Monday, July 15, 2024

Budget documents released

The annual proactive release of Budget documents took place today.

Documents are normally released eight to 12 weeks after the Budget as a bundle in order to give the documents context, and to streamline responding to requests for information.

The documents reflect the full process of producing a Budget with many ideas and proposals considered before the final package is settled on.

“Budget 2023 struck a balance across four priorities. Easing cost of living pressures, investing in recovery and resilience, strengthening public services like health and education and fiscal sustainability, including driving down inflation,” said Finance Minister, Grant Robertson.

“In addition to challenging economic conditions, two significant events impacted the preparation of Budget 2023. The Auckland Anniversary Weekend Floods and Cyclone Gabrielle hit in the middle of preparations and there was also a change of Prime Minister, and as a result, a change of priorities in some areas.”

He said the events sat alongside the Government’s goal of setting a path towards surplus and the ending of COVID emergency funding.

“As a result, many trade-offs, reprioritisations, savings and changes occurred during the process.

“As we said earlier in the year, we would look at all possible options for dealing with the circumstances, including a range of tax options in the Budget 2023 process. But Cabinet ultimately made the decision not to proceed with most of them.

“Work was undertaken on a range of proposals for a tax switch, particularly based on a revenue neutral switch that would have seen a tax free zone created of up to $10,000, funded by increased tax on the wealthiest New Zealanders.

“This work began in 2022, but ultimately the decision was made not to go ahead with it given the significance of the change in difficult and highly uncertain economic conditions.

“Cabinet did agree to raise the trustee tax rate to align with the top tax rate, as was announced on Budget Day. This change will bring more fairness and equity in the tax system. It brought New Zealand into line with other countries and removed the risk of trusts being used to avoid paying tax,” Mr Robertson said.

He said the Government also considered a levy on the excess profits of banks in order to assist with the rebuild costs from the North Island weather events.

“There are many pros and cons with a proposal like this, but ultimately we did not progress this idea as there was enough space in the Government accounts to manage the recovery and rebuild without it,” he said.

“Economic conditions have continued to make for difficult times for many New Zealanders since the Budget. The Budget forecasts that the Treasury independently arrive at were finalised in April. The latest set of government accounts shows that government revenue forecasts are not being met. On the other hand Government spending is under forecast, and is set to decline over the forecast period.

“Regardless, we are looking closely at how we respond to the changing forecasts to ensure we achieve the balanced approach that we set out at the Budget to support people to ease cost of living pressures, maintain strong public services and stay on a path to surplus. This includes continuing to look for further savings and efficiencies in our programme.

“There is a challenge for all political parties as they put together commitments for the election. There is no room for unfunded promises, such as National’s tax cuts. In order to maintain the public services that New Zealanders rely upon, like health, education and housing, there needs to be targeted investment. Now is not the time for unfunded tax cuts, but rather for careful, balanced management of the books,” Mr Robertson said.

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