Next Wednesday, Finance Minister Nicola Willis will release a Budget Policy Statement outlining the Coalition Government’s operating allowances and spending priorities.
This document would usually be released back in December, alongside Treasury’s half year update, but it was deferred to give the new administration a chance to get itself set up.
The Public Finance Act requires the Budget Policy Statement to be presented to Parliament by March 31, or as soon as the next session starts, making Wednesday almost the last minute.
It is required to detail the overarching policy goals guiding budget decisions, wellbeing objectives, and how these align with the most recent fiscal strategy report.
The most watched elements are the operating spending allowances which dictate how much discretionary spending the Government will have in the Budget.
Treasury will also provide an update on the economic outlook, which is expected to be a material downgrade from the forecasts it made in December.
In the half-year update, Treasury predicted that real GDP would grow 1.5% in the year ending June 2024 but that now looks unlikely. The Reserve Bank thinks there will be zero growth.
Lower economic activity would mean less tax revenue and more Government borrowing.
Westpac economists said Government borrowing over the next four years could increase by between $7 and $10 billion as a result.
The forecast operating surplus in the 2026/27 financial year will likely be pushed back one year, despite Treasury advising the new Government to make hitting that goal its top priority.
But Willis and the Coalition have a higher priority. It has promised fiscally-neutral income tax cuts come hell or high water.
Consider delays
Westpac’s economists said there was “merit” in considering delaying the tax cuts until the operating balance was closer to surplus and inflation was under control.
That is not on the table for the National Party, as Willis reiterated in Parliament this week.
“The Government's plans for the Budget have not changed. These include delivering tax reductions to provide cost of living relief to New Zealanders who have seen no change in personal income tax rates and thresholds for 14 years,” she said.
However, it is an open secret that billions in revenue expected from taxes in National’s fiscal plan will not be arriving as forecast. This shortfall will need to be made up somewhere.
Again, Willis was asked about the “fiscal hole” of $5.6 billion—which Winston Peters seemingly confirmed during a speech—in Parliament.
She wouldn’t deny or confirm that number, saying only that the “tax package” was affordable.
It is possible there will be tweaks to the tax cuts but we won’t find out until the May Budget, as the coming policy statement only details high level priorities and fiscal envelopes.
Operating balance
National said it would lower the annual operating allowances set by Labour by a cumulative $3.3 billion across the forecast period, bringing it to $11.4 billion by Budget 2027.
According to the Treasury, about $4 billion had already been pre-committed which would leave about $7.4 billion to work with.
The pre-election fiscal update warned, in coded language, that the operating allowances would be enough to support existing levels of services but nothing more.
Willis’ mini-budget should trim core Crown spending by a cumulative $5.2 billion over these four years, giving her a little more room to manoeuvre.
That extra space could be needed to accommodate coalition commitments.
For example, Politik reports there may be a struggle behind the scenes over two NZ First projects. It has negotiated a $1.2 billion regional growth fund and a $1.3 billion funding boost for Pharmac — with the exact details still being worked out.
It is possible tax cuts could be softened to improve the books or a lower priority policy, such as a free year of university, could be axed as an offset.
International Monetary Fund Mission Chief, Evan Papageorgiou cautiously endorsed the one year delay to returning to an operating surplus while visiting New Zealand.
Usually, the international analyst would get to see a policy document before filing his report but not this time. However, he did have meetings with Willis who has been sounding unsure about whether it would be possible to hit the 2027 surplus.
By midday on Wednesday we will likely have a better idea of which fiscal promises will be delivered on, and which ones were wishful thinking.
102 Comments
This government's attitude can be summarised as austerity for the plebs, welfare for the wealthy and for donors.
One way to judge the adequacy of the fiscal update is to see the extent to which it accounts for the economic effects of planetary resource overshoot (including climate change, a leading symptom) and the extent to which the assessment recognises we are a sovereign currency issuing nation.
Honestly, they should just keep the deductibility at 80% or 50%. I think that 0% deductible was a bit much and would have caused some issues but keeping it at 50% or 80% deductible would still keep that incentive for new builds and help to even the playing field between owner-occupiers who can't deduct any interest and investors, which was the intention of the policy, especially in the absence of any other asset tax. The fact the government won't even consider this as an option is somewhat irritating.
And yeah, the brightline tax exists but it may as well not exist given how easy it is to avoid and how limited the pool of people it captures is.
"... to even the playing field between owner-occupiers who can't deduct any interest ..."
Nailed it.
At 100% deductibility, the rentier class get an unfair economic advantage over OOs. Other countries have figured this out and have done something about it - most usually by allowing OOs to claim some of their interest as deductible. Want more evidence? This is the reason why FHB are buying a rental property before they buy a home for themselves.
Not so NZ.
We're still being conned by the "Businesses are able to claim 100% and being a LL is a business" nonsense. Real businesses that provide rental accommodation are set up as real businesses and are subject to business taxes and oversight. Not so the landlord business in NZ.
Have I mentioned how our massively antiquated tax system is holding NZ back?
The other major challenge for first-home buyers (FHBs) is the requirement to accumulate a substantial deposit, often sourced from taxed income, which can be as high as 39%. This is becoming an increasingly difficult feat with each passing year.
On the other hand, individuals who had the advantage of purchasing property when prices were more reasonable can leverage the equity from their homes. This allows them to effectively have a large deposit to outcompete FHBs at auctions, without the need to save this amount through taxable earnings.
And then as discussed above, they can fully deduct the interest on the mortgage of the rental property they've acquired. Where they can potentially stand to make a considerable profit from capital gains upon selling (untaxed), or they can use the untaxed equity to invest in additional properties. It's a scenario where it's both feasible and common to avoid paying any tax whatsoever—a situation that is virtually unattainable in any other line of business.
Which is why when people claim they're "businesses" I cringe.
If structured well, a property investor may never pay tax. Excess deductions are carried forward in the early years, and by the time they're more or less extinguishing these carried forward losses they'll probably be ready to rinse and repeat by leveraging another rental.
Here's an article:
https://www.nzherald.co.nz/business/how-much-tax-do-property-investors-…
keyword - voting. It seems silly that the young are either too disengaged to care about voting or feel the weight of their vote is essentially worthless so why bother. On a large scale, they have the power to enact change, the task however is how we bring them to the realisation that voting is important and necessary to ensure their voice is heard.
This is just so wrong. Owner occupiers don't pay any tax on the first place on the return from the property (which they effectively rent to themselves). So they effectively get everything deducted regardless of the size of their mortgage - part of the massive advantage they enjoy over renters and, indeed, landlords.
Renters haven't "figured this out" because it's total bs, they will clearly pay more tax owning a rental than owning their own home, which anyone can figure out with a few moments' thought. The reason some people buy a rental first is because they can't afford to buy in the city they live and work in, so they buy a rental elsewhere and wear the tax losses because they are hoping for capital gains.
Yes some other countries have also given owner occupiers the ability to deduct mortgage interest from their unrelated income which is appalling policy, effectively a massive government hand out to rich people who borrow - but popular because owner occupiers dominate voting and, as demostrated here, few of them think through things enough to realise that they aren't actually owed anything.
Meanwhile renters pay full income tax, plus a chunk of their landlord's income tax. They are the ones who need tax relief, not homeowners.
I can see your point there, how housing is treated by our tax policy compared to other asset classes isn't ideal, to say the least.
The main appeal of the interest deductibility policy for me as I touched on above was its potential to encourage the construction of new homes rather than the acquisition of existing ones. At the heart of the housing crisis is a lack of supply (a situation exacerbated by an unsustainable immigration rate, though that's a separate issue...). People buying existing homes doesn't do anything to help create more supply, it just pushes the market up and locks out FHB's.
Any measure that promoted the development of new properties was beneficial in my eyes, maybe there is a better way of incentivsing that but the new government hasn't proposed anything like that at all, and it's unfortunate that we're abandoning that incentive by eliminating the policy rather than modfying it or keeping a portion of it in place to keep that incentive rolling.
Sorry, HGWR. I am right and economists worldwide agree with me.
I'll try to explain. (Sorry to other economists as I make this simple and skirt around the complete maths that only re-enforces my point.)
Consider a rental property valued at $1m that can be rented at $750 per week.
The economic cost (and value) to the renter would be the rent at $750 / week.
Likewise, the economic value to the OO is $750 / week - the same they could pay in rent for the same house. This is the key to understanding the maths.
$750 / week is $39k per year.
The OO has paid $200k as a 20% deposit and is paying some $41k in interest in the first year ($31k in the 15th year) on a 30 year mortgage. (See https://www.interest.co.nz/calculators/full-function-mortgage-calculator). Let's pretend the 'investor' does the same (as so many do).
Focusing on rents and interest alone (and ignoring inflationary effects to keep the maths simple) ...
The OO's net economic benefit in the first year is a $2k loss being: rent saved ($39k) less interest paid ($41k).
At first glance the LL's net economic benefit appears the same, $2k loss being: rent earned ($39k) less interest paid ($41k).
But the LL gets to carry the loss forward to write off against future tax bills !!!
Can the OO do this? NO - They can not!
But I've just used one expense: interest.
Include rates, insurance, maintenance, etc. and the loss that the LL carries forward is way bigger than $2k.
Thus even when the LL is cash flow positive - they're still not paying tax on the income as those carried forward losses ensure that their 'taxable profit' is zero but the 'tax free cash profits' are rolling in. Add in the tax-free capital gains that both the OO and the LL enjoy and you can see the that poor renters are right royally screwed!
(Note I mentioned in another comment - responding to an assertion that '7 years' is a magical number - that should the LL sell at the time their carried forward losses are all used up the IRD will take a very keen interest and the LL will be facing a extremely difficult 'please explain' from the IRD. There will be many LLs facing these questions when they sell - even if they've held for 30 years!)
The ability to carry forward 'business losses' is the main reason for why the LL wins out over the OO - but there are other more subtle ones that can have a huge effect.
Obviously my example is hugely simplified and a fully worked exampled including inflationary effects, taxes, etc. becomes more complex (and enlightening!). Note also haven't even mentioned interest deductibility that even further skews the numbers in favor of LLs. I've talked to many 'property gurus' that do not have spreadsheets that provide accurate answers - instead they 'wing it' using rough numbers that are always, without exception, wrong. Also, somewhat topical at present, are the effects of a CGT and why I believe both the OO and the LL should be paying CGT so the poor renters don't get right royally screwed by our tax system!
But the fact remains - LLs have an economic advantage over OOs and it is for that reason more mature tax systems address this imbalance.
I can't believe you wrote that much, that smugly, when you're still completely wrong.
The landlord pays tax on the $750/week, the owner occupier doesn't. If the landlord is given a full deduction it brings them in line with the OO's benefits - anything less and they are worse off. (This does assumes landlord's deductability is ring fenced to rental income - which it is under any sensible tax system).
Your claim can be easily tested by imagine an owner occupier in your hypothetical $1m, $750/w property. Versus a landlord who owns one such property, whilst renting in another identical property themselves. According to you, the renter-landlord has an unfair advantage. Well, let's see:
Services consumed: for OO, one home. For renter-landlord, one home. Score: equal
Services provided: for OO, one home. For renter-landlord, one home. Score: still equal
Gross rental income / expenditure: for OO, 0, for renter-landlord 750-750 =0. Score: still equal.
Tax paid on income from property: for OO, 0. For renter-landlord, tax on 39,000 less deductibles. Score: an obvious win for the owner-occupier.
The renter-landlord is never better off, and in any situation where deductibles are less than 39,000 they are worse off.
Please explain why I'm wrong (hint: I'm not) or correct your post above.
https://www.odt.co.nz/opinion/who-pays-tax-when-it-comes-interest-deduc…
Explains it pretty well
"keeping it at 50% or 80% deductible would still keep that incentive for new builds" unfortunately it doesn't work like that. The degree to which you can deduct interest creates a sliding scale of the price you can sell new builds in the secondary market... flowing through to new build sale prices, profitability, and therefore quantity supplied.
sometimes I wonder if it's time to ban landlords and rental altogether.
people kept argue rentals and landlords are not business, then just kill the idea of it. landlords are seen to rich. they don't have to deploy their capital into residential market, they can deploy elsewhere. and those who needs a roof over their heads can seek help elsewhere.
Damien Grant on Grant Robertson's legacy
https://www.stuff.co.nz/politics/350222404/how-do-we-judge-6-years-gran…
Let me help you.
You said. "..Grant gives no space to the actions of the RBNZ...."
You missed this. If indeed you read the article. It's a reasonable chunk of Damien Grant's article. I'll paste it here for you.
".......Speaking of the Reserve Bank. New Zealand once led the world in the integrity and independence of our central bank. It was understood that the Reserve Bank governor was above the political pressures of the day and would focus only on monetary stability.
Between them, Tweedledee and his mate managed to destroy public confidence in this arrangement. Watching the Finance Minister and the governor of the Reserve Bank giving joint press conferences made it clear that the goal of monetary stability would be subordinated to the political economic needs of the moment.
The inability of either man to comprehend the damage this did to the market’s perception of our monetary settings is remarkable. They either did not care, or did not know; so caught up in the moment that the wider significance of their actions escaped them......"
I completely understand that that narrative fits perfectly with your cognitive and cultural biases. Those bias are yours alone.
But it is not fact. Nor is it reasoned. Nor is it true. Such utterances are typical of Grant's style and appeal only to those that never examine them. He's after "likes" from as many fools as he can collect. He is not interested in being honest, nor trustworthy, nor balanced. Post the article to your MySpace page. I'm sure you'll get plenty of "likes" that will make you feel good - as it does him.
Yes that is his procedure. He is as clueless as Grant Robertson when it comes to numbers. Robertson was and is a loser, almost everyone knows it now. He even goes so far as to blame his utter failure on his supposed allies (the unions) being homophonic. I’m sure they love that accusation. Truth is, he was useless and should never have been near leadership or the money. The only good thing is he is gone. Just about the only good thing that the unions have ever done (and I unusually support them in that) is make sure that idiot didn’t have even more power to destroy things that he already did.
The % of Super working is now over 20%, 5x what it was 2 decades ago.
Not because they want to keep working.
Edit: https://www.stuff.co.nz/nz-news/350218070/retirees-work-80s-90s-insuffi…
ex Kiwiblog comment today
"Damien Grants point on Gross Debt and Robertsons contrived Net Debt is important.
Robertson is a swindler by referring to Net Debt.
Net Debt takes into account the Cullen Fund, which of course is to fund future retirement costs. But it is only proper accounting to count that asset if you also count the future liability. The unrealised future liabilities of our aging population balloon over the next 3 decades. A massive deficit is looming according to Treasuries own numbers. Their projections out to 2060 make your eyes water. We will literally go bankrupt under a status quo scenario. (even a Nats/ACT govt will take us there unless they soon announce a major change to how we tax and grow debt"
Oliver Hartwich on Damien Grant's legacy
https://www.stuff.co.nz/business/opinion-analysis/300089324/the-vexing-…
Grant, the owner of Waterstone Insolvency, is a colourful figure. Not only is he a successful entrepreneur and an opinionated columnist for Stuff, more importantly, Grant is also an ex-criminal convicted for credit card fraud and his involvement in a share-trading scam.
Remind me why I should read something from this guy? Is it because he's old and white and vis aligned with ACT?
Grant served prison time for fraud and credit card offences, the last of which he was convicted of in 1994.
He has 34 convictions for dishonesty offences, the first involved offending for which he was sentenced in December 1987 and February 1988, at which point he was 22 years old.
A second tranche of offending occurred about six years later and has been described as "share theft frauds". It involved more serious offending with the total value of the frauds in the hundreds of thousands of dollars and resulted in convictions for theft, forgery, personification by fraud, altering a document, conspiracy and other related charges.
You're missing all of the picture & making up stuff. I made no reference to either authors being "left or right", you have. it's quite legitimate to have my own & your own opinion on an author's credibility - refer all the ad hominem anti grant comments above, you didn't accuse any of them of double standards because they confirm your own bias.
I've read some of his pieces before and I thought they were drivel. Before I waste more time on him I'm asking why is he given a voice, it's a genuine question.
I mean Golriz was absolutely ripped to shreds on here because she shoplifted, this guy seems to have been convicted of multiple crimes over many years, it doesn't say much about his character.
What is it about him that merits someone taking the time to listen to him?
I wonder whether Willis will try to outdo Ruth Richardson? ... (Rushing to return to surplus is about the dumbest thing they could be doing at this point of the economic cycle. But they have 'form' for doing really, really dumb things. Why? Because ideology trumps decades of economic wisdom.)
We have three choices to keep the economy going:
- govt deficit spending (govt pump money in)
- increase private sector debt (banks pump money in)
- get the $400bn in our bank accounts moving more quickly around the economy while at the same time bringing our trade deficit into balance (to reduce overseas savings in dollars)
My view is that we make strategic use of (1) to achieve (3).
To achieve (3) we probably need a CGT, inheritance tax, land tax, a much more progressive tax system, more generous state pension and top quality subsidised aged care services. I would also bring corporate tax rates and GST down. Still not sure how we encourage domestic demand without blowing the trade deficit (given existing trade deals).
Seems to me that your suggestions increase the flow of money in the economy, not the amount of production. Yes, of course they will stimulate some activity downstream, but will that outweigh the inflationary effect?
Meanwhile - we could encourage actual productive activity by turning off the cheap debt tap that encourages talented people to devote their energy to speculation, rent seeking and unproductive credit-hoovering. Or else to head overseas, fed up with their salary being leeched on by the above.
But you want to turn that tap back on - *why*? Do you not see how disastrous the medium and long term consequences would be?
"Seems to me that your suggestions increase the flow of money in the economy,..."
That's pretty damn hard to do when the bulk of the debt (money) is locked up in private mortgages. So only new debt will have the effect required. But if that new debt also gets locked up in private mortgages (or rich people's toys and vanity projects), the effect will be short lived and we'll be back to where we are now in no time.
When people say, "we have a housing problem", they really don't understand just how big a problem it is! Restoring 100% of interest deductibility so landlords to lock even more money away on thoroughly unproductive assets only makes it far, far worse.
Fair questions. increasing and speeding up the exchange of money between NZ people and businesses generates more work and economic activity, yes. This will drive increases in production and productivity, BUT only if we get the tax and policy settings right to prevent money being quickly sucked up by rentiers, and change investment incentives away from property and speculation. Not sure what you mean by 'turning the tap back on'? I would go for increased Govt investment to achieve the change, and support private debt (mortgage) reduction if that's what you mean.
As a current small business owner, and with two prospective businesses in the works, I agree with much of this. I have money available to kick off one or both of those prospective businesses, but I hesitate. Currently money on TD at least stands still in real terms. The alternative is investing in new businesses (always risky) at a time of increasing hardship and plummeting demand amongst customers and a govt apparently determined to support the inflated value of our housing and other assets to the detriment of business development.
In fact, the more I think about it, the more asset value inflation beyond anything 'reasonable', seem to be what bedevils us in NZ, and much of the anglosphere, if not further afield. When I look at a small business, I'm looking at a multiple of two to three times EBITDA. That means, if a business costs $450k to buy or setup, I expect it to make $150k p.a. Or if it's making $150k, I expect to be able to buy or sell it for $300-450k (the latter only if its operating under management). Cf. that to the multiples on stocks (admittedly much more liquid etc.) and on houses.
@Jfoe, how do we get asset values back to something that more closely relates to income streams? And gets that money moving in the economy again, instead of being locked up in unproductive, over-valued assets?
The degree of asset price over-valuing seems to depend very much on the tax and policy settings in each country - i.e. how much the 'rules of the game' incentivise the property ponzi. Sweden, Aus, UK, Canada, Ireland etc all share some similar characteristics. How to deflate the property asset bubble (and corresponding private debt bubble) is a critical question.
The problem is that half of kiwis are home-owners - so it is an electoral nightmare. Every election loss in the last 20+ years has happened when house prices are falling (or have fallen in the previous 6 months). I think the answer lies in some kind of debt forgiveness - perhaps alongside a Land Tax / and the introduction of a really tight CGT introduction (gains above inflation taxed very heavily). I would see the state offering to buy the land under owner-occupier's houses at a % of the RV. The land would then be leased back to the owner at a peppercorn rent. The State would only transfer money to pay off all or part of a mortgage (or potentially to top up a kiwisaver). The macro impacts of this change would be significant - land values would crash, disposable income for some households would nearly double, land bankers would go bust, bank profits would collapse... it would be a huge adjustment. It would need some careful planning.
jfoe,
To achieve (3) we probably need a CGT, inheritance tax, land tax, a much more progressive tax system, more generous state pension and top quality subsidised aged care services.
I don't know your age, but I doubt you will long enough to see such a significant change to our tax system. A well constructed CGT would make the system fairer, but would take a long time to generate a substantial amount. By well constructed, I mean with an annual tax-free amount, allowance for carryforward of losses and with the tax based only on an inflation adjusted figure.
Why not introduce stamp duty on all property transactions? In the UK, this raised some Sterling14bn in 2021/22. Pro rata, that could produce some NZ$1.50bn and would do so quickly.
I agree that our current system is not fit for purpose, but I see huge resistance to change.
"Keeping to an economy that needs government spending to drive it will end badly."
Keeping to an economy that needs ever increasing amounts of private debt created by banks will also end badly. And we've been doing that continuously for the last 20 years. At least the government has run surpluses in a few of those years.
So what's your plan? ;-)
On a more educational note to explain what I saying, at this point in the economic cycle, reducing government spending will make the current recession far, far worse. John Maynard Keynes made his observations to this effect after the Great Depression in the 1930s. Governments that followed his recommendations - NZ being one - came out of the great depression quite quickly and/or saw no depression at all! Prior to this, neo-classical economic theory held that businesses would seize the opportunity of lots of cheap/idle labor and ramp up. This didn't happen - the concentration of wealth was such that the rich just sat back and watched. (Funny though - even now neoclassical economic theory still sits well among the great unwashed and governments frequently get voted in to make things worse because that's what ignorant voters think is the right thing to do.)
That's exactly what the USA is doing and you don't hear much criticism about what they are doing. They are adding 1 trillion to their debt every 100 days. That's 10 Billion every day and their debt to GDP is at 120%. We are at around 35%.
Maybe National is trying to first make Labour look as bad as possible in their early days and create a recession with all of their cutbacks, then create a turn around story with the use of debt. National's good at borrowing too. They borrowed a huge amount in the years after 2008. It was 200million a week for a very long time and it was barely talked about or criticised at the time.
Both are frivolous with borrowing. But I'm not entirely sure why National increased debt from $10b to $60b. People claim it's because CHCH had an earthquake, although the RBNZ in 2015 estimated a total rebuild cost of $40b ($16b each for resi/commercial and $7b for infra). By September 2015 $26b had been paid out by insurers. So at most $14b for the tax payer, where did the other $36b go?
https://www.rbnz.govt.nz/-/media/project/sites/rbnz/files/publications/…
Govt debt increased under National because private debt growth stalled and Govt had to step in and invest to keep aggregate demand up. Between 1992 and 2008, private sector debt gradually replaced Govt debt - the latter depended on the former.
Worth noting that Govt did not run a surplus between 1952 and 1988.
I expect some absolute shockers. I also suspect that the net savings that Govt actually achieve will be much lower that expected. They might make a few billion dollars of savings, but Labour left some seriously under-funded services that are facing significant inflationary pressures. Disabilities is a good example - that budget has required top-ups most years (for years), yet Labour's last budget set it at cash standstill for the next 4 years!
The impacts also flow downstream to councils. Our local board in Auckland will face 50% cut in their budget. This is partly driven from the Government's announcement that it will not allow Auckland to continue to raise money through the local fuel levy and fund things like local ferry electrification because that is not MOOOAAARRRR ROADS (this is a local public transport service not the big interislander).
The council now has to find that money from rates and local budgets so services will get cut. In practice this means less bins, if playgrounds get broken they will not be fixed, no budgets to maintain parks and community facilities. It's all there in black and white. The exact same thing happened with the Tories in the UK, libraries closing, disabled services cut, facilities for children cut ...
As sectoral balances illustrates with the accounting identity (S-I) = (G-T) + (X-M), the governments financial balance and the private sectors financial balance are a mirror image of each other and so if the government has a budget surplus then the private sector must run and equal financial deficit. This means that households will either have to spend their savings or increase their own debt.
Budget surpluses don't sound so wonderful then do they? If the government gives tax cuts (T) but then also reduces its spending (G) by an equal amount then the private sectors domestic balance (S-I) doesn't alter and after accounting for the foreign sectors balance (X-M). https://en.wikipedia.org/wiki/Sectoral_balances
Here what I think could happen.
- Government runs a surplus
- Recession gets worse
- RBNZ drops the OCR so people & businesses can take on more private debt
- People & businesses are forced to take on more private debt
- Overseas lenders become concerned. Debt is debt and it doesn't matter much to them whether it's private or public
- The NZD tanks in response.
- New overseas lenders will lend at the much lower NZD
- ... The can has been kicked down the road but NZ Inc has just taken a massive step backwards (again)
Sorry for the black humor. (That summary is given with tongue firmly in cheek. Or is it?)
I find all that stuff to be utter rubbish. There is no way the total debt would be exactly the same if tax rates were say 10% with the government racking up trillions in debt. We would all just spend our tax cuts on crap and be just as badly off but also have a failing economy.
The government plans to finance our tax cuts by reducing the governments spending by an equal amount but as sectoral balances illustrates this is financially impossible and this is all because politicians incorrectly believe that taxation finances spending. We pay our taxes with the money which the government must first spend and if it reduces its spending then we also have less money to pay our taxes with anyway.
The quality of the last goverment's outgoings were in my view, shameful. I realise this may not be the case if you were a recipient of their largess, however, that is democracy in action. Each side gets a go every so often & it will be interesting to see what this lot do. Early days I know, but already the bleeding has reduced, which is one of the main jobs of ER upon the arrival of the patient. The good ship NZ is listing badly to the left [port] & all we've done so far is close off the leaking areas. Next we'll need to pump out the sea water before we can muster any form of positive action. This could take the first full term of this govt. The trick here is to try & keep as much of the new infrastructure in place for as long as possible. Will they poop in their own nest? Eventually, probably. But let us hope we can steady the good ship before heading for calmer waters, rather than pretending to govern when they didn't have a f........ clue what they were doing. Remember, they were pretty bad, if not the worst govt this nation has ever had & history will will judge them so.
BUT i don't think this government IS going to fix what the last government did, i to agree with you that the results of the last governments spend were woeful. BUT because of the rush to reduce staff. the redundancies alone are going to cost over 100 mil and a much cheaper option (which businesses use) is a hiring freeze and a non-replacement of positions to reduce the amount needed to pay people out. there are many 65+ government employees that have put their hand up to be made redundant and collect a lotto ticket payment into retirement, this government is also overspending. in areas already and it looks like we have another finance minister that will never balance the books
hope you don't require any type of government service in the future, i.e there will be less police on the road as they are in the office doing paperwork, those so called back office staff in certain locations free up front office staff to get things done, sure there are wellington office jobs that can go but when government departments cut back you will be surprised how few of those are let go and instead it is positions all over the country and service declines because of it. A classic is corrections have to reduce spend by 100 Million but we want to put more people in prison so how do you achieve that
What services have improved over the last 6 years with such an increase in public servants?
You obviously just read the headlines without really putting in muchthought as to what you are saying.
Has crime decreased with the increase in "back office" staff as an example?
What "upcoming tax cuts"? There's a huge amount of talk about delaying them. And even then, most people will get < $10 per week, and many will get nothing or less..
Oh. Wait. Sorry. You're a struggling LL praying for the re-introduction of 100% interest deductibility?
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