NZ Budget 2024: ‘Tax Relief’ for the ‘Squeezed Middle’ – But Who’s Paying? 7 Experts Follow the Money

Craig Elliffe: Small Cuts, Big Consequences

Honestly, who would want to be Nicola Willis at this point?

The $14.7 billion in tax cuts will necessitate a dramatic rethink on long-term expenditure in New Zealand and the type of public services the country expects. The government’s cutback strategy seems to focus on the next four years, not beyond.

From a broader economic perspective, the hope is that the cuts will aid households. However, this won’t provide significant relief if interest rates remain high. The outlook for 2024 includes rising job losses and a more pessimistic economy.

The tax cuts are spread thinly across many people. We must ask whether $50 or $100 a fortnight will make a significant difference if interest rates remain high and the government’s ability to fund core services diminishes.

If the government continues tightening its belt to fund these relatively small tax cuts, we may end up with poor infrastructure, low wages, and a struggling economy.

One positive aspect of the tax policy is that the government is addressing the fiscal drag issue. Over 14 years of inflation have pushed people into higher tax brackets, diminishing the benefits of salary increases.

Long-term, organizations like the International Monetary Fund and the OECD would have preferred the government focus on reducing debt to achieve a surplus more quickly. These organizations suggest introducing a capital tax, but this budget avoids tackling such significant issues.

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