New Zealand to spend budget windfall on tax cuts and roads
● Conservative government look to cash in on thriving economic situation
New Zealand’s conservative government is planning to reduce taxes and spend more money on building roads and railways as it looks to cash in on a thriving economy.
The budget released yesterday is the ninth for the National Party after it gained power in 2008 and the first under new finance minister Steven Joyce.
The country is in a financial position many others might envy as it decides what to do with rising budget surpluses. Mr Joyce’s plan will involve spending the windfall rather than paying down debt and comes during an election year.
The budget will reduce taxes for most families, saving them an average of NZ$26 (about £14) a week. It will give extra help to low-income earners, with increased subsidies for children and accommodation. Pensioners and students will also benefit.
Mr Joyce said the budget offered a “once-in-a-generation” opportunity to raise living standards for all New Zealanders.
He said: “We have been talking about changing tax rates and returning some of the benefits of growth to families for the last four years. We now finally have the opportunity to do so.”
Also included in the plan is money to rebuild a highway damaged last year during an earthquake, as well as money for commuter rail in Auckland and freight rail elsewhere. There is also extra money to build more prison cells and buy defence equipment.
The economy has been growing at an annual rate of about 3 per cent, thanks to increases in tourism and immigration, a growth rate stronger than in most developed nations. It is forecast to rise to 3.8 per cent over the next two years before moderating.
The government is also planning to continue subsidising big-budget films made in New Zealand, after the success of movies including director Peter Jackson’s Lord of the Ring and The Hobbit series. Mr Joyce said he had misgivings about the fairness of subsidising one particular industry, but recognises it is how the international entertainment industry operates.
The budget plan comes as the National Party seeks to win a fourth consecutive threeyear term during September elections. Polls indicate the party’s popularity has dipped a little since Bill English became prime minister in December, after former leader John Key resigned.
The National Party remains the most popular single party, but liberals see an opportunity to take power at the election by joining forces. Under New Zealand’s proportional voting system, political parties typically need to form alliances to govern.
Opposition leader Andrew Little said the budget plan amounted to an irresponsible election bribe.
He said: “This is a tired government whose only idea left is to splash the cash instead of a genuine commitment to fix housing, health, education and infrastructure.”
The Treasury predicts the government’s operating surplus will increase from NZ$2.9 billion (£1.58bn) next year to Nz$7.2bn in 2021. Although the government plans to spend the windfall, it says debt will still decline as a proportion of the economy because the economy will be larger.