There will be no surprises in Budget 2024 as the Government will be focused on reducing public spending and cutting taxes, Prime Minister Christopher Luxon said on Wednesday.
In a speech to the Auckland Business Chamber, the Prime Minister said there would be more money for health, education, and law enforcement in the Budget.
But there wouldn’t be many unexpected announcements or expensive new initiatives.
“I’m not expecting this year’s Budget to be a surprise. And that’s exactly the way it should be. We will do exactly what we said we would do,” he said.
“No bells. No whistles. Just the basics done brilliantly to rebuild the economy, restore law and order, and deliver better public services”.
Luxon's speech contrasted against the newly-released Australian budget which lifted net spending by AU$24 billion and will shift the Federal Government from a surplus to deficit.
New Zealand’s Budget won't have that kind of spending as the Crown finances are facing a $9 billion annual deficit and are not likely to return to surplus until 2028.
The Prime Minister said previous big budgets had resulted in higher taxes, more debt, and an economy dependent on government interventions.
“It might feel good at Budget time, but there’s absolutely no kindness in spending up large, only to see businesses close and families go without as the consequence of inflation”.
While the Coalition has promised more prudent budgets, it has also committed to tax cuts and given itself permission to add up to $3.5 billion in new spending.
Finance Minister Nicola Willis has said the operating allowance would be below what Labour had forecast but may be higher than the $3.2 billion put forward in her party’s fiscal plan.
This has been criticized by some economists who think the Government should be reducing operating allowances and using spending cuts to reduce the deficit — before cutting taxes.
Luxon reiterated Willis’ view that bringing down public spending had to be done gradually to reduce the risk of stalling the already fragile economy.
“We could throw the whole country into austerity. I just don't think that would be a good thing [but also] we can't carry on the way that we've been going”, he said after the speech.
“I think we've found a third way through, where we can actually get the balance right of that investment in frontline services, get the bureaucracy down, and then have a plan for the future”.
Five point plan
The Prime Minister said five things were needed to set the economy up for future growth: world-class education, more tech research, better infrastructure, less regulation, and stronger international connections.
Luxon said education was the thing that had worried him the most during his three years as a politician and it needed to be a focus for his government.
More science and technology research was needed to drive the development of higher value products and services which New Zealand can export around the world.
Modern and reliable infrastructure, such as the Waikato Expressway, would have economic, social, and environmental benefits.
Reducing regulations could encourage more competition in the NZ economy and strong international connections would lead to more trade and foreign investment.
“If we focus on those five things, as government, business, and communities, we can change the quality of life in New Zealand. And there's no reason, on the 200th anniversary of the founding of this country, that we shouldn't be the leading small advanced country on Earth”.
“But we've got a bit of work to dig ourselves out of the hole around inflation in particular, and then we've all got to focus on driving for growth and economic productivity”, he said.
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