An economist says the Government's latest economic declaration is "very light on details and very high on electioneering".
Finance Minister Nicola Willis yesterday announced this year's Budget Policy Statement, revealing tax cuts and getting the Government's finances "back on a sustainable track" would be the priorities of the upcoming Budget.
Treasury's forecast scenario – provided alongside the Government's Budget Policy Statement – suggested the country's economic outlook had deteriorated since the December Half Year Update.
Willis said tax cuts would be funded within the Government's operating allowance through a combination of "savings, reprioritisation and additional revenue sources". Her statement did not include what those additional revenue sources would be.
Labour leader Chris Hipkins said the Government "can't even answer the most fundamental question, which is how much money they're going to spend in the Budget". He argued "tax cuts simply aren't affordable".
Economist Shamubeel Eaqub told Breakfast this morning: "Compared to previous years, this Budget Policy Statement was more of a pamphlet – very light on details and very high on electioneering.
'They found out it's hard and slow'
"They've gone into this new term with a lot of promises that they made during the election time around quite grand tax cuts which were costed incorrectly, so it's gonna cost a lot more to provide the tax cuts.
"They thought they were gonna be really great and cut a lot of costs out of public service – and they've found out it's actually really, really hard and slow.
"What we're probably going to see is, they will absolutely hang onto their promised tax cut, but they haven't said that it's going to be exactly as they campaigned on."
Eaqub said getting the books back in order would take longer than the Government expected.
"Most of what government does and where the money goes – things like health, education, welfare – you can't just turn them off.
'The money is simply not there'
"It has significant consequences on what people expect the New Zealand government to do."
On the tax package, he said: "It is ideology that trumps rationality."
And it's a "really expensive" way of providing relief to struggling Kiwis, Eaqub added – though he acknowledged the planned cuts would provide some relief.
"We are overdue a tax cut... but I guess the rational response would've been, be pragmatic and do it 12 months later.
"That's not what we're getting.
"I suspect what we'll get is, the tax cuts will be implemented over a longer period of time because the money's simply not there."
Tax cuts 'responsibly and affordably'
Yesterday, Finance Minister Nicola Willis said tax cuts would be funded within the Government’s operating allowance through a combination of “savings, reprioritisation and additional revenue sources”.
She said the Government would provide tax reduction “responsibly and affordably”.
“It is the most responsible thing we can do to deliver for New Zealanders who are going through a cost of living crisis.
“We’re not going to press delay on such an important priority.”
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