If you were looking forward to tax cuts to ease your own personal finances then you’ll be sorely disappointed. You may have to wait until the next election year in 2017.
If you’re a beneficiary with children, however, you’re going to see the first increase in benefits – other than inflation adjusting – since 1972 – 43 years ago.
Personal finance implications at a glance:
- The $1,000 KiwiSaver kick start has been kicked into touch from 2pm on Budget Day.
- Benefit rates increased for the first time in 43 years.
- New child hardship package meaning beneficiary families will receive an extra $25 a week, after tax, from 1 April 2016.
- Working families on low incomes will receive increased Working for Families payments and childcare support.
- Tighter obligations on beneficiaries to find part time work.
- $1.7bn of child support penalties scrapped in a bid to increase payments.
- Unemployment is projected to fall below 5 per cent next year.
- Modest tax cuts expected in 2017, which also happens to be election year.
- House building on crown owned land to be sped up in Auckland.
- New border fees of $16 for arrival and $6 for departure.
In terms of overall numbers, the government has budgeted for a deficit of $684m this financial year, but expects that turn into a $176m surplus in 2015/16. Meanwhile New Zealand’s “rock star” economy is expected to produce nearly 2.8 per cent economic growth per annum for the next four years.
The Minister of Finance Bill English said he had been watching the gap grow between beneficiary income. “On one hand, this gap creates a strong incentive to move from welfare into work,” he said. But the Government is concerned about the effect on children when their family’s resources fall behind those of other households and told reporters that the gap had grown enough.
As has been common in recent years there are also moves to get beneficiaries back to work. One key change is to increase childcare subsidies from $4 per hour to $5 for pre-schoolers and after school care. Families can use this subsidy for up to 50 hours a week.
At the same time, the government is pushing sole parents to return to work sooner. They’re expected to start looking for work, once their youngest child reaches the age of three, instead of the present five years of age. And beneficiaries with part time work expectations will be required to find work for 20 hours a week rather than 15, English said.
Whilst Working for Families is going up for some families, those earning more than $88,000 per year will see their subsidy cut.
The big bad housing bubble:
Housing is front page news in New Zealand – and Auckland in particular. It wasn’t a surprise, therefore, that the Budget had measures to do something about the so-called property bubble in the nation’s biggest city.
English said in his speech to parliament that the government had set aside a $52m contingency to facilitate housing development on crown-owned land in Auckland. Housing and Building Minister Nick Smith is meeting with developers on May 29 to begin forging potential partnerships. It’s likely that Iwi will get first right of refusal on some of the land.
The Budget also contained measures to tax property speculators. The move, announced days before the Budget, will see that people buying and selling properties for a profit – including foreigners – pay their fair share of tax.
KiwiSaver kick-start kicked into touch:
The big surprise for many was the axing of the $1,000 KiwiSaver kick start for new members of KiwiSaver. The retirement scheme has been a victim of its own success. The government only ever budgeted to have 700,000 members by now, yet 2.5m have joined – making the $1,000 per person kick start an expensive exercise.
Some of less headline-grabbing changes in the budget will also affect us. District Health Boards get $320m more per year over the next four years, there will be a new Bowel Cancer Screen Pilot and hospices get $76.1m to help expand their palliative care services. The government is expanding its controversial charter schools programme, spending more to make school buildings earthquake proof and another $53m to fix the remaining bugs in the education pay system Novopay. There will be more funding for forestry research and biosecurity funding is being beefed up.