NZ Election: All the things ACT will cut or abolish to pay back the COVID-19 debt

ACT says if it controlled the purse-strings, the country would be $76 billion better off by the end of the decade.

But its plan comes with massive cuts to benefits, Working for Families, education spending and KiwiSaver subsidies.

Leader David Seymour says it's "not fair" a future generation of workers will be lumped with paying back the nation's debt, estimated to reach 55 percent of GDP in the coming years - high by recent New Zealand standards, but still lower than the situation many of our OECD peers were in before the COVID-19 pandemic.

"Labour said they want to put children at the heart of everything, but they're handing them a $140 billion bill for their current spending," Seymour told Newshub.

"ACT's plan will reduce total debt by $76 billion over 10 years. That is the most important gift we can give those children currently at intermediate school who have no say in what's going on and will otherwise be left with Labour's bill."

The Government borrowed big to ease the economy through the lockdowns and the global economic shock of COVID-19. In the June quarter, GDP fell a record 12.2 percent. Job losses were mitigated by the wage subsidy and spending returned to near-normal levels in the following months, after the virus was temporarily eliminated from our shores. Most economists are picking a record bounce-back in the September quarter, possibly as high as 16 percent. 

But it's going to take longer than that to pay back the debt. Seymour wants to cut GST and income taxes, which would reduce the Government's tax take.

"The ACT Party would reduce GST by five points for one year to stimulate the economy, reduce the middle-income tax rate from 30 percent down to 17.5 percent so people keep more of their own money," said Seymour.

ACT's alternative Budget estimates the cost of dropping GST for just one year will cost $6 billion, and the income tax change $2.7 billion in the first year, rising to nearly $5 billion a year by the end of the decade.

ACT's plan instead relies on keeping debt down through massive cuts. A number of schemes would be completely abolished, including: 

  • the Winter Energy Payment
  • KiwiSaver subsidies
  • the first-year fees-free scheme
  • the Best Start payments for families with newborn babies
  • research and development tax credits and growth grants
  • the Provincial Growth Fund
  • Callaghan Innovation "etc" 
  • the One Billion Trees programme
  • film and racing subsidies.

Govt personnel numbers would be cut 10 percent, leader salaries cut 20 percent, Working for Families increases cancelled and benefits trimmed back to their pre-pandemic levels.

"If we want to put children at the heart of everything, we need to stop giving them the bill for our current carelessness as a country," said Seymour.

Labour has proposed a new top tax rate of 39 percent for income above $180,000. That would raise about $550 million a year. The Greens want wealth taxes, a capital gains tax and more tax brackets for high-earners that kick in at lower income levels.

National is yet to release its tax plan, but has promised no increases to income tax if elected and wants to link tax brackets to inflation to prevent fiscal drag. ACT's plan notes its cutting of the middle tax bracket might actually generate more money than it expects due to fiscal drag over the next decade, suggesting the party has no plans to link them to inflation.