Understanding New Zealand's 2024 Budget: Key Highlights and Implications

Finance Minister Nicola Willis has presented New Zealand's 2024 Budget, outlining the government's plans to rebuild the economy, manage public finances carefully, and help Kiwis with the rising cost of living. This Budget aims to lay the foundations for sustainable growth while being fiscally responsible.

Tax Relief

One of the biggest announcements in this Budget is tax cuts aimed at low- and middle-income New Zealanders. These tax cuts are designed to provide relief to those who haven't seen a reduction in their taxes since 2010. The tax relief measures focus on reducing the burden for those earning less, helping them keep more of their income. The tax cuts are structured to benefit individuals and families with lower incomes the most by adjusting the income tax brackets and thresholds.

The Budget documents indicate that around 1.9 million households will benefit on average by $60 per fortnight, 3.5 million New Zealanders will benefit on average by $32 per fortnight and households with children are expected to benefit on average by $78 per fortnight. Anyone earning $78,100 or more a year will receive a minimum tax cut of $40.10 per fortnight.

The Budget has increased the upper limit of eligibility for the independent earner tax credit to $70,000, with amounts reducing from $66,000. This change is estimated to benefit an additional 420,000 people by up to $20 per fortnight. Additionally, the in-work tax credit will be increased by $50 per fortnight starting 31 July. A new FamilyBoost childcare payment has been introduced, which will refund 25% of early childhood education (ECE) fees up to a maximum of $150 per family per fortnight.

The government plans to fund these tax cuts by reallocating existing funds and finding savings within the current budget, avoiding additional borrowing, and thus preventing an increase in national debt or inflation.

Investing in Public Services

The government is also focusing on improving key public services. Increased funding for health services aims to improve access to medical care and reduce waiting times for treatments, ensuring better health outcomes for all New Zealanders.

The education sector will receive more funding to enhance the quality of education, support teachers, and improve school facilities, providing a better learning environment for students.

Additional funding will be allocated to law enforcement and the justice system to improve public safety and reduce crime rates, which includes hiring more police officers and upgrading equipment and technology.

Controlled Spending

The Budget emphasises careful management of public funds, focusing on reallocating existing resources rather than introducing many new spending initiatives. This approach helps keep spending under control and ensures that funds are used efficiently. The operating allowance, which is the amount set aside for new spending, has been reduced compared to previous updates, reflecting the government's conservative approach to new expenditures and prioritising essential services and projects.

Economic Outlook

Despite the lower GDP forecasts, the government is committed to maintaining financial stability. This involves keeping debt levels manageable and ensuring that the budget remains balanced. By doing so, the government aims to create a stable economic environment that can support long-term growth. The government has revised its GDP forecasts downwards, acknowledging that the economy hasn't performed as well as expected in recent years. This means starting from a lower base for future growth projections.

The 2024 Budget aims to provide much-needed tax relief, invest in crucial public services, and maintain careful control over spending. By doing this, the government hopes to support New Zealanders through current economic challenges and lay the groundwork for future prosperity. For more detailed information, you can check out the official Budget 2024 documents here.

Alysha Redgrove
CA, CPP