NZCTU: Budget At A Glance 2024

NZCTU’s Budget at a Glance provides an immediate working peoples’ analysis of Budget 2024. We’ll be following this work up with more detailed analysis and commentary throughout the next couple of weeks.

Budget 2024 fails the most important tests

Joe Biden famously said, “don’t tell me what you value, show me your budget and I’ll tell you what you value”. This Budget demonstrates the values of this Government. It is a Budget that places ideological wants before real needs. The Government wants to cut taxes. It wants to cut spending. But it doesn’t deliver the investment that New Zealanders need. In short, this Budget fails the most important test going – will it help deliver a better Aotearoa?

Nicola Willis had her own tests in opposition. She said that her tax cut programme would not “require any additional borrowing”. On this metric, the government is failing its own test. According to the Treasury, the government will borrow an additional $17.1bn by June 2028. Tax cuts will cost nearly $10bn. Without the cuts, borrowing would be much lower. Future taxpayers are going to pay for tax cuts today.

Willis also claimed that she would be able to deliver on all National’s election promises “regardless of the state that Labour leaves the books in”. Yet the tax cut programme doesn’t include the Working for Families changes promised by National in opposition. The gambling tax changes were supposed to bring in $716m over the next four years. They now bring in $190m. It’s now clear that the tax package isn’t being delivered as promised.

The Budget also fails the test of not cutting the front-line, as the Government calls it. It is cutting 240 lines of expenditure in total. The Minister of Finance has made it clear that there will be further rounds of cuts, noting in her speech that ongoing cuts “will be a feature of future Budgets”. Real terms cuts are made to operating grants to education. Vote Customs sees only cuts, no investment at all. The same is true for Agriculture, Biosecurity, Fisheries, and Food Safety; it is also true for Māori Development and Pacific Peoples.

Much was made by this Government during the election campaign that funding would be made available to health, enough to meet inflation and population needs. In March, the Ministry of Health told the Health Select Committee that the funding now being provided wouldn’t be enough. Funding was also promised for new cancer drugs. Funding would be provided for a new medical school at the University of Waikato. However, there is no money available for cancer drugs, or for a new school – only a cost benefit study.

The Budget fails the test of helping to end child poverty. Officials now forecast the targets on child poverty will be missed significantly. These are targets that had been the subject of bipartisan agreement until now. The government states that, “A key driver of child poverty is living in a benefit-dependent household”. In reality, the key driver of living in poverty is being poor – something that is not helped by real terms cuts to the minimum wage and cuts to welfare payments. If the Government really believed in social investment, it wouldn’t be failing this test.

This Budget fails the test of preparing New Zealand for the future. Investment to support business, science, and innovation is cut by $1.4bn – and only $700m is returned. This includes cutting large elements of the Warmer Kiwi Homes programme, which improves the energy

efficiency and health of New Zealand’s ageing housing stock. Tackling climate change is no longer a concern, with $180m cut from the Energy Efficiency and Conservation Authority. The National Resilience Plan, established to help with future natural disasters, is ended. A common theme across the baseline cuts to public services is the reduction in research and data capacities. This will only make it harder for us to plan for the future.

The Government has clearly signalled its values with this Budget. Short-term benefits for some in the form of tax cuts will come at the cost of long-term borrowing, rising child poverty, and increasing insecurity in the face of climate change and rising unemployment. According to the Treasury, forecast new spending in the future is “unlikely to be sufficient to cover future cost pressures on existing services”. That means future cuts are baked in.

It would be easy to blame this programme on malice – to frame the Government as being indifferent to the needs of New Zealanders. That would be the wrong approach. Rather, what this Budget demonstrates is that the current Government has placed its political survival over the very real investment needs of the country. Government is squeezing the cost of school meals while giving landlords $3bn in tax reductions. This is despite the Minister of Finance admitting that this won’t do anything to tackle rising rents. Everything in this Budget is a choice. The Government has chosen the wrong approach for New Zealand.

Craig Renney
Economist and Director of Policy
New Zealand Council of Trade Unions
NZCTU | Budget 2024 Report