The Budget Policy Statement is usually just a small blip on most people’s radars each year – but not so for 2024. Why is that?
A Budget Policy Statement (BPS) sets out a Government’s priorities and goals for its annual Budget.
The BPS also details what the economic environment is like for making those looming Budget decisions – that is, how much money the Government has to work with.
But the increased interest in this year’s Budget Policy Statement essentially boils down to one thing: tax cuts.
National’s election campaign promised to deliver tax cuts this year, and Prime Minister Christopher Luxon and Finance Minister Nicola Willis have been adamant those tax cuts are still coming.
Willis went as far as saying last year that she would resign as Finance Minister if National failed to deliver its tax reduction plan.
However, there has been much debate over whether the Government can afford those tax cuts National campaigned on.
Even Deputy Prime Minister Winston Peters appeared to confirm a recent Sunday Star Times analysis that said the Government was facing a significant fiscal hole during his infamous ‘State of the Nation’ speech 10 days ago.
Peters used part of that speech to attack the previous government’s management of the country’s finances, something Willis and Luxon have also been doing ever since taking over the books.
It’s common for governments to blame previous administrations when there are difficult decisions to make and that tactic will likely be deployed again today.
So, can the Government afford its tax cuts?
The International Monetary Fund (IMF) cautioned the Government last week about spending on tax cuts.
Willis responded to that warning, saying: “We are being careful because we are not going to be delivering tax cuts that require us to borrow more.”
But the funding for those tax cuts does need to come from somewhere.
Some of National’s original plans for raising the required revenue – like a tax on foreign home buyers – are no longer on the table after coalition negotiations put an end to them.
This means the Government will likely need to cut spending in other areas, cast aside some election promises, or rethink the size of those tax cuts.
New Zealanders will still need to wait until the Budget itself to get the full picture of what the Government has planned for people’s back pockets – but today’s BPS should offer some clues as to what is coming on May 30.
You can read about what was revealed in the BPS at 1News.co.nz from 1pm today