No Budget tax cuts as Govt focuses on debt
Tax cuts will be off the table at this year's Budget as the Government focuses on paying down debt, the Finance Minister says.
Finance Minister Bill English used his speech to the Wellington Chamber of Commerce to set the scene for this year's Budget on May 26.
In it, he said the Budget would put an emphasis on paying down its debt, with a target of reducing it to 20 percent of GDP by 2020.
But what won't be in the picture are tax cuts. Mr English says the Government's priority is to pay back debt; however, he left the door open to possibly future cuts.
"We are still committed to cutting personal taxes over time, and will consider these -- either in Budget 2017 or after -- as and when the fiscal situation improves."
Green Party finance spokeswoman Julie Anne Genter says not including tax cuts this year was the right thing to do.
"It's good that the Government has realised that tax cuts aren't the kind of medicine our economy needs right now," she said.
"National's tax cut bribes have historically benefitted people on high incomes, and come at the expense of fixing problems like child poverty and the housing crisis."
She believes some tax changes could be made including shifting the burden from families and small business to big polluters and housing speculators with a carbon tax and capital gains tax.
Mr English also says the Government will spend more money than it planned to in this year's Budget, taking some funds earmarked for 2017.
The Government is still aiming to bring down net debt from 25 percent of GDP to around 20 percent by 2020.
Mr English says spending pressures brought on by higher-than-expected population growth and opportunities to invest in public services have spurred the Government to rearrange its spending allowances.
The caps had been set at $1 billion of new spending this year, and $2.5 billion for Budget 2017.
Instead, some of the money budgeted for next year will be spent this year and also on paying down debt to reach to 2020 target.
The capital spending allowance, used for one-off investments in infrastructure, will be lower to help reduce debt.
"However, a significant amount of additional investment will be funded by reprioritising within the Crown's large balance sheet."
Mr English believes these changes will mean spending will be cut by $1.2 billion over the next five years.
Mr English says during his time as Finance Minister, he's tried to make the Budget less of a centrepiece for each year, saying the Government spends most of its money throughout the year.
Significant help for Auckland's housing problem doesn't seem to be forthcoming in the Budget, with Mr English saying it's not something "extra money" can solve.
He agreed with Reserve Bank Governor Graeme Wheeler who yesterday said he was concerned at the risk of house prices rising rapidly -- something which needed to be contained.
The Government still maintains supply of houses will help ease prices.
"What makes building a house so difficult is principally the planning rules set by councils that restrict, delay and raise the cost of development.
"Very little low-cost housing is being built. Just 25 years ago, around a third of new houses were priced in the lowest quartile of overall house prices. Today it is less than 5 percent," he says.
Current rates of house building in Auckland sit around 9500 per year, but on average there needs to be 13,000 each year for the next 30 years to meet demand.
He noted the New Zealand economy seemed to be doing better than some other international ones.
Though the country's main export, dairy, was "struggling", other industries like tourism, beef, wine and IT have been increasing.
Labour finance spokesman Grant Robertson says the Government should be investing more to stimulate the economy.
"Bill English has signalled a Budget money-go-round that fails to meet the need for investment to grow the economy. He plans to cut funding for capital projects now, just as the call for investment grows.
"Labour believes the Government should be investing in much-needed essential Auckland infrastructure such as housing and transport, and support the regions to develop high value industries and decent work," he says.
He says the Government has refused to meets targets of debt reduction in the past, and there's little to suggest that will change this time around.
The Government has already made a number of pre-Budget announcements including extra funding for Government drug-buying agency Pharmac, changes to the provisional tax system, money for emergency housing across the country and tourism infrastructure.
Prime Minister John Key has previously said there'd be no major surprises in the Budget.
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