.
Sorry, was....
And neither major Party will acknowledge the dilemma. They both therefore qualify as stupid. Better defined as ignorant.
The Pandemic and subsequent monetary policy decisions by Reserve Banks were responsible for that. And Putin causing an energy shock and food shortages.
Labour's housing policies are the one area where they are unequivocally better than NACT, if you're concerned about over-priced housing.
Outcomes aren’t always aligned with current policy, it can take a while. For example National say reducing speed limits hasn’t reduced deaths on the road, but basic physics says it will work. Likewise it is obvious that removing tax incentives to property investment will reduce speculation and house prices. We may not actually know how well those 2 policies have worked until National reversed them.
Yes I really like how Labour have undone the housings Ponzi.
Only reason I voted for them last time after 50 years of the blue team.
Now National want to start Ponzi up again not going back to them any time soon.
National seem to be very poor readers of the room.
This one thing could; lose them the election it has for the last two elections.
The exact same would have happened under National. It’s not rocket science. Ask yourself “where did this money come from?”, and follow it back up and you’ll see. This was a united central bank move, blaming Labour for the amount which was spent is like voting for national on the basis that they will spend significantly less in the next term than labour. Read the fiscal plan. Look at the numbers. Same. Same same. 0.1% difference???
Now, blaming successive governments for failure to address wealth inequality, there’s a targeted blame. Expecting poverty to be fixed by a massive money injection without changing policy which channels wealth in one direction is a bit elementary.
The other half of the funding comes from new revenue initiatives, including the foreign buyers tax which has been questioned by economists. It was unchanged in the fiscal plan.
Oh so still sticking by these shoddy numbers then... The supposedly fiscally responsible party ladies and gentleman.
The problem is those over 65 have it ingrained in their heads that Govt Super should be guaranteed to all over the age of 65, no questions asked. They see it as more of a loyalty rebate scheme than the benefit it truly is. Didn't you know when the clock strikes midnight and they hit 65, people's living costs go up by $1000 per fortnight?
All because some politician who died 30 years ago supposedly made a promise without consulting with today's taxpayers.
So National are betting on local/NZ wage inflation to continue to outpace CPI inflation?
The way the world is going, they might have that the wrong way around.
And I agree, whatever the case - it should be the same for all beneficiaries. Funny thing is, I suspect that the majority of superannuitants likely think all benefits should be lifted to equal that of superannuation.
Just like the majority of NZers think there should be taxes on capital gains.
And imagine National deciding to means test the $5 prescription charge instead of means testing super. Surely the cost of implementing such a means test will exceed the paltry savings.
Go for the big gain someone - at a minimum, re-introduce the surcharge cynically dumped by National/Winston;
https://www.goodreturns.co.nz/article/891752323/the-removal-of-the-surcharge.html
And of course before them it was Rob Muldoon who screwed us;
I do not know where all the National stalwarts get the idea that they are good fiscal stewards.
Biggest balls ups in NZ history.
.
With all the attacks and vitriol, especialy from National and Act aimed at NZ First, I would be quiet happy for them to sit on the cross benches and watch what happens from a distance while protecting us pensioners interests.
Yup will still Party vote NZ First as I remember why National had to be sent out the last time they butchered the country.
Just can't understand why they are restoring the interest deductibility thing. Unbelievable.
a. It's an equitable tax on a planned money making activity. Landlords were not in it for rental income, it was the capital gain. We subsidised them in fact.
b. The mad result was a house price bubble which has been NZs biggest social disaster.
c. It's a big cost item in their budget above.
d. Reduces home ownership.
(note. Never will vote Labour)
The Tax Working Group advised against removing the ability to claim interest. Most accountants would support this view as it differentiates residential property against other types of business (but you don't see it as a 'business'). I believe it would also be an outlier against international best practice, and I am happy to be corrected but categorically in Argentina and Switzerland these costs are offset against rental income. Any comments from folk with UK or Australian firsthand experience?
I always thought the lack of tax deductability was a good balance against the cheaper interest rates on housing. Oddly my commercial property gets hit with a 2 percentage points higher mortgage interest rate than the mortgage on a house. Why is a mystery - and the lack of tax deductability on residential evens it up
Maybe it is a higher risk because the government doesn't subsidise commercial property lessors - whereas it does subsidise tenants, and hence their landlords.
Get real - this subsidy on it's own will be costing NZ taxpayers the equivalent of National's tax cut plan + Labour's GST-free fruit and veggies combined.
March 2019 quarter there were 295k recipients. That's 15% of all households, or 45% of renters. Sure, not all renters will get it, but it wouldn't be unreasonable to suggest that 1/3rd of renters receive it.
https://www.msd.govt.nz/documents/about-msd-and-our-work/publications-r…
will allowing interest deductability result in a similar 40% market leap to the one achieved when Labour flooded the banks with cheap cash to lend to speculators - despite the treasury advice that this would lead to large increases in house prices .... i think not at 7% i doubt it will make a jot of difference to house prices at current levels
Lets not forget the RB had a big part to play with the cheap money,which as we all know if we are being honest is the main reason house prices went up not the interest deductibility change...leave the policy as it is and see how house prices go with higher interest costs...so why should landlords get relief from high interest rates via deductibilty,whilst owner occupiers have to cope on their own... the policy was just strting to work...and now Nat ? ACT are coming to save the necks of a whole lotta overleveraged landlords.
It all sounds rosy until you realize those costs are going to be passed on over time. Either people will increase rents, or, people will sell and that will create a shortage and then people will increase rents. Ditto for insurance costs doubling.
If such a cost was pushed onto supermarkets and our food bills went up 10-20% there would be riots. This time there won't be because a) people don't like landlords and b) tenants aren't protesting and/or cost of living payments can be increased.
Rental properties are now over a third of the total housing stock, and that's not because people don't want to own a house but because speculation and favourable tax treatment has pushed up the price of property so they can't afford it.
Landlords exiting the market is a good thing, the house doesn't disappear it gets sold to an OO, and hopefully it puts downward pressure on prices.
If costs like insurance rise then yields will fall further and property prices will have to fall, I'm not sure there's much fat in the system out there to put rents up.
And the 2018 census put to bed much of the claims that a rented property that becomes an owner occupied would make people homeless. The 0.1 people difference can be put solely down to demographical variances.
According to 2018 census data, the occupancy of rentals and owner-occupied properties were nearly identical, averaging 2.8 and 2.7 people, respectively
https://www.mpamag.com/nz/news/general/landlords-planning-to-sell-up-on….
But rents are rising at a lower rate than inflation?
https://www.scoop.co.nz/stories/BU2302/S00167/overall-rent-increases-le…
National’s lower spending track has been made possible by indexing most benefit payments to the rate of inflation instead of wage growth. ... This will save about $2 billion across the forecast period and would continue to accrue overtime. Superannuation, the largest benefit, would still be indexed to wage inflation.
No surprises there. Gotta look after their voting base.
Many will be wishing to be skip the majority of their lives and just start at 65.
This is a quote from Oxfam in the UK describing the impact of policies similar to those proposed by National,
"The UK’s current austerity programme threatens to solidify the UK’s position as a country of growing inequality and poverty. Its emphasis on cutting public spending as opposed to increasing taxes has already begun to increase the hardship faced by people on low incomes, whilst allowing the richest bear a comparatively small burden of the pain. As millions more are expected to be living in poverty and at risk of poverty by the end of the decade, the richest look set to get richer."
Sounds great doesn't it.
What mostly disturbes me is the short-termism of BOTH major parties. The current one has opened the gates and allowed a net 100000 people into New Zealand this year alone. Our run down infrastructure will struggle to absorb those and most concerning both parties have not made any propositions for that in their plans. To cater for 100000 people you need:
1 hospital; 25 primary schools; 6 high schools; 2 fire stations; 1 police station; 1 water treatmentplant; 1 waste water treatment plant; 1 electricity transformer plant and whatever I forgot. You need to equip and man those! All upfront costs and I am not even talking about housing those people.
So my question to both parties is: What is your plan with the immigration quantity and how are you going to plan and cost for that?
"What mostly disturbs me is the short-termism of BOTH major parties"
That's due to the current rules of the popularity contest (aka election). Politicians are playing to win in each election cycle and this results in a focus on short term thinking, short term results from each election to the next election, rather than long term thinking.
The incumbent government took the politically unpopular decision to address an issue that previous governments have passed on to successive governments for a number of years - shortage of affordable housing. That is leadership on that issue.
However the incumbent government have also had policy decisions that have led to other issues, and undesirable outcomes.
Labour supporters are bordering on hysteria now. The whole country has gone down the toilet and somehow it would have been worse or will get worse under National. Labour has had 6 years and wasted it, more people living in motels and cars and noticeably permanent camper vans the other day at the ferry terminal in Gulf Harbour.
God save us if Labour get back in.
UK has had a right leaning Government since 2010 and the current Tories are very much like ACT. Not looking much better over there.
Map reveals England and Wales regions hit by shoplifting 'epidemic' | UK News | Metro News
You don't consider this to be a culmination of the last 40 years of government policies, free market economic principles and financial speculation on homes? Maybe there's some flaws in this entire system that aren't being acknowledged or addressed?
You appear to have some disdain for these living conditions? Tell me what would your God will you to do about it?
Why oh why can National not find some saving? Labour lite - with just as many crackpot greens in blue clothing. The wasted spending list in the link makes one want to weep.
"In 2017 when Labour came to power, crown spending was $76 billion per year. Now in 2023 it is $139 billion per year, which equates to a $63 billion annual increase (over $1 billion extra spend every week!) In 2017, NZ’s government debt stood at $112 billion. Today, excluding an accounting trick, that debt is now doubled at $224 billion or $115,000 per household. Meanwhile, in 2017 individual tax payers paid the government $33 billion. By 2023 this had gone up 67% to $55 billion to help fund Labours spending. Here is just some of the wasted spending (which most media swept under the carpet):
https://www.bassettbrashandhide.com/post/alex-holland-labour-s-spending
Child poverty is really child lack of access to resources and energy.
Can't solve that other than reducing overall consumption, and per-head consumption if you're overshot (as we very much are).
Yes, they can equalise, but that doesn't solve the overall problem.
She clearly had no more clue that Bill English... both believed in money, alle same religion.
The government sector and the private sector are a mirror image of each other and so whatever happens on one side has the opposite effect on the other. If the government reduces its spending then this also reduces the income of households and if the government runs surpluses then households must run deficits and give up savings or increase their own debt.
This is all beyond Nicola Willis' understanding though as she only sees the governments budget as a household budget much like Margaret Thatcher did.
Due to LSAP, RBNZ bought billions of govt bonds, which increased govt spend significantly as the only other place for it to go would be back on the other side of the balance sheet as govt deposits. As this debt exists as an asset on the RBNZ balance sheet and the money flowed into the private sector, excess reserves were created by RBNZ. This put further downward pressure on the OCR, and pressure on banks to lend billions into the private sector.
You already know this, I know. My point is that this is not only a fiscal cleanup, the other side, the monetary cleanup, that has only just started. This is not just a year or two of higher interest rates then back to business.
The third factor, foreign supply constraints, lower demand for our exports, higher price for our imports. This is not an environment we can pump money into.
Your analysis does not align with what Standard and Poor's say here, https://www.hks.harvard.edu/sites/default/files/centers/mrcbg/programs/…
Or with what economist Silvana Tenreyro of the Bank of England says here, https://www.bankofengland.co.uk/-/media/boe/files/speech/2023/april/qua…
It’s late, but I think in the standard and poors table 1 and that section on the balance illustrates the point I’m trying to make. Given that the asset bought was government bonds, which appeared as government deposits on the balance sheet, was then spent into the private sector. As it was spent, reserves increased to match assets. I’m not suggesting banks lend reserves, but that LSAP was a double whammy which obviously had massive influence on both government spending and bank lending.
If I’m way off, lmk where. This is just my understanding
Silvana Tenreyro states, "QE is an asset swap: it does not create new private-sector assets, which is how some may understand ‘money printing’ descriptions. Nor does it involve spending money in the sense that fiscal policy does. No private-sector banks, firms, households or governments end up with higher net worth from QE transactions themselves.
QE affects the economy only to the extent it affects interest rates. There is no separate ‘money’ channel that can unleash inflation".
From RBNZ
"The aim of the programme was to lower borrowing costs to households and businesses by injecting money into the economy through the purchase of various government bonds.
When we bought assets, this increased their price and so reduced their yield. That meant the interest rate, in this case on government bonds, fell. This has the effect of ‘lowering the tide’ on other interest rates in the economy, particularly longer-term interest rates of two years or more. It also reduced the cost of borrowing for households and businesses.
Secondly, our asset purchases encouraged the sellers of the government bonds to use the money they received from us to buy other financial assets like company shares, bonds or new lending – helping to inject money into the economy."
What I can't find is the gain or loss by the RBNZ as it unwinds its position as the government indemnified the RBNZ for any losses, i.e. unwinding there position will realise any paper losses and holding to maturity will have an opportunity cost. Where does all this figure in the governments accounts as it is billions.
Ahh you’re right, the BOE speech page 6 describes where I’ve gone wrong. These govt bonds I believe were bought on the secondary market, so likely off banks (?) as in the diagram example given. And govt spend increased on the basis of lower interest rates. Knew already the process in regards to the commercial banks but that speech on the BOE better describes the govt bond asset purchase scenario.
Thanks for the links! Appreciate it.
Don't do that!
Vote for the Greens or TOP.
At least then we'll have some chance of a reform of a tax system that is thoroughly distorting every decision about working, investing and/or seeking productivity gains. The purple parties - both of them - need a lesson in why the status quo is no good for anyone in NZ ... Even the rich.
Our 'obligations' are non-binding. Why count them at all? Is climate homeopathy really a priority?
"The achievement by a party of its NDCs is not a legally binding obligation."
The inflationary pressure has been with us for decades, we were able to conveniently pass it off to foreign nations to keep prices low and run an effective low wage economy. Let’s not forget that a large amount of government debt which will be paid off lives as an asset on the RBNZ balance sheet.
National’s lower spending track has been made possible by indexing most benefit payments to the rate of inflation instead of wage growth.
This will save about $2 billion across the forecast period and would continue to accrue overtime.
Restoring interest deductibility for landlords would cost $2.1 billion across the forecast period, or about $525m.
I know it's all fungible, but the effect of these two policies is essentially take $2b from beneficiaries and give it to landlords. Who needs it most?
The difference between the two parties is weafer thin. The
Re distinctions are more about marketing and rhetoric than substance.
It reminds me of Donald Trump and Bernie sanders and their almost identical hard stance on trade. They wanted the same thing but were going after different voters
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