Pundits have dubbed this year’s Budget various things, all describing something bland or hum drum. It has been called the Beige Budget, the Housewife Budget, in reference to Finance Minister Nicola Willis repeatedly comparing her budget to that of struggling kiwi households, for others it is the No Frills Budget. Whatever moniker sticks to Budget 2024 one thing is certain, there are no surprises. Nicola Willis’ first budget delivers exactly what it says on the label, tax cuts funded almost, but not quite by savings.
According to Minister Willis this is because “What is apparent now as opposed to six months ago, is that the current downturn started earlier, has been deeper, and is expected to last for longer, than previously thought.” This means funding tax cuts was much harder than it would have looked from the other side of the election when she made the promise to deliver them.
The Government now expects to borrow an additional $12 billion over the next four years, over and above its plans, and has delayed its projected return to surplus by a year to June 2028.
From 31 July all New Zealanders will have a little more change in their pockets, but probably not really enough to ease the burden on those already struggling on low incomes. In addition, the tax cuts come with a risk of further fuelling inflation. Minister Willis says however, that downgrades to GDP and lower revenue forecasts coupled with a dramatic decrease in Government spending will reduce inflationary pressure on the economy and even the tax cuts in combination with spending levels could lead to a decrease in interest rates.
There are the significant baseline savings of around $2.5 billion from imposing hard targets on the public sector. In addition, there are “further savings and revenue” from ending multiple programmes implemented by the previous Labour Government where delivery has been hard to measure or where programmes have become so mired in politics, they are nigh on impossible to deliver. Money has also been found via capital review savings and the return of tagged contingencies, but with an operating allowance of $2.4 billion less than Treasury estimates will be needed to pay for cost pressure in the public services, cost savings will have to be ongoing to balance the books.
In terms of new spending most of this is going to health, education and law and order. Other services receiving a boost are transport, defence and disability services.
This is very much a holding Budget. The Government has not been able to cut spending by as much as it would like, because there are some areas where funding is desperately needed, like health and education, where the basic infrastructure is literally falling down.
At the same time the forecast tax take is falling every time the Treasury updates its forecasts. This has left Minister Willis in the position of cutting but not slashing; perhaps this means she got the balance of her first Budget about right.