Everything you need to know about Budget 2024, and not a line more.

After sharing home-made choc-chip cookies with the prime minister, finance minister Nicola Willis presented her first budget today at 2pm, wearing a blue power suit and a sense of determination. “I have kept my pledge,” she announced, meaning inside the very basically designed booklet are tax cuts, spending cuts, and frontline service boosts.

Remind me, what are we budgeting for?

Today the government revealed its budget for the next year. It’s important because it will determine how the government will spend the money we all contribute, and how it won’t.

How much money are we talking about?

Heaps! Billions! This year’s operating budget is $3.2 billion, which is relatively small – the smallest since 2018. The operating budget is the money for extra new ideas and initiatives on top of the $140bn the government spends on stuff that already exists, like schools, hospitals, benefits, the military and superannuation. 

I get a little nervous around big numbers, so can you maybe start by telling me about the vibe of this budget?

When The Bulletin asked for three descriptors of the budget yesterday, Willis said: “Delivery, responsibility and relief”. When Barbara Edmonds, Labour’s finance spokesperson, was asked the same thing, she said: “Irresponsible and broken promises.”

The vibe is that Willis bound herself to tax cuts in election promises, but economic analysis since has suggested they may not be a good idea given deficits in the government’s books and a sluggish economy.

So, how about those tax cuts?

Yes, they’re coming. The Treasury has put up a tax calculator so you can see by exactly how much your back pocket will be boosted. Don’t get too excited – for the vast majority of us these cuts are pretty small: the budget document said 1.9 million households will benefit by $30 a week on average, and $39 a week for households with children. Willis is still calling them “modest but meaningful”. 

The cuts come mostly from an adjustment of the income tax brackets. It’s the first time in 14 years they’ve been shifted. The bottom bracket (10.5%) now extends to earnings up to $15,600. The 17.5% tax rate now applies up to $53,500, and the 30% tax rate to $78,100. The top two tax brackets haven’t changed their upper limits. The overall policy is costed at $3.7bn a year.

There are still five tax brackets, so Act hasn’t managed to negotiate its policy of flattening them into three – at least not yet. Willis said the idea had merit and remained something to consider in the future.

There are also the tax cuts we already knew about: interest deductibility for residential landlords ($2.6bn) and adjusting the bright line test ($180m).

Has the government thought of any new ways to make money?

Yes, Willis has been saying “new revenue streams” will partly cover tax cuts, along with less spending. So far these new streams are taxing online casino operators and increasing immigration fees – small compared to what the government will lose from income tax.

And if there’s less money coming in, where is there less going out?

Our very own Joel MacManus, who was in the budget lockup today, described it as “​​hundreds of little slashes”, so maybe the next three years are going to be like walking through cutty grass. The spending cuts are wide, across almost every area of government, which Willis said will save an average of $5.86bn a year. 

There are 240 different spending cuts in total, including $40 million from what was meant for new supply and capability of Māori housing and $20m from youth transitional housing. Subsidies for hot water heaters and energy-efficiency measures are being scrapped, which will save $178m over four years, and $38.7m is coming from scaling down initiatives like the Community Renewable Energy Fund.

The Consumer Advocacy Council is ending, which will save $5.72m over four years. As part of cuts at the Ministry for Culture and Heritage, New Zealand Symphony Orchestra is losing $1.4m over the next four years, and NZ Film Commission and Ngā Taonga Sound & Vision are also losing funding.

As has already been announced, Auckland Light Rail is over, as is Let’s Get Wellington Moving, and there’s a steep reduction in Kāinga Ora spending. The disestablishment of the Māori Health Authority will save $35m over four years.

National’s been going on about the ‘frontline’ a lot – so what’s in here for services?

As the government has been signalling, there’s new spending in health, education, police and corrections.

Health is getting an extra $7.4 billion over four years, including $1.7bn to boost Pharmac’s budget, but that’s not enough to cover the 13 new cancer drugs National campaigned on. Free prescriptions are gone, with the $5 co-payment being reinstated from July.

Education is getting $1.48bn for new or upgraded schools and classrooms, $153m to establish charter schools, and $477m to continue a (scaled down) Healthy School Lunches programme for two years. As announced last week, there’s also $53 million over four years to recruit and train about 1500 new teachers.

Five hundred new police officers are going to cost $226m, and the force is getting $425m towards new police cars and pay upgrades. Corrections gets $1.94bn to expand Waikeria prison, and increase pay for Corrections officers, along with some other investment that was left hidden for commercial sensitivity.  The defence force has not been forgotten – it’s getting $570m for new vehicles, helicopters and infrastructure.

What about for the most vulnerable?

The budget pushed forward with the social investment approach, with a tagged contingency of $51m. Part of this will establish a social investment fund to directly commission outcomes, work with communities, non-government organisations and iwi providers. Another portion will be used to support the standalone Social Investment Agency from July 1.

People with Community Services Cards, over the age of 65 and under 14 will continue to get free prescriptions after July, while everyone else will be back to $5 prescriptions. This is estimated to save $116m over the next five years.

There is increased funding for Oranga Tamariki frontline staff, but a nearly 40% reduction in funding for the crown response unit to abuse in care. Whaikaha Ministry for Disabled People is getting an extra $1.1 billion for social services. 

What’s in there for the kiddies, young people and families?

Back in March, Willis announced an up to $75 rebate on early childhood education fees at an annual cost of about $180 million. Reimbursements will begin being paid out in October. Also already announced is ongoing funding for school lunches, even if they’re not as nutritious as the previous meal format. 

Free study for first-year tertiary students has been scrapped, and instead the final year will be fees free. It will be staggered to prevent double dipping. This is expected to save $877 million over four years, which is to say fewer students will be receiving the support.

Were there any surprises?

Honestly, not really. Expectations have been tempered for a while by Willis and Christopher Luxon, who has often referred to the budget as being “no frills”.

One thing the budget has not done is reduce our debt. Over the next four years it is expected  the government will borrow an extra $12bn. When asked why she chose to borrow while delivering tax cuts, Willis said she wanted to keep the commitment she had made to New Zealanders (and possibly not have to keep her word and resign).

What’s the reaction been like?

As expected, opposition parties are coming in hot. First was the Green Party. In a statement, co-leader Chlöe Swarbrick said the government had chosen to “slash and burn funding for climate action and punch down on people who need support”. Then Labour chimed in. In a statement, Labour leader Chris Hipkins said the budget wasn’t worth “the paper it’s printed on”. He called the spending in health and education “piddly”.

If you want to know more, we’ve been keeping track of reactions on a live blog.

Will this budget help our economy?

The Spinoff’s Liam Rātana spoke to economists a few days ago about whether the extra spending money people receive from tax cuts will stoke inflation; with current high rates, people will probably end up saving much of the extra money instead of spending it. 

The budget is released along with an economic forecast from the Treasury. They’re expecting good things not this year, but next. GDP is forecast to shrink by 0.2% this year, but increasing to 1.7% growth in 2025, and  inflation and interest rates are both expected to fall from next year. 

So is the budget good or bad?

Depends who you ask!