Here at Shellock we take a close interest in the night sky. We hope you enjoy this photo of Aurora Australis, taken by J Moot in Christchurch earlier this month. We also take a passing interest in the Government’s annual Budget. Immediately before the Budget the media ask the public for their wish list and return afterwards to hear how they went (usually not that well). We think wishing and hoping will get you nowhere (except start humming an old song). Very few of us understand the complexity of prioritising and allocating billions of dollars, other than it is similar to the principle of borrowing from Peter to pay Paul.
Below is a snapshot of some key changes, including many announced earlier. Most Ministers and Associate Ministers have managed to get their name and announcement out pre-Budget – a well-worn tradition in New Zealand. But sometimes it helps to have it all (or most of them) in one place. This is your place. Or, if you prefer the Government’s place you can click here.
Summary
The Government has announced three goals. These are to:
- Build a stronger, more productive economy that lifts real incomes and increases opportunities for New Zealanders.
- Deliver more efficient, effective and responsive public services to all who need and use them – in particular, to restore law and order and improve health outcomes and educational achievement.
- Get the Government’s books back in order and restore discipline to public spending.
This is linked to five priorities:
- Delivering meaningful tax reductions to provide cost of living relief to New Zealanders.
- Identifying enduring savings across Government departments and agencies.
- Improving public services by shifting spending to higher-value areas and focusing on results.
- Keeping tight control of Government spending while funding a limited number of high-priority Government policy commitments and urgent cost pressures that cannot be funded through reprioritisation.
- Developing a long-term, sustainable pipeline of infrastructure investments.
Disclaimer: Some of the figures reported below are over four years, and some are for one year. There is also a risk the Budget numbers include previously announced spending. Where we know, we clarify the details.
Proposed New Tax Rate Bands
The much anticipated (for good or for ill) changes to the current individual tax bands (while the rates themselves will not change). These tax bands have not changed for 14 years despite incomes increasing and inflation. This monetary fiscal creep is what keeps most Governments afloat – they (usually) don’t need to increase taxes, because inflation will do it for them. However, this year the Government have proposed to introduce new tax rate thresholds with effect from 1 August 2024 (slightly earlier than we anticipated). They will be as follows:
| Income bands | Rate | Old bands |
| $0 to $15,600 | 10.5% | $0 to $14,000 |
| $15,601 to $53,500 | 17.5% | $14,001 to $48,000 |
| $53,501 to $78,100 | 30% | $48,001 to $70,000 |
| $78,101 to $180,000 | 33% | $70,001 to $180,000 |
| Over $180,000 – no change | 39% | $180,001 + |
If you earn less than $14,000 there will be no tax relief.
You can go to the tax calculator at this link here to see what it means for you.
The Government have also announced changes to the income level for the Independent Earner Tax Credit, increased the In-Work Tax Credit (for those with dependent children) and the new FamilyBoost for those with children in early childcare.
The Government has indicated this amounts to $3.7 billion a year in tax cuts. We know many people will be disappointed with these changes. Some will consider the tax cuts too little, too late, or too high and financially irresponsible. But it is what it is. If you feel that you don’t need your tax cut we recommend you consider donating some or all of it to a charity or public benefit organisation of your choice.
Job cuts
Much of the Government “savings” have been found by reducing the public workforce and reprioritising spending. Redundancy is a word no employee wants to hear. But redundancy with an exit package softens the blow considerably. Few private employers offer redundancy packages, while most Government agencies do. With over 3,000 FTE’s going or gone from the Public Service we might be well concerned with how much is that going to cost. According to OneNews (1st May), the number is closer to 3,500, with upwards of 7,500 in the end. Despite it being intended to be restricted to being “backroom” roles only, this is highly unlikely and has seen cuts in all areas of a Government agency. However, we also must understand that some positions were already vacant, and many took voluntary redundancy including frontline staff. We understand there have been savings of $1.6 billion dollars here, some redirected to frontline roles, the balance back to the Government for reallocation.
Without sounding unkind to those that have or will lose their jobs, we, the taxpaying public also need to understand that the number of Public Service FTE’s have grown considerably in the last few years, including consultants some of whom move from one agency to another for years on end, usually on higher rates than an employee doing the same tasks. Some of these roles were and are necessary (especially during the Covid crisis), but some roles have passed their use by date. According to official statistics over the last 5 years, the public sector workforce increased by 15% (with central government up 15.3% and local government up 13%). This compares with a 9% growth in the private sector over the same period. For the 2022/2023 year this was a total public sector workforce spend of $6.945 million on some 462,300 people. The majority (88%) work in central government (407,200) and 12% in local government (55,100). For the same period contractors and consultants received $1,268 million.
A cynic might also suggest that some of the proposed roles to be culled (intentionally or unintentionally) may have the effect of stymieing the Government’s job reduction objectives, perhaps by people who suggest other people’s jobs are not required, but rarely their own.
We also acknowledge there are job losses across the country in the private sector too. For every job lost there is a person and a family worried about their future. In our experience most people after getting over the shock go on to bigger and better opportunities.
Health
On 29th April Associate Health Minister David Seymour announced Pharmac’s largest ever budget of $6.294 billion over four years (excluding funding for new cancer treatments). On Budget day the allocation is $1.77 billion (probably for a year). As these two numbers do not add we cannot explain the difference. There appears to be nothing allocated yet for new cancer treatments, which may be explained by the delay in having these assessed and approved.
The Budget provides for $3.44 billion for hospital and specialty services and $2.12 billion for primary care and public health (including somewhere in here is $30 million for security). $31.2 millionto extend free breast screening to 70-to 74-year-olds over time.
On 22nd May Winston Peters announced the Budget will provide $24 million over four years to contract the I Am Hope Foundation to provide young people aged between 5 and 25 years with free mental health counselling services through the Gumboot Friday initiative. This is estimated to provided 15,000 people access to free mental health counselling services annually. Earlier Mental Health Minister Matt Doocey announced the implementation of a new mental health and addiction peer support service in hospital emergency departments to relieve Emergency Department’s and provided more appropriate care – funding from pre-existing but unallocated health budgets.
We are pleased to see a dedicated $1.1 billionto ensure disabled people can access the essential services, equipment or support they need.
Education
On 14th May the Government announced funding for new Charter schools at $153 million to be provided over four years to establish and operate up to 15 new Charter schools and 35 State schools converting over. This is intended to help lift declining educational performance. A controversial spend, particularly among supporters of State schools especially when there is a lack of special funding for high needs children and special schools for them.
$1.48 billion is allocated to build new schools and classrooms and to maintain and upgrade existing ones. As many of us are aware, the Government announced a freeze on new builds earlier this year while they took a stock of what was in the pipeline and what was affordable.
From Term 1 2025, all state schools will teach reading using the structured literacy approach. To help this implementation, the Government has committing $67 million as part of the 2024 Budget to support developing training materials and resources for schools and teachers. This is part of the Government’s wider six priorities announced by Education Minister Erica Stanford on 29 April.
- Clearer curriculum: Establishing a knowledge-rich curriculum grounded in the science of learning.
- Better approach to literacy and numeracy: Implementing evidence-based instruction in early literacy and mathematics.
- Smarter assessment and reporting: Implementing consistent modes of monitoring student progress and achievement.
- Improved teacher training: Developing the workforce of the future, including leadership development pathways.
- Stronger learning support: Targeting effective learning support interventions for students with additional needs.
- Greater use of data: Using data and evidence to drive consistent improvement in achievement.
Education Minister Erica Stanford announced the Budget will support the training and recruitment of 1,500 teachers into the workforce earlier this week. (We understand this is not new teaching positions, but a ‘different path’ to teaching.) Funded for four years it will cover 1200 School Onsite Training Programme (SOTP) places for aspiring teachers to train in the classroom expands the (already existing programme) to include primary and intermediate as well as secondary trainees. A training stipend of $20,000 will be available for some toward their living and training expenses and a tuition fees contribution as well to schools involved in the programme. Money will go towards grants for recruiting overseas teachers, and finder’s fees, special placement at hard to staff schools, for returning teachers to the workforce and study awards and support grants. It would be nice to think that a full time working qualified teacher didn’t need support grants (but with luck they will work in a school that has a spare lunch or two left over for them).
$516.4 million has been allocated to support schools and early childhood education providers, plus an allocation of $48.7 millionto support the Te Matatini national festival and support kapa haka in the regions.
Feeding the five thousand
After earlier concerns around the continuance of financed school lunches, the Associate Education Minister David Seymour announced on 8th May (to some surprise) that the Government will be delivering a “more efficient” Healthy School Lunches Programme, saving taxpayers approximately $107 million a year by “embracing innovation and commercial expertise”. The Budget provides $478 million of funding for the school lunches programme, with an interim model for 2025 and 2026 with a full redesign of the programme to be implemented later “based on commercial experience, data, and evidence.” This includes bringing in 10,000 2 to 5 year olds who attend low-equity, not-for-profit, community-based early learning services. Under 2’s need not apply.
There will be no change to the school lunch programme for primary learners in years 0 to 6 but an alternative provision model will be established for years 7 and up (intermediate and high school) expected to be back to basics with a sandwich and a piece of fruit. How much a teenager eats at lunchtime is a matter of debate. Yes, some of us grew up on “a sandwich, a biscuit and an apple”, but we also had breakfast and dinner every day. Unfortunately, some families cannot provide the same today. However, we note the Government has confirmed students at schools receiving taxpayer-funded lunches will also continue to be supported by the Kickstart Breakfast and Fruit in Schools programmes.
Roading and infrastructure
The Government also announced on 13th May pre-budget Roads of Regional Significance to sit alongside Roads of National Significance. What this means in practice is unknown but appears to mean than some projects signed off previously will be scaled back or cancelled. The Budget allocates $4.1 billion for the National Land Transport Fund to accelerate priority projects including the Roads of National Significance. There is $1.2 billion for the new Regional Infrastructure Fund to invest in resilience infrastructure and regional projects that support economic growth.
And to go along those important roads Energy Minister Simeon Brown announced on 30th April 25 new high-speed EV charging hubs along key routes between major urban centres as part of the Government’s plan to “supercharge” New Zealand’s EV infrastructure. Further, the Government have announced a target of 10,000 public charging stations by 2030. No specific funding was announced at the time, but references co-investment models with private partners will be announced later this year. Earlier in April Simeon Brown found funding (including diverting funding) to work on state highway 6/6A (Queenstown) to boost economic growth, reduce congestion, and create a safer and more reliable transport network.
Welcome news of more than $1 billion for the rebuild and recovery of communities affected by Cyclone Gabrielle and the 2023 Auckland Anniversary floods, including $939.3 million to repair roads. Separately, the Government earlier confirmed an additional $20 million to complete the flood mitigation project in Westport. There is $200 million to support KiwiRail to carry out maintenance and renewals on the national rail network.
And on the downside from 1 April 2024 owners of PHEVs were charged the rate of $38 per 1,000 km in road user changes (those that use both petrol and electricity, but not petrol hybrids that cannot plug in). Whereas owners of light EVs pay the full road user charges rate of $76 per 1000 kilometres. Rumour has it the road user charges will be rolled out to other hybrids and petrol vehicles.
Housing
The Government has announced it will allocate $140 million towards 1,500 new social housing places to be provided by Community Housing Providers (CHP’s) from July 2025. First Home grants have already been scrapped to help pay for it, which was described as an expensive and inefficient way to support first home buyers. Minister Chris Bishop has stated that “Discontinuing the First Home Grant is expected to generate savings of $245 million over a four-year (2024-28) forecast period with a minimal effect on home ownership rates.”
The Government has stated 500 (of the 1,500) will go toward CHP’s current pipeline of work and it has three objectives in mind: “value for money from government investment, contributing towards the government’s target of getting people out of emergency housing motels, and a balanced approach between achievability and building capability in historically underserved regions.”
The remaining 1,000 will be using an “active purchaser” approach which officials will be developing this year. According to the media release “Active purchasing” is a concept developed in the Independent Review of Kainga Ora and refers to the government developing a much more sophisticated understanding of current and future housing needs at a national, regional and cohort level, taking a Social Investment approach to improving housing outcomes, and potential outcome-based contracts.”
Led by former Prime Minister, Sir Bill English, the Independent Review of Kainga Ora has seen it sent to the naughty corner while it reviews and restructures its processes, systems and pays down debt. The report stated “We have seen a lack transparency and accountability in the social housing system, coupled with a poor understanding of tenant outcomes. This results in decision-making that is remote from affected individuals, households, and communities. Interventions and investments are not based on evidence of a long-term view, with current settings incentivising higher-cost support in urban areas and creating poverty traps for tenants. … Improvements to the system and Kāinga Ora are needed to make sure New Zealanders can access suitable housing.” We understand that Kāinga Ora has complained there was little consultation and factual errors in the report. At a half a million dollars to produce, you would hope there was extensive consultation, and facts checked off before completion. You can read the final report here.
Whatever your views are on Social Housing, investment by Government, private enterprises, Kiwisaver investment funds, social agencies or Iwi, or even foreign investment funds is desperately needed. According to recent reports there are over 25,000 people on the state housing waiting lists. This number is surely an underrepresentation, as many have given up on being on a list, and others do not technically qualify to go on the list to start with.
Climate change
Climate Change Minister Simon Watts announced on 10th May an inquiry on climate adaptation has been agreed with support from political parties across the House. The purpose of the inquiry is to develop and recommend guiding objectives and principles for the design of a climate adaptation framework for New Zealand, with any legislation expected to be introduced in 2025. However, there does not appear to be any specific new allocations for climate change initiatives.
Crime
May was a busy month with Corrections Minister Mark Mitchell announcing an increased $1.94 billion spend on in more frontline Corrections officers, more support for offenders to turn away from crime, and more prison capacity. There is a plan for 685 new frontline staff at Corrections. Of this funding, $78 million is earmarked to extend rehabilitation programmes for the 45% of prisoners who are on remand to access support to turn their lives around. There is also an increase in recruitment of another 500 police.
$424.9 million to support frontline policing, including boosting pay and purchasing police vehicles.
Also announced by Associate Justice Minister Nicole McKee on 22nd April an intention to return to (a revised version of) the Threes Strikes sentencing law. While this is a popular move by some, it is highly controversial and arguably has proved ineffective in reducing crime.
Crime is seen as a major issue for many voters as more people are personally affected. The trouble is, we cannot lock up everyone, so we need more preventative and rehabilitation programmes to reset early offenders on a straighter path. The Government addresses this with $68.7 million to address youth offending, including a military-style academy pilot.
Defence
Defence Minister Judith Collins announced on 10th May the upcoming Budget will include new funding of (close to) $571 million for Defence Force pay and projects, allocated $163 million for increases in remuneration for personnel and $408 million to upgrading equipment and infrastructure. Most will be spent over 4 years, with additional funding in the budget for systems, hardware and services including renting additional accommodation for staff. The Ministry has also made savings in other areas or reprioritisation, to the tune of about $99.2 million, which is incorporated in the above budget allocation.
Home and Away
The Government is also supporting humanity needs overseas, including $7m to support communities affected by severe food insecurity and other urgent humanitarian needs in Ethiopia and Somalia, announced in April. As well as reducing global greenhouse emissions, and supporting clean energy transition in South East Asia, through a contribution of $41 million in climate finance to the Asian Development Bank led Energy Transition Mechanism. Foreign Minister Winston Peters also announced on 1st April $21 million in humanitarian assistance to those affected by conflict in Gaza (on top of previous grants of $15 million from October 2023) and $4 million to Sudan.
Further, the Foreign Affairs have been allocated nearly $60 million in capital and operational investment for the renewal of New Zealand’s diplomatic post infrastructure in the Pacific, from savings found behind the couch (according to Foreign Affairs Minister Winston Peters “we have found $15 million in savings per year in Vote Foreign Affairs from back-office efficiencies and lower priority activities”). There will also be moves on the Scott Base Redevelopment project, being a significant project of national interest. At least some of our keen readers will be very interested in progress on the Scott Base redevelopment – and possibly disappointed too.
Summary
It’s been a busy Budget day. There has also been a “carkoi”, a junior Doctors 2 day strike, the New Zealand Rugby Union governance decision, department store Smith & Caughey’s Auckland stores have been closed due to a cyber attack having just announced a plan to close down, Flybuys announced they were closing by the end of the year, and the Aotearoa Music Awards are being held tonight. These events may be more important to many than this 2024 Budget, but ultimately everything will come out in the wash, we are not going to Hell in a handbasket, the baby will not be thrown out with the bathwater, and the sky will not fall in – at least not today.
If you have any questions on how the tax changes will affect you, you are welcome to contact us.
