Saturday, July 20, 2024

Budget to get finances ‘back on track’ says Minister

Finance Minister, Nicola Willis says the Budget will deliver urgently-needed tax relief to hard-working New Zealanders while putting the government’s finances back on a sustainable track.

The Finance Minister made the comments at the release of the Budget Policy Statement today, setting out the Government’s Budget objectives.

“The coalition Government intends to reduce debt, reduce government spending as a proportion of the overall economy, and get back to surplus,” said Ms Willis.

The Minister said the priorities for Budget 2024 are to: 

  • deliver meaningful tax reductions to provide cost of living relief to New Zealanders who have seen no change in personal income tax rates and thresholds since 2010;
  • identify enduring savings across government departments and agencies;
  • improve public services by focusing new spending on priority areas including health, education and law and order;
  • keep tight control of government spending while funding a limited number of high-priority Government policy commitments and urgent cost pressures that cannot be funded through reprioritisation; and
  • develop a long-term, sustainable pipeline of infrastructure investments.

“Tax reductions will be funded within the operating allowance through a mixture of savings, reprioritisation and additional revenue sources,” Minister Willis says. 

“Funding tax relief in this way means we won’t have to borrow extra to provide tax relief and we won’t be adding to inflationary pressures.

“As things currently stand inflation is pushing low and medium-income workers into higher tax brackets, meaning they are paying more tax.”

The Minister says the operating allowance – the amount of money allocated to fund new spending and revenue initiatives – will be set at less than $3.5 billion for the coming Budget.

“The exact amount of the operating allowance and the timeframe for a return to an operating balance before gains and losses (OBEGAL) surplus will be specified in the Budget after Cabinet has had the opportunity to consider the updated fiscal forecasts and projections that are currently being prepared by the Treasury.” 

She said the Budget Policy Statement charts a responsible, moderate course correction for New Zealand.

“To assist with the preparation of the Budget Policy Statement, the Treasury has produced a forecast scenario. The scenario suggests that the economic outlook has deteriorated since the December Half Year Update and that economic activity has been weaker than previously thought.”

“This reinforces the importance of bringing government spending back under control by embedding a culture of responsible spending, restoring fiscal discipline, right-sizing the government’s footprint and improving the efficiency and productivity of spending.

“This will not be achieved in a single Budget. International evidence is that reducing deficits is best done over the course of several years by focusing on structural reforms to expenditure and revenue settings.”

The Finance Minister says the Government’s overarching goals for this term of office are to build a stronger, more productive economy, deliver more efficient, effective and responsive public services and get the government’s books back in order.

“Budget 2024 begins that process by bringing government spending back under control, delivering responsible tax relief and focusing on the economic and fiscal fundamentals that make the greatest long-term difference to the quality of life in New Zealand,” said Ms Willis.

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