Transcript: Prime Minister Christopher Luxon's full pre-Budget speech

  • 15/05/2024

Prime Minister Christopher Luxon has delivered his pre-Budget speech.

Luxon gave the speech to the Auckland Business Chamber on Wednesday.

He said his Government was "working hard to reduce inflation and enact pro-growth", adding the Coalition was introducing policies to "end the recession we inherited at the end of last year".

Read the full speech below:

Ka nui te mihi kia koutou. Kia ora and good afternoon, everyone.

Thank you so much for having me here in the lead up to my Government's first Budget.

Before I get started can I acknowledge:

  • Simon Bridges - Auckland Business Chamber CEO.
  • Steve Jurkovich - Kiwibank CEO.

Kids born this year will turn 16 in 2040 - the year we will mark 200 years since the Treaty of Waitangi was signed and the bi-cultural foundations of New Zealand, as we know them today, were established in law.

More than previous generations, they will grapple with a world bursting at the seams with opportunity and, also, uncertainty.

A global economy shifting its weight from the Atlantic to the Indo-Pacific.

An increasingly diverse New Zealand full of both the challenges and opportunities that come from a more multi-cultural society.

And families, businesses and communities forced to adapt and evolve at pace in response to the often-devastating impacts of climate change.

It's an exhilarating time. Because the world is, increasingly, at our doorstep with all the challenges and opportunities that brings to our backyard.

And looking out to 2040, our responsibility is to define the conditions we want to leave for those young Kiwis born in New Zealand today.

It's now our obligation to leave a similar legacy for our children and grandchildren - for that generation who will come of age in the time of our nation's bicentennial.

My vision is that by 2040 New Zealand will be characterised by three achievements.

A more dynamic and productive economy, with higher living standards and more opportunity. A country where Kiwis return home in search of a better life, instead of leaving in pursuit of higher incomes.

Public services defined, delivered and evaluated through the lens of social investment. Funding devolved to communities, so Kiwis achieve their potential, leading healthier, happier lives.

A comprehensive response to climate change, both on track to achieve our ambitious emissions targets, and resilient to the challenges of a more volatile world.

We have already taken some early steps to achieving those objectives.

On the economy, we're working hard to reduce inflation and enact pro-growth policies to end the recession we inherited at the end of last year. 

On social investment, Nicola Willis announced last week that this year's Budget would include funding to embed social investment in the delivery of services across government.  

It's early days and there's plenty more to do. But in the coming months, you'll hear more from me about how we define and achieve each of those strategic objectives - what success might look like by 2040 and how we get there.

I truly believe New Zealand's best days lie ahead of us, if we reach out and grasp the opportunities in front of us.

In the meantime, I am resolutely and unapologetically focused on delivery.

New Zealanders voted for us last year to do three things - rebuild the economy, restore law and order, and deliver better public services. 

We've already made tremendous progress. Take our plan to rebuild the economy.

Since we came into office in November, there has been a steady march of reform designed to unshackle business, reduce inflation, and create the conditions for growth. 

We are giving business the confidence to hire, by restoring 90-day trials and cancelling compulsory union bargaining.

We are dismantling the obstruction economy - introducing fast-track rules to accelerate investment and charting out a course of systematic RMA reform. 

We are ending the war on farmers, starting by cancelling the Ute Tax last year. Now we're slashing through a jungle of red and green tape. Modifying, delaying, and cancelling a raft of rules and regulations - SNAs, freshwater, winter grazing, or slope rules.

We're also putting together an extensive infrastructure pipeline, eliminating the bottlenecks to growth plaguing businesses across the country, but especially in our fastest growing regions. 

That includes a transport programme - as Simon will appreciate in his new role as Chair of NZTA - that gets back to the basics of connectivity, growth, and resilience.

Or water reforms that put assets back in community ownership and create the financial freedom necessary to make critical investments in local infrastructure. Here in Auckland, those reforms, unanimously endorsed by the Council, will enable up to $2 billion of investment in projects like the Central Interceptor over the next ten years. 

It's early, but we're seeing some promising signs of progress.

Inflation has fallen to 4 per cent, from its peak of more than 7 per cent - a three-year low. Food inflation has collapsed to just 0.8 per cent, with fruit and vege prices falling from this time last year. 

Average mortgage rates are slowly showing signs of softening - falling around 20 basis points from their peak in October last year.

And the recovery in business confidence since last year suggests that while conditions are difficult, the future looks bright for both the boardroom and the building site. 

I accept that relief will not be immediate. Economic history and our own recent experience show us yet again that inflation has a way of sinking its teeth into an economy - driving higher interest rates, declining economic growth, and rising unemployment.

Unwinding those pressures has been and will continue to be tough. And when Government puts its foot on the spending gas, as has been the case in recent years, the job becomes that much harder. 

It might feel good at Budget time, but there's absolutely no kindness in spending up large, only to see businesses close and families go without as the consequence of inflation.

So, it won't be a surprise that as we head into the Budget, the big job back in Wellington is getting government spending back under control. 

Even while the economy has stagnated in recent years, the size of the state has surged. In per capita terms, the economy is just 3 per cent larger than it was at the end of 2017. By contrast, government spending per capita has grown by more than 50 per cent.

The result - higher taxes, more debt to fund the shortfall, and an economic engine dependent on the interventions and spending decisions of ministers to maintain momentum. 

No family would look at that growth in spending relative to income and describe it as responsible. So, we're doing exactly what we said we would do.

We're cutting the waste and restoring a culture of fiscal discipline.  

Late last year we confirmed more than $7 billion of savings in our Mini Budget - the public dividend from cancelling projects like Let's Get Wellington Moving, Lake Onslow, and Auckland Light Rail. And you'll see a lot more in the Budget.

Last week Minister of Finance Nicola Willis confirmed the Budget will show we have achieved our ambitious savings target of $1.5 billion per year. 

I want to thank those departments and agencies who have delivered on their savings targets. They have demonstrated through their action that better government doesn't mean bigger government.

And those savings mean we can make real choices. 

Supporting low-and-middle-income families with the cost of living.

Reducing borrowing and getting the books back in order. 

And investing in frontline services that Kiwis rely on every day, like health, education, and law and order.

I acknowledge that the savings programme has been difficult for those affected. 

But, above all else, the first priority of government must be to achieve the best possible outcomes for the money we collectively spend on behalf of taxpayers - the best hospitals, the best schools, and the safest streets.

And those taxpayers deserve to be treated with respect. 

This year, we will deliver income tax relief to low-and-middle-income working New Zealanders for the first time in 14 years. I'm proud of that.

That tax relief will be fully funded - as we said in the campaign - from savings, reprioritisation, and new revenue measures. 

Why is that commitment to tax relief so important?

First, because those Kiwis struggling with the cost of living - the "squeezed middle" - deserve support. We were elected on a platform of delivering tax relief to those families and I don't plan on breaking that promise. 

Second, because inflation has dragged Kiwis into higher and higher tax brackets - dragging family budgets backwards as incomes struggle to keep pace with inflation.

As a government, we have a responsibility to ensure we aren't just relying on inflation to do our dirty work for us. 

Good governments can compensate families for the impact of inflation and deliver great public services, if they get wasteful spending under control.

Thirdly, because there should be a reward for work. Kiwis work hard to support their families and their community, and our Government believes that if you work hard, you absolutely deserve to keep more of what you earn.  

You also deserve to see the best possible results for every dollar of tax you pay, which is why a big focus of this year's Budget is shifting money out of the back office and into the frontline.

Take Corrections, where last week we announced an investment of $1.9 billion to keep Kiwis safe and deliver on our commitment to restore law and order. That funding will make a real difference, ensuring violent and repeat offenders are off the street and ensuring more prisoners can access the rehabilitation they need to prevent future offending. 

But we could only deliver that scale of funding because of the $440 million in savings we delivered across the Corrections portfolio.

And how did we deliver those savings? It's a pattern you'll see across the Budget this year. 

  • A more efficient back office.
  • Closing programmes that aren't working.
  • Targeting funding at those that are.
  • And getting better value out of every dollar that we spend.

It's the same story in Education. 

We know we have to hit the ground running early. Achieving better results for all those kids waking up each morning and going to school - or, too often, not going to school - is an absolute top priority for me.

As Prime Minister, I set two targets in Education: 80 per cent achievement in reading, writing and maths at Year 8, and 80 per cent of students attending school regularly. 

That might sound straightforward, but delivering those targets will be a huge challenge. Only around half of students are achieving where they should be today - well south of our 80 per cent target - and more than half our kids don't attend school regularly now.

So, it won't be a surprise that we are making big commitments on the frontline in the Budget this year in Education. 

So far, we have announced we are rolling out $67 million for structured literacy to make sure every Kiwi kid gets the best opportunity to learn to read and write.

We're also rolling out $153 million for charter schools because we know the difference those schools can make in lifting achievement among young people. 

And we're making sure kids are ready to learn - maintaining funding for lunches and period products in schools after that funding was set to expire.

You'll see more funding for Education as a whole in the Budget as well. But like Corrections, we can only deliver on those commitments at the frontline because we have achieved major savings in the back office. 

And like Corrections, the Education savings are significant.

In total, we will deliver $429 million in savings in Education over four years, the vast majority of which are concentrated in the back office at the Ministry of Education. 

And, again, like Corrections, those Education savings are dwarfed by the total increase in funding we are making to Education in this year's Budget. But the effect of those savings is to amplify the difference we can make in the frontline - ensuring every dollar we spend goes further.

I think that's what taxpayers expect - that when they go to work and make their contribution, they expect that to fund classrooms and lunches and teachers, not the back office. 

I'm proud that our Budget delivers on that expectation. And whether it's Education, Corrections or a range of other public services, we are targeting your money at delivering the great public services and outcomes you expect.

I'm not expecting this year's Budget to be a surprise. And that's exactly the way it should be. We will do exactly what we said we would do.

We will cut wasteful spending.

We will get money out of the back office and into the frontline. 

We will invest in infrastructure.

We will deliver tax relief. 

We will make a virtue out of simply and unapologetically delivering what New Zealanders voted for.

It's what we need to rebuild the economy and beat inflation. It's what low-and-middle-income families need to respond to the cost of living. It's what the Government needs to get the books back in order. 

No bells. No whistles. Just the basics done well to rebuild the economy, restore law and order, and deliver better public services.

Thank you - and with that let's move to questions.