Rabbits, Switch-Ups And Highway Robbery: Politicians, Economists React To Budget 25

Giles
Dexter, Political Reporter

Budget Day is
a bit
of a whirlwind.

Opposition politicians,
journalists and economists have just three-and-a-half hours
to pore over the books, before presenting reports and
analysis on what’s on offer, what it means to people and, of
course, come up with a hot take or two.

The government
found $2.7 billion a year through its changes to pay equity,
cut its own contributions to KiwiSaver, told 18 and 19 year
olds it would no
longer pay them to sit on the couch and introduced a new
Investment Boost tax incentive, which is tipped to increase
New Zealand’s GDP by 1 percent over the next 20
years.

It was dubbed
the ‘Growth Budget’ by the government, although the
finance minister was fond of calling it the ‘No BS
Budget’.

Economists and MPs had their own nicknames
and thoughts to share.

Bagrie Economics managing
director Cameron Bagrie called it the ‘Rabbit Budget’, as
the pay equity changes allowed the government to pull the
rabbit out of the hat and generate savings.

“Looking
forward, we need a few more rabbits to pull out of a few
more hats in the 2026 and 2027 Budgets, because we’re still
a long way away from returning to surplus.”

The books
are not
expected to return to surplus until 2029 and, even then,
it will be a modest surplus of $200 million.

Bagrie
said New Zealand still had not seen the hard
yards.

“The savings are all backloaded into 2027, 2028
and 2029, and those savings to be delivered are going to
require that we need tight expenditure control in the 2026,
2027 and 2028 Budgets. We know that spending pressures,
including the funding of the defence force, are going to be
pretty intense.”

Council of Trade Unions economist
Craig Renney, who is also on Labour’s policy council, said
it was a ‘Highway Robbery Budget’ with the changes to pay
equity.

“It’s not a Budget that’s delivering for
working people and it doesn’t appear to be a Budget with
working people in mind,” he said. “We’re taking money
straight out of the pockets of low-income
workers.

“We’re taking benefits off 18-19 year olds,
we’re taking money from the education budget. We’re taking
money off Vote Māori Development, Vote Pacific Peoples and
we’re spending it on defence.”

On the KiwiSaver
changes, Renney wanted assurances that employers would not
put pressure on low income workers to deliberately take the
3 percent level, so their own costs did not go up.

He
praised the Investment Boost scheme, saying New Zealand was
“way behind” in capital investment and the state had a big
role to play.

Baucher Consulting tax expert Terry
Baucher was also a fan of the scheme, saying it was more
generous than many predicted. He was less impressed with
what was in the Budget for low-income families.

“The
government has increased the Working for Families threshold
to $44,900, but that’s still below what someone on minimum
wage would earn annually and it’s $10,000 lower than it
should be, if it had been increased in line with inflation
since June 2018,” he said.

“Arguably, you could say
that the burden for that Investment Boost is being paid by
low-income workers and I don’t agree with that. It’s a
disappointment in that regard.”

He said New Zealand
faced a “demographic crunch”, and there was not enough in
the Budget to encourage families to work and raise their
children in New Zealand.

“We’re taking money from our
younger working people to give to older, richer
property-owning people and long-term, in my view, that’s not
a recipe for a growth economy.”

Baucher said he
understood why the government was means-testing KiwiSaver at
higher levels, although did not support reducing the
government contributions overall.

Inequality
researcher Max Rashbrooke said the KiwiSaver
changes were mean-spirited.

“It is the state
increasingly saying, ‘If you’re going to save, you’re on
your own. We’re putting the burden on you to save out of
your pay and we’re putting the burden on your employer,
rather than collectively, the state, trying to ensure that
people are saving well for their
retirement’.”

Infometrics chief executive Brad Olsen
said it was the ‘Switch-up Budget’ as the government tried
to spend more, while cutting back.

“There are some big
trade-offs that the government has had to make in Budget
2025 and I think, definitely for some groups, they’ll be
saying that’s probably the wrong trade-off,” he
said.

Olsen was “fairly relaxed” on the KiwiSaver
changes and did not believe the current government
contribution rate stimulated a huge amount of further
investment that otherwise would not happen.

“I don’t
think it’ll shift the dial in terms of more or less
investment from Kiwis by getting rid of that government
contribution, but by increasing both the employer and
employee contribution rates, that will stimulate more
savings over time and I think that’s positive.”

He was
also onboard with cutting the government contribution rate
entirely for those earning more than $180,000, saying the
government needed to get its books in order and it did not
need to give those earning good money that much
support.

New Zealand Initiative chief economist Eric
Crampton said the government was making slow progress
towards the smaller structural deficit in 2029 and needed to
sort it before the demographic changes really started to
bite in the 2030s.

“At some point, we have to wonder
about the fiscal responsibility provisions in the Public
Finance Act matter, because those effectively say you should
not be running structural deficits for a decade, and we will
have been running structural deficits for a decade. The ones
during Covid were excusable – now, not so
much.”

Crampton agreed that greater means-testing and
targeted assistance to those in need made sense.

“[It]
can help towards fiscal consolidation,” he said. “I don’t
need to be getting a subsidy towards my
KiwiSaver.

“It’s better to target these sorts of
things. Similarly, a bit tighter targeting in Working for
Families can make a lot of sense.

“It’s good that they
are stopping the inflation indexing of repayment thresholds
for student loans. It would be nice if they took a few other
measures.”

He pointed to re-instating interest on
student loans as a measure that the government could take,
while at the same time, increasing scholarships that are
means-tested.

No commitment from Labour on $12.8b pay
equity return

Fresh from delivering their speeches to
the House, a rolling maul of MPs from government and
opposition came across Parliament’s tiles to take
questions.

First up was Labour leader Chris Hipkins,
who continued to denounce
the pay equity changes, particularly now there was a
number put on them.

He committed to reversing the
changes, should Labour return to the government benches, but
couldn’t be nailed down on the exact
amount.

Primarily, that was because he was unsure how
the government had arrived at its figures.

“They still
haven’t released their calculations on how they arrived at
the savings they’ve delivered today, so I can’t give you
numbers,” he said.

“I can give you the principle,
which is the principle is very clear for us. We don’t
believe that women should be paid less than men.”

He
also said the Working for Families changes were “a measly
amount, won’t even pay for a block of butter” and the
government cutting its KiwiSaver contributions “raided the
future retirement savings” of New Zealanders.

“I think
most Kiwi families will be feeling that any advantage they
got from tax cuts last year has been well and truly absorbed
by increased costs in other areas,” Hipkins said. “Their
power bills are still going up, their rents are still going
up.

“Prices of food are still going up and they’re
finding other forms of government support are now being cut,
like Working for Families, Best Start, KiwiSaver, and so
on.”

Prime Minister Christopher Luxon said Hipkins
“has flip-flopped all over the place” and questioned
how he would pay for reinstating pay equity as it had
been.

“Is he going to tax for it or is he going to
borrow for it, if he wants to unroll all those
changes?”

Luxon said it was a “balanced Budget”, which
was focused on growth, and supporting people with the cost
of living and on frontline services.

Meanwhile,
Winston Peters said he was proud of the SuperGold rates
relief, and money for railways and defence.

“Everybody’s
going to make that statement, they’re proud of this and
proud of that,” he said. “Most of them will say they’re
proud of their portfolio, but I suppose the fact is we could
have made a big mistake and done what I’ve seen in the
past.

“We have some revolutionary Budget we pay for
for the next 15 years and I’ve seen a couple of those in my
time.”

He hinted, over the next few months, New
Zealanders would see other changes that would assure them of
“a better economic outcome”, thanks to his party’s
influence, although stayed coy on what those were.

ACT
leader David Seymour said “the numbers speak for
themselves”, as a result of Brooke van Velden’s pay equity
changes.

He also said the increased
funding for private school subsidies would make things
“vaguely fair” and that he agreed to the Incentive Boost
scheme, once he saw evidence it would be
effective.

“If you’re going to give any kind of target
a tax break, then acquiring capital equipment and goods is
probably the most powerful thing you can do, if you just
want to see increased capital intensity.”

The Green
Party came out swinging, with co-leader Marama Davidson
nicknaming the Budget the “no-ambition Budget, it’s the
child-poverty Budget, it’s the we-don’t-care-about-women
Budget, it’s the we-don’t-care-about-rangatahi Budget, it’s
the we-don’t-care-about-disabled-people,
we-don’t-care-about-Māori,
we-don’t-care-about-Pasifika”.

“Who do we care about?
Wealthy and fossil fuel companies.”

Davidson said the
JobSeeker changes for 18-19 year olds was the government
saying “with their full hearts, their full chests, they are
really happy to be cruel and mean to people who are already
having a hard time”.

Chlöe Swarbrick said the $200m
towards co-investment in new gasfields was potentially
a breach of the UK and EU free trade
agreements.

Finance Minister Nicola Willis said
the KiwiSaver changes would ensure the scheme was
sustainable into the future, insisting it struck the right
balance.

“New Zealand faces rising costs from
superannuation from an ageing population and we need to make
sure that we have our house in order.”

She said
officials were unable to advise on how many people would opt
down to the current 3 percent rate, as it involved making
guesses on people’s behaviour.

“That is something
we’ll have to see in due course. I expect there will be many
New Zealanders who, until they are feeling more financially
secure, may not increase their contributions.

“I think
many New Zealanders will, because the default will be that
you instantly go to that higher rate and people will have to
think very carefully about whether they want to save
less.”

© Scoop Media