Nicola Willis has announced the smallest budget since 2018, with an operating allowance of $3.2 billion. For the most part, it makes good on National’s promised tax cuts.

Joel MacManus reports from the Budget 2024 lockup at the Beehive, thanks to the support of Spinoff Members. 

For rolling coverage of responses to today’s budget, see our live updates 

• Budget 2024 delivers most of National’s promised tax cuts, with income bracket adjustments and a new FamilyBoost childcare rebate. 
• Tax cuts are being funded by hundreds of cuts across almost all areas of government. 
• The Fees Free tertiary education scheme will switch from funding the first year to the final year of study. 
• Billions of dollars of new spending in health, police, education.

The front cover says it all. This is a serious document. Gone are the stock photos from Labour-era budgets. Instead, we have a bland white exterior, bearing the words: “Budget and Economic Fiscal Update 2024”. The inside page is the exact same design; as if to beat the idea into your head; this is minimalist, contractionary and cost-efficient. The government can’t even spare the expense for a graphic designer or a Getty subscription. 

Finance minister Nicola Willis had a tough line to walk in Budget 2024. She had promised tax cuts, and spending cuts, and frontline service boosts, all amid a shrinking economy and inflationary pressures. She addressed the assembly of journalists and economists in the budget lockup proudly, almost defiantly. “I. Have. Kept. That. Pledge,” placing the emphasis on Every. Single. Word. Of. The. Sentence. Between the lines, it was as if she was trying to say “See! You thought I couldn’t do it. Well look at me now.” 

This is the smallest budget since 2018, with an operating allowance of $3.2 billion. For the most part, it makes good on National’s promised tax cuts. For a small number of New Zealanders the cuts will be over $100 a week, though it will be much less for most people. “Modest but meaningful,” is how Willis described it. 

Who will get tax cuts? 

The widest tax cut in Budget 2024 comes from adjusting the income brackets; though this is a one-off. Any talk of tying tax brackets to inflation will be one for another day. There is no change to the tax rates. 

This is how the income tax thresholds are changing, from July 31 – a month later than National campaigned on: 

10.5% tax rate: $0-14,000 changes to $0-$15,600 

17.5% tax rate: $14,001-$48,000 changes to to $15,601-$53,500 

30% tax rate: $48,000-$70,000 changes to $53,501-$78,100

33% tax rate: $70,001-$180,000 changes to $78,101 $180,000 

39% tax rate:  $180,001+ no change 

The biggest dollar difference is the FamilyBoost payment National promised in the election campaigns, a 25% reimbursement of ECE fees, up to $75 per week. It’s expected to reach about 100,000 families.The reimbursements will be paid out quarterly as a lump sum, starting in October. 

There are also extensions for two tax credits; the Independent Earner Tax Credit, which promises $10 a week for an extra 420,000 people, and the In-Work Tax Credit, which promises up to $25 a week for 160,000 people. 

How much will you get? Well, it depends entirely on your situation. Parents with kids in ECE will notice a big difference, but it’s much smaller elsewhere. According to documents provided in the Budget lockup: 

• A minimum wage earner will keep an extra $12.50 per week. 
• A single adult earning $55,000 pays $25.50 less tax per week. 
• A retired couple on superannuation is better off by $4.50 per week (or $2.25 each). 
• A working couple earning a combined $150,000 will keep an extra $40 a week (or $20 each). 
• An average income household with two children in school is better off by $51 per week ($25.50 each). 
• An average income household with two children in ECE will see a tax cut of $126 per week (or $61 per parent). 

Willis estimated 19,000 households will be eligible for the full Family Boost payment.

Aside from the personal tax cuts, the budget also includes two previously announced cuts for landlords and property investors. Restoring interest deductibility for residential rental properties will cost the government $2.9bn in reduced revenue over four years, and adjusting the bright line test will cost $180m. 

Hundreds of budget cuts 

This is the smallest budget since 2018, with an operating allowance of $3.2 billion. But Willis has avoided the deep blood-letting seen in previous contractionary budgets. Instead, she’s gone for the mile-wide-and-inch-deep approach. 

Across almost every area of government, there are lists of programmes that are cancelled, reduced or not expanded. In total, there are 240 different cuts: $17m from the Kermadec ocean sanctuary, $4m from a wood processing growth fund, $2m from the Laptops for Teachers scheme, $8m from contaminated sites, $20m from youth transitional housing. The list goes on. 

Most of the big-money cuts had already been announced, including Auckland Light Rail, Let’s Get Wellington Moving, and a steep reduction in Kāinga Ora spending. 

Boosts for health, police, defence, but no cancer drugs 

Amid all the cuts, there is some big new spending in health, education, police and corrections. 

Over four years, that includes an extra $7.4 billion towards health, mostly focused on addressing cost pressures at Te Whatu Ora, and $1.7bn over four years to boost Pharmac’s budget. There are a few smaller initiatives that get highlighted too; $24m for Gumboot Friday, $31m to gradually extend breast screening to 70 to 74-year-olds, and $22m to train 25 more doctors per year. 

As had been signalled in the past few weeks, National’s campaign promise to start funding 13 new cancer drugs this year has not been fulfilled. In her budget address, Willis said this was something she regretted. Reinstating the $5 prescription co-payment, which was meant to partly fund the drugs, continues, and will commence from July 15.

The education boosts include $1.48bn for new or upgraded schools and classrooms, $153m to establish charter schools, and $477m to continue the Healthy School Lunches programme for two years. 

The budget promises an additional 500 police officers at a cost of $226m, plus $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.  

Other big winners include the Defence Force, which gets $570m for new vehicles, helicopters, and infrastructure, and Whaikaka Ministry for Disabled People, which gets an extra $1.1 billion for social services. 

An economic rebound within sight

Willis began her budget lockup speech by painting a grim economic picture, but predicting a rapid turnaround within sight. GDP is forecast to shrink by 0.2% this year, but increasing to 1.7% growth in 2025. It’s the same story for inflation and interest rates, both expected to fall from next year. A return to surplus is forecast for 2027/28.