July 30, 2024 • 19 mins
The Government’s long-awaited tax cuts are finally coming into effect from today.
National campaigned strongly on the cuts, and on Budget Day announced a $14 billion tax package for the next four years.
The average Kiwi should soon receive an extra $40 a fortnight to spend how they wish, with more benefits coming for parents, but the lowest income earners are only set to gain $9.
So, is this tax package fair for all – and will it provide the cost of living relief the Government promised?
Today on The Front Page, we’ll get the political rundown from New Zealand Herald deputy political editor, and On the Tiles podcast co-host, Thomas Coughlan, and then get insight on how to best use your tax cut from Auckland Central Budgeting’s Teresa White.
Follow The Front Page on iHeartRadio, Apple Podcasts, Spotify or wherever you get your podcasts.
You can read more about this and other stories in the New Zealand Herald, online at nzherald.co.nz, or tune in to news bulletins across the NZME network.
Host: Georgina Campbell
Sound Engineer: Paddy Fox
Producer: Ethan Sills
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:04):
Kyoda. I'm Georgina Campbell in for Chelsea Daniels and this
is the Front Page, a daily podcast presented by the
New Zealand Herald. The government's long awaited tax cuts are
finally coming into effect from today. National campaigned strongly on
(00:26):
the cuts and on Budget Day announced a fourteen billion
dollar tax package for the next four years. The average
kiwi should soon receive an extra forty dollars a fortnight
to spend how they wish, with more benefits coming for parents,
but the lowest income earners are only set to gain
(00:46):
nine dollars. So is this tax package fair for all?
And will it provide the cost of living relief the
government promised? Later we'll get more inside on how to
best use your tax cut from Auckland Central Budgetings Theresa White.
But first on the front Page, we'll get the political
(01:09):
rundown from New Zealand Herald Deputy Political editor and my
on the Tiles podcast co host Thomas Cocklin. Thomas, who
are the winners and losers from the tax cuts and
working for families changes coming into effect?
Speaker 2 (01:28):
So the big winners are people who work and all
of those workers proportionately. It's people who and what you'd
call the middle income range a sort of sixty thousand
dollars popping up seventy thousand dollars. The government made the
decision or not to abolish or to shift that top
rate of tax, which is thirty nine percent on income
(01:49):
and over one hundred and eighty thousand dollars. So that
basically means that after about seventy thousand dollars, you don't
get any more money from this tax package than you
would otherwise. So someone earning say five hundred thousand dollars
would get the same from the tax cut part of
it as someone earning about eight thousand dollars. Roughly there
is I think the best way to think about the
(02:10):
tax package is as two parts. One of it is
just cutting your taxes. When you work, obviously, you pay
tax at a rate which is determined by how much
money you earn. What the government has done is adjusted
all those brackets up would by eleven point five percent.
Thereabout system changes apart from that top tax bracket, and
that basically means that if you have a job, you
(02:31):
will pay slightly less of your income and tax. That's
the first part, very easy to understand. The second part
is that. There are a number of schemes that the
government has which are situational and that changes how much
money you get depending on your situation in life. So
the biggest part of that is probably a Family boost
tax credit. Now that is for young families who have
(02:51):
children in early childhood education. You can get up to
seventy five dollars a week from that, which is a
tax credit that basically world it's like a rebate on
your early childhood costs. So you pay money for early
childhood education and then at the end of every quarter,
I believe id will give you a refund of some
of your costs up to seventy five dollars a week.
(03:13):
So that's a fairly massive tax cut. And as far
as the income tax cuts are concerned, the most you
can really get is about twenty dollars a week, but
obviously you only get that if you have a young
child in early childhood education and you spend rather a
lot of money on early childhood education. So it is
a lot of money, but not a lot of people
get it. The other couple of things are changed to
(03:33):
working for families, so that's a few hundred thousand families
who are in work not on a benefit, they get
more money through what's called an inwork tax credit up
to fifty dollars a week. That is a very common
tax credit. Many load of middle income families who work
get it. Some people possibly even don't even know that
they get it. It was introduced by Labor many years
ago by the Hell and Clark government, and so that
(03:55):
it's periodically adjusted. Labor was looking at adjusting it to
it the election stune app So there you go. And
the other one, the real hidden gem of this tax package,
I think, is the Independent Earner tax Credit. This is
a tax credit of ten dollars a week which is
designed for people who don't have children and who aren't
on a benefit, that are the sort of struggling middle
(04:15):
if you like. So it has an income floor, so
it means that if you're sort of a kid on
a paper run, you don't get this tax credit. But
if you basically if you have a full time job
but you don't earn a whole lot of money, you're
quite likely to get it. It's a ten dollars a
week bolt onto the tax system. And what it basically
means is that people who are on middle incomes, who
aren't receiving any other support from the government. Think about
(04:38):
someone in their twenties or thirties who doesn't have kids,
working hard but probably not hitting the peak of their
owning potential. They get an extra ten dollars a week
through this tax credit, and that basically means that someone
who's earning sixty five thousand dollars I think it caps
out at sixty six it starts abating at sixty six
thousand dollars now can take home about forty five dollars
a fortnight from this package. So that's quite a lot
(05:00):
of money for a text package, and it does help
to kind of tilt the balance a wee bit at
middle incomes. So what the government's done with the Independent
and A tax creator has basically expanded its eligibility. It
used to cut off much lower because inflations eroded the
value of that. They've expanded the eligibility. So now it
starts cutting off and I thinks sixty six thousand dollars
and it's all gone by seventy thousand dollars, So that
(05:23):
basically means that more people will be able to get it.
Speaker 3 (05:27):
This program has actually been designed to actually cap out
so that actually someone like me, yes gets twenty dollars
a week, but actually someone who's on lower middle income
actually gets more than I get. That's exactly how it's
been designed for lower middle income workers who actually that
squeezed middle That's what we've done here. We've just lifted
the tax brackets up and then we've kepped them at
the top level.
Speaker 2 (05:50):
Now I'm getting around to the losers. The losers are
beneficiaries who get nothing, and some people who are part
time on the benefit will lose a small amount of
money in order to for the scheme. One of the
things that has been cut labors twenty hours of pre
early childhood education being expanded to two roles. That's gone now.
And the benefit and vexation changes that Labor had introduced,
(06:11):
which meant that benefits would rise faster than they would otherwise. Well,
those who have been rolled back to people who are
on a benefit are not going to see the benefits
rise as much as they would have done under Labor.
So it's a real rebalancing of the transfer system towards
young families and people who work against people who are
on a benefit. And you can sort of see that
(06:32):
at the election. Young women were the target voters for
both parties, and so that early childhood education was designed
to be a policy that appealed to those voters.
Speaker 1 (06:41):
This was obviously a major campaign promise for the government.
How are they selling these tax cuts this week? And
what does the opposition have to say about the cuts?
Speaker 2 (06:53):
It is excruciating. The government is selling them via social
media blitz, they arranged post cabinet press conference around them.
I mean, obviously, it's a fourteen billion dollar tax package
over four years. It's a huge amount of money, so
you'd expect them to make sure they get a good
bang for their buck out of it. But I don't
think New Zealanders will be able to move in the
(07:15):
next few weeks without hearing some government minister talk about
how great it is that New Zealanders are getting to
keep more of their income. To be feared that it's
the first time in fourteen years that the tax system
has been substantially adjusted like this, so that actually is
quite a big deal. Marginal tax rates did creep up
for many New Zealanders, and it would have meant that
this year, for the first time, someone earning the full
(07:36):
time minimum wage would have had it part of their
income tax at thirty percent. Not much, It would have
only been a few hundred dollars tax at thirty percent,
but it would be quite a historic event to see
someone on the minimum wage, working full time being taxed
at such a high rate. You can see why they're
crying about it because it's quite significant obviously that it
has come at a large cost. So labors sort of
(07:57):
working up many examples of areas where the things that
have been cut to pay for them would have made
a greater difference to household budgets than the amount of
money people will receive and tax cut. So I've got
an example of a household income of one hundred and
twenty thousand, which is two people earning sixty thousand each.
And they look at sort of cuts to public transport subsidies,
(08:21):
the prescription charge which has been reinstated, rates and insurance
costs that have gone up, just to make the case
that these tax cuts will obviously give people some money,
but they will take it away in other areas and
in some cases, in many cases, some people will be
worse off at the end of the day. Interestingly, I
spoke to Chris Sipkins, the labor leader on my podcast
(08:44):
last week, and he didn't make the point that eventually
Labor was going to have to look at adjusting the
text thresholds, because if you don't adjust them, then people
do start to get text at too high a rate
of tax.
Speaker 4 (08:57):
Fiscal drag is a problem. I acknowledge that fiscal drag
is a problem. We should always look at how we
can support people on the lowest incomes, and text is
one of those ways. But also one of the debates
about income text that frustrates me is that the parties
on the center right of the political spectrum have been
stressing for decades now that the way you raise people's
incomes is to cut their taxes. Actually, the way you
raise their incomes is to make sure they're big paid more.
Speaker 2 (09:21):
And now obviously Labour's having this discussion about what will
probably be a text switch of some kind of capital
gains tax perhaps which will allow them to cut and
come text breads elsewhere. But at the moment they're looking
at the cost of living hacks that Labor had at
the last election, which did reduce people spending in certain areas,
and the fact that actually, you know, the tax cuts
at the end of the day might not be worth
(09:43):
some of those more targeted and dimensions that labor had.
Speaker 1 (09:45):
One thing that could eat into these tax cuts that
sticks out for me, it's the sky high rates increases
that councils around the country have just signed off on.
But could there be more relief coming late this year
with cuts to the official cash rate looking likely.
Speaker 2 (10:05):
It depends on everyone's circumstance. So two thirds of households
own their own house. In March of this year, LGNZ
published figures that said there would be an average rates
rise of fifteen percent, which is huge CPI and FLASH
and was tracking to come into the one to three
percent band by the end of this year. Fifteen percent
is a massive so certainly what the government returns to
(10:26):
some households will be more than easing up by councils,
and that is that is certainly something that the government
is frustrated with. So there were oftenly a third of
households own a house without a mortgage. Many of those
are retirees. New New Zealand has just under a million
people who collect superannuation and are retired. Many of them
will own their homes outright without a mortgage, although some
do still have a mortgage. A growing number. A third
(10:49):
of households own their home with a mortgage, and I
think have an average mortgage of less than three hundred
thousand dollars. Another third of households don't have a house
and therefore I don't have a mortgage. We have seen
some evidence of rents moderating, so that third that rents
might get some overdue relief. Rents have gone up massively
the last few years, and yes, so as the year
goes on, we've already seen the wholesale interest rates start
(11:12):
to show signs of easing, which will we eventually passed
on to people who have a mortgage. And the amount
of pain that will relieve already depend on the size
of someone's mortgage. So if you're in that third of
households that does have a mortgage, certainly, if you have
one of those larger mortgages, you know, my heart goes
out to you because you've been on the front line
of this interest rate spike and you've been doing the
(11:32):
heavy lifting to reduce inflation. So some relief to those
households will finally be coming. Obviously, if you have a
smaller mortgage, you'll get proportionately less relief, but of course
the cost of living prices probably hasn't hit you like
it's at other households, because you know the interest rate
hikes that you will have had on your rather smaller mortgage,
what WI you have actually fed through into your household
(11:53):
budgets as much anyway, So you know, swings and roundabouts.
Speaker 1 (11:56):
Thanks so much for joining us, Thomas. The government has
sold these tax cuts as relief for struggling kiwi's so
how far is that relief going to be felt by
(12:16):
the average worker? To discuss more, we're now joined on
the front page by Auckland Central Budgeting's General manager Theresa White. Theresa,
what do you make of these tax cuts, like how
far will they go to providing people relief from the
(12:37):
cost of living?
Speaker 5 (12:38):
Well, I mean, I think we all appreciate a little
bit of money in a bake pocket right now. So
it is tough out there. It's tough for everyone. Everyone's
struggling in their own way. Our numbers have increased year
on year in terms of people coming in to see us.
Speaker 6 (12:55):
We've had a.
Speaker 5 (12:58):
Probably one hundred percent increase in case numbers in the
last couple of years and across the board throughout the country.
Services like ours have had the man and forty percent
increase in people coming in and using our services. So
that kind of indicates that there's a level of financial
distress out there that it's a little bit unprecedented. I've
(13:19):
never seen it in the time that I've been working
in our service, and it's gotten more since COVID. But yeah,
a little bit of money is good, and I think
that a shift in the tax bracket is long over due.
But I think if it's at the expense of essential services,
my personal values is that I would much rather make
(13:40):
sure that everything's paid for properly. Some of the people
at the lower end of the income scale aren't going
to see any real relief at all, So it is
really you know, beneficiaries, people on low incomes are it's
going to be very, very nominal and they're just not
going to see it. It's just going to go straight
on household expenses, living expenses, for costs.
Speaker 1 (14:02):
And when you say you know that people are really
struggling and you're seeing more people through your doors, can
you give some examples of the types of things that
they're struggling with.
Speaker 5 (14:14):
Yeah, So, I mean we have had an increase with
people under more good stress. So that's definitely grown in
the last year. It's the interest rates that have gone up.
Its people that have bought recently. People are losing their
jobs and then struggling to pay mortgages and with the
higher interest rates that makes it much harder.
Speaker 6 (14:33):
That's a big thing going on, and.
Speaker 5 (14:37):
It's just those little things and these are some of
the things that happen traditionally, but it's getting a little
bit more market and pointed. You know, we've got super
innuitance who aren't using heaters in the middle the winter
because they're having to make the choice between buying food
and putting the heat on, and that's not okay. You know,
we've got an aging population in a period of time
(14:57):
where we've got lots of people going into retirement who
don't own their own home outright, So we're going to
see kind of even more stress on that as time
goes on. And when times the good people take on
dish and then something happens and they can'tfford to pay it.
And that's one of the biggest things that people come
to see us about is debts that they've got and
(15:20):
more and more is just the general cost of living.
So like with the tax relief across the board, it
might be fifteen to twenty dollars for kind of average
to middle income that our rents in Auckland have gone
up by about forty bucks a week over the last year,
so it just gets canceled out in terms of that relief.
So yeah, it's going to help a little bit.
Speaker 6 (15:41):
But it's not going to make a major impact to
most petal swifts.
Speaker 7 (15:49):
Sam Summers runs a small business delivering food during the week.
But along with today's onions, he also had this interpretation
of his government tax cut.
Speaker 2 (16:00):
Is what the tax cuts represents to me? For me,
it is equivalent of two dollars fifteen a week or
free chubber chop lollipops.
Speaker 1 (16:11):
What do you think people will be spending their tax
cuts on to improve their situation? You know, given their
existing costs are already so high, you know, do you
think they'll be putting that money towards paying off debt
or mortgages or be soaked up by other household costs?
Speaker 5 (16:30):
Yeah, well, I mean my expectation is that most people's
tax cuts will likely be swallowed by household bills.
Speaker 6 (16:36):
I mean, if you kind of do a bit of
the math. I just did a quick calculation for me.
Speaker 5 (16:41):
I'm set to get maybe fifteen dollars a week, but
my rates are going up, and my insurance has gone up,
and I have to pay full price for my daughter's
school bus fares, and the doctors have gone up and
all of those things.
Speaker 6 (16:58):
So I think that's the thing.
Speaker 5 (16:59):
It will help pay for those things that are already
risen or already gone and kind of bring us back
to where we were maybe six months ago. But it's
my expectation it's going to get swallowed by household living costs.
If you are lucky enough to have it as extra
money in your back pocket, I would just suggest people
save and build up a buffer.
Speaker 6 (17:21):
That's my biggest.
Speaker 5 (17:22):
Learning from where I work is that people don't have
money put aside, and when times are tough, they've got
nothing to dip into. So I would really encourage people
to do that, and yeah, pay down debt, get rid
of it while you can. And it's just that interest
on debt as an absolute killer.
Speaker 1 (17:39):
What else would you like to see from the government
to improve people's lives and relation to the cost of living?
If most of these tax cuts for some people are
just going to be eaten up immediately.
Speaker 5 (17:52):
One thing is our benefits are very very low, and
I you know, there's a lot of talk about how
that works, but we see people who literally just don't
have enough money to pay for food so after rent costs,
so rents are really high. So if we have something
that can help bring rents down to make people's lives
affordable even housing costs, you know, there is some fundamental stuff.
(18:14):
And you've got rents, how much they've increased. So we've
gone from maybe you know, thirty percent of your income,
which is still pretty high, to fifty percent of your
income and then even maybe more so people are paying
up to eighty percent of their income just to put a.
Speaker 6 (18:28):
Roof over their head. So that's one of the things
that really needs to change, I think in our world,
you know.
Speaker 5 (18:35):
And there's been some good stuff with it, you know,
the family tax credits and we're tax credits, so they've
been risen, but the threshold the entry threatshold to get
them hasn't. So that would be really good to lift
that as well, so more people can access that support
and to make it available for beneficiaries as well. So
what I say is We've got a little bit of
adjustment for you know, low to middle income workers and
(18:59):
those in the h higher brackets, but those in the
lower thresholds have really really missed out in this package,
so that gap between the haves and the have nots
is widen considerably again, and I don't think that that's
good for society.
Speaker 1 (19:13):
Thanks so much for joining us, Theresa, I really appreciate
your time. That's it for this episode of the Front Page.
You can read more about today's stories and extensive news
coverage at zidherld dot co dot mzed. The Front Page
is produced by Ethan Sills and sound engineer Patti Fox.
(19:37):
I'm Georgina Campbell. Subscribe to The Front Page on iHeartRadio
or wherever you get your podcasts, and tune in tomorrow
for another look behind the headlines.
Kyoda. I'm Georgina Campbell in for Chelsea Daniels and this
is the Front Page, a daily podcast presented by the
New Zealand Herald. The government's long awaited tax cuts are
finally coming into effect from today. National campaigned strongly on
(00:26):
the cuts and on Budget Day announced a fourteen billion
dollar tax package for the next four years. The average
kiwi should soon receive an extra forty dollars a fortnight
to spend how they wish, with more benefits coming for parents,
but the lowest income earners are only set to gain
(00:46):
nine dollars. So is this tax package fair for all?
And will it provide the cost of living relief the
government promised? Later we'll get more inside on how to
best use your tax cut from Auckland Central Budgetings Theresa White.
But first on the front Page, we'll get the political
(01:09):
rundown from New Zealand Herald Deputy Political editor and my
on the Tiles podcast co host Thomas Cocklin. Thomas, who
are the winners and losers from the tax cuts and
working for families changes coming into effect?
Speaker 2 (01:28):
So the big winners are people who work and all
of those workers proportionately. It's people who and what you'd
call the middle income range a sort of sixty thousand
dollars popping up seventy thousand dollars. The government made the
decision or not to abolish or to shift that top
rate of tax, which is thirty nine percent on income
(01:49):
and over one hundred and eighty thousand dollars. So that
basically means that after about seventy thousand dollars, you don't
get any more money from this tax package than you
would otherwise. So someone earning say five hundred thousand dollars
would get the same from the tax cut part of
it as someone earning about eight thousand dollars. Roughly there
is I think the best way to think about the
(02:10):
tax package is as two parts. One of it is
just cutting your taxes. When you work, obviously, you pay
tax at a rate which is determined by how much
money you earn. What the government has done is adjusted
all those brackets up would by eleven point five percent.
Thereabout system changes apart from that top tax bracket, and
that basically means that if you have a job, you
(02:31):
will pay slightly less of your income and tax. That's
the first part, very easy to understand. The second part
is that. There are a number of schemes that the
government has which are situational and that changes how much
money you get depending on your situation in life. So
the biggest part of that is probably a Family boost
tax credit. Now that is for young families who have
(02:51):
children in early childhood education. You can get up to
seventy five dollars a week from that, which is a
tax credit that basically world it's like a rebate on
your early childhood costs. So you pay money for early
childhood education and then at the end of every quarter,
I believe id will give you a refund of some
of your costs up to seventy five dollars a week.
(03:13):
So that's a fairly massive tax cut. And as far
as the income tax cuts are concerned, the most you
can really get is about twenty dollars a week, but
obviously you only get that if you have a young
child in early childhood education and you spend rather a
lot of money on early childhood education. So it is
a lot of money, but not a lot of people
get it. The other couple of things are changed to
(03:33):
working for families, so that's a few hundred thousand families
who are in work not on a benefit, they get
more money through what's called an inwork tax credit up
to fifty dollars a week. That is a very common
tax credit. Many load of middle income families who work
get it. Some people possibly even don't even know that
they get it. It was introduced by Labor many years
ago by the Hell and Clark government, and so that
(03:55):
it's periodically adjusted. Labor was looking at adjusting it to
it the election stune app So there you go. And
the other one, the real hidden gem of this tax package,
I think, is the Independent Earner tax Credit. This is
a tax credit of ten dollars a week which is
designed for people who don't have children and who aren't
on a benefit, that are the sort of struggling middle
(04:15):
if you like. So it has an income floor, so
it means that if you're sort of a kid on
a paper run, you don't get this tax credit. But
if you basically if you have a full time job
but you don't earn a whole lot of money, you're
quite likely to get it. It's a ten dollars a
week bolt onto the tax system. And what it basically
means is that people who are on middle incomes, who
aren't receiving any other support from the government. Think about
(04:38):
someone in their twenties or thirties who doesn't have kids,
working hard but probably not hitting the peak of their
owning potential. They get an extra ten dollars a week
through this tax credit, and that basically means that someone
who's earning sixty five thousand dollars I think it caps
out at sixty six it starts abating at sixty six
thousand dollars now can take home about forty five dollars
a fortnight from this package. So that's quite a lot
(05:00):
of money for a text package, and it does help
to kind of tilt the balance a wee bit at
middle incomes. So what the government's done with the Independent
and A tax creator has basically expanded its eligibility. It
used to cut off much lower because inflations eroded the
value of that. They've expanded the eligibility. So now it
starts cutting off and I thinks sixty six thousand dollars
and it's all gone by seventy thousand dollars, So that
(05:23):
basically means that more people will be able to get it.
Speaker 3 (05:27):
This program has actually been designed to actually cap out
so that actually someone like me, yes gets twenty dollars
a week, but actually someone who's on lower middle income
actually gets more than I get. That's exactly how it's
been designed for lower middle income workers who actually that
squeezed middle That's what we've done here. We've just lifted
the tax brackets up and then we've kepped them at
the top level.
Speaker 2 (05:50):
Now I'm getting around to the losers. The losers are
beneficiaries who get nothing, and some people who are part
time on the benefit will lose a small amount of
money in order to for the scheme. One of the
things that has been cut labors twenty hours of pre
early childhood education being expanded to two roles. That's gone now.
And the benefit and vexation changes that Labor had introduced,
(06:11):
which meant that benefits would rise faster than they would otherwise. Well,
those who have been rolled back to people who are
on a benefit are not going to see the benefits
rise as much as they would have done under Labor.
So it's a real rebalancing of the transfer system towards
young families and people who work against people who are
on a benefit. And you can sort of see that
(06:32):
at the election. Young women were the target voters for
both parties, and so that early childhood education was designed
to be a policy that appealed to those voters.
Speaker 1 (06:41):
This was obviously a major campaign promise for the government.
How are they selling these tax cuts this week? And
what does the opposition have to say about the cuts?
Speaker 2 (06:53):
It is excruciating. The government is selling them via social
media blitz, they arranged post cabinet press conference around them.
I mean, obviously, it's a fourteen billion dollar tax package
over four years. It's a huge amount of money, so
you'd expect them to make sure they get a good
bang for their buck out of it. But I don't
think New Zealanders will be able to move in the
(07:15):
next few weeks without hearing some government minister talk about
how great it is that New Zealanders are getting to
keep more of their income. To be feared that it's
the first time in fourteen years that the tax system
has been substantially adjusted like this, so that actually is
quite a big deal. Marginal tax rates did creep up
for many New Zealanders, and it would have meant that
this year, for the first time, someone earning the full
(07:36):
time minimum wage would have had it part of their
income tax at thirty percent. Not much, It would have
only been a few hundred dollars tax at thirty percent,
but it would be quite a historic event to see
someone on the minimum wage, working full time being taxed
at such a high rate. You can see why they're
crying about it because it's quite significant obviously that it
has come at a large cost. So labors sort of
(07:57):
working up many examples of areas where the things that
have been cut to pay for them would have made
a greater difference to household budgets than the amount of
money people will receive and tax cut. So I've got
an example of a household income of one hundred and
twenty thousand, which is two people earning sixty thousand each.
And they look at sort of cuts to public transport subsidies,
(08:21):
the prescription charge which has been reinstated, rates and insurance
costs that have gone up, just to make the case
that these tax cuts will obviously give people some money,
but they will take it away in other areas and
in some cases, in many cases, some people will be
worse off at the end of the day. Interestingly, I
spoke to Chris Sipkins, the labor leader on my podcast
(08:44):
last week, and he didn't make the point that eventually
Labor was going to have to look at adjusting the
text thresholds, because if you don't adjust them, then people
do start to get text at too high a rate
of tax.
Speaker 4 (08:57):
Fiscal drag is a problem. I acknowledge that fiscal drag
is a problem. We should always look at how we
can support people on the lowest incomes, and text is
one of those ways. But also one of the debates
about income text that frustrates me is that the parties
on the center right of the political spectrum have been
stressing for decades now that the way you raise people's
incomes is to cut their taxes. Actually, the way you
raise their incomes is to make sure they're big paid more.
Speaker 2 (09:21):
And now obviously Labour's having this discussion about what will
probably be a text switch of some kind of capital
gains tax perhaps which will allow them to cut and
come text breads elsewhere. But at the moment they're looking
at the cost of living hacks that Labor had at
the last election, which did reduce people spending in certain areas,
and the fact that actually, you know, the tax cuts
at the end of the day might not be worth
(09:43):
some of those more targeted and dimensions that labor had.
Speaker 1 (09:45):
One thing that could eat into these tax cuts that
sticks out for me, it's the sky high rates increases
that councils around the country have just signed off on.
But could there be more relief coming late this year
with cuts to the official cash rate looking likely.
Speaker 2 (10:05):
It depends on everyone's circumstance. So two thirds of households
own their own house. In March of this year, LGNZ
published figures that said there would be an average rates
rise of fifteen percent, which is huge CPI and FLASH
and was tracking to come into the one to three
percent band by the end of this year. Fifteen percent
is a massive so certainly what the government returns to
(10:26):
some households will be more than easing up by councils,
and that is that is certainly something that the government
is frustrated with. So there were oftenly a third of
households own a house without a mortgage. Many of those
are retirees. New New Zealand has just under a million
people who collect superannuation and are retired. Many of them
will own their homes outright without a mortgage, although some
do still have a mortgage. A growing number. A third
(10:49):
of households own their home with a mortgage, and I
think have an average mortgage of less than three hundred
thousand dollars. Another third of households don't have a house
and therefore I don't have a mortgage. We have seen
some evidence of rents moderating, so that third that rents
might get some overdue relief. Rents have gone up massively
the last few years, and yes, so as the year
goes on, we've already seen the wholesale interest rates start
(11:12):
to show signs of easing, which will we eventually passed
on to people who have a mortgage. And the amount
of pain that will relieve already depend on the size
of someone's mortgage. So if you're in that third of
households that does have a mortgage, certainly, if you have
one of those larger mortgages, you know, my heart goes
out to you because you've been on the front line
of this interest rate spike and you've been doing the
(11:32):
heavy lifting to reduce inflation. So some relief to those
households will finally be coming. Obviously, if you have a
smaller mortgage, you'll get proportionately less relief, but of course
the cost of living prices probably hasn't hit you like
it's at other households, because you know the interest rate
hikes that you will have had on your rather smaller mortgage,
what WI you have actually fed through into your household
(11:53):
budgets as much anyway, So you know, swings and roundabouts.
Speaker 1 (11:56):
Thanks so much for joining us, Thomas. The government has
sold these tax cuts as relief for struggling kiwi's so
how far is that relief going to be felt by
(12:16):
the average worker? To discuss more, we're now joined on
the front page by Auckland Central Budgeting's General manager Theresa White. Theresa,
what do you make of these tax cuts, like how
far will they go to providing people relief from the
(12:37):
cost of living?
Speaker 5 (12:38):
Well, I mean, I think we all appreciate a little
bit of money in a bake pocket right now. So
it is tough out there. It's tough for everyone. Everyone's
struggling in their own way. Our numbers have increased year
on year in terms of people coming in to see us.
Speaker 6 (12:55):
We've had a.
Speaker 5 (12:58):
Probably one hundred percent increase in case numbers in the
last couple of years and across the board throughout the country.
Services like ours have had the man and forty percent
increase in people coming in and using our services. So
that kind of indicates that there's a level of financial
distress out there that it's a little bit unprecedented. I've
(13:19):
never seen it in the time that I've been working
in our service, and it's gotten more since COVID. But yeah,
a little bit of money is good, and I think
that a shift in the tax bracket is long over due.
But I think if it's at the expense of essential services,
my personal values is that I would much rather make
(13:40):
sure that everything's paid for properly. Some of the people
at the lower end of the income scale aren't going
to see any real relief at all, So it is
really you know, beneficiaries, people on low incomes are it's
going to be very, very nominal and they're just not
going to see it. It's just going to go straight
on household expenses, living expenses, for costs.
Speaker 1 (14:02):
And when you say you know that people are really
struggling and you're seeing more people through your doors, can
you give some examples of the types of things that
they're struggling with.
Speaker 5 (14:14):
Yeah, So, I mean we have had an increase with
people under more good stress. So that's definitely grown in
the last year. It's the interest rates that have gone up.
Its people that have bought recently. People are losing their
jobs and then struggling to pay mortgages and with the
higher interest rates that makes it much harder.
Speaker 6 (14:33):
That's a big thing going on, and.
Speaker 5 (14:37):
It's just those little things and these are some of
the things that happen traditionally, but it's getting a little
bit more market and pointed. You know, we've got super
innuitance who aren't using heaters in the middle the winter
because they're having to make the choice between buying food
and putting the heat on, and that's not okay. You know,
we've got an aging population in a period of time
(14:57):
where we've got lots of people going into retirement who
don't own their own home outright, So we're going to
see kind of even more stress on that as time
goes on. And when times the good people take on
dish and then something happens and they can'tfford to pay it.
And that's one of the biggest things that people come
to see us about is debts that they've got and
(15:20):
more and more is just the general cost of living.
So like with the tax relief across the board, it
might be fifteen to twenty dollars for kind of average
to middle income that our rents in Auckland have gone
up by about forty bucks a week over the last year,
so it just gets canceled out in terms of that relief.
So yeah, it's going to help a little bit.
Speaker 6 (15:41):
But it's not going to make a major impact to
most petal swifts.
Speaker 7 (15:49):
Sam Summers runs a small business delivering food during the week.
But along with today's onions, he also had this interpretation
of his government tax cut.
Speaker 2 (16:00):
Is what the tax cuts represents to me? For me,
it is equivalent of two dollars fifteen a week or
free chubber chop lollipops.
Speaker 1 (16:11):
What do you think people will be spending their tax
cuts on to improve their situation? You know, given their
existing costs are already so high, you know, do you
think they'll be putting that money towards paying off debt
or mortgages or be soaked up by other household costs?
Speaker 5 (16:30):
Yeah, well, I mean my expectation is that most people's
tax cuts will likely be swallowed by household bills.
Speaker 6 (16:36):
I mean, if you kind of do a bit of
the math. I just did a quick calculation for me.
Speaker 5 (16:41):
I'm set to get maybe fifteen dollars a week, but
my rates are going up, and my insurance has gone up,
and I have to pay full price for my daughter's
school bus fares, and the doctors have gone up and
all of those things.
Speaker 6 (16:58):
So I think that's the thing.
Speaker 5 (16:59):
It will help pay for those things that are already
risen or already gone and kind of bring us back
to where we were maybe six months ago. But it's
my expectation it's going to get swallowed by household living costs.
If you are lucky enough to have it as extra
money in your back pocket, I would just suggest people
save and build up a buffer.
Speaker 6 (17:21):
That's my biggest.
Speaker 5 (17:22):
Learning from where I work is that people don't have
money put aside, and when times are tough, they've got
nothing to dip into. So I would really encourage people
to do that, and yeah, pay down debt, get rid
of it while you can. And it's just that interest
on debt as an absolute killer.
Speaker 1 (17:39):
What else would you like to see from the government
to improve people's lives and relation to the cost of living?
If most of these tax cuts for some people are
just going to be eaten up immediately.
Speaker 5 (17:52):
One thing is our benefits are very very low, and
I you know, there's a lot of talk about how
that works, but we see people who literally just don't
have enough money to pay for food so after rent costs,
so rents are really high. So if we have something
that can help bring rents down to make people's lives
affordable even housing costs, you know, there is some fundamental stuff.
(18:14):
And you've got rents, how much they've increased. So we've
gone from maybe you know, thirty percent of your income,
which is still pretty high, to fifty percent of your
income and then even maybe more so people are paying
up to eighty percent of their income just to put a.
Speaker 6 (18:28):
Roof over their head. So that's one of the things
that really needs to change, I think in our world,
you know.
Speaker 5 (18:35):
And there's been some good stuff with it, you know,
the family tax credits and we're tax credits, so they've
been risen, but the threshold the entry threatshold to get
them hasn't. So that would be really good to lift
that as well, so more people can access that support
and to make it available for beneficiaries as well. So
what I say is We've got a little bit of
adjustment for you know, low to middle income workers and
(18:59):
those in the h higher brackets, but those in the
lower thresholds have really really missed out in this package,
so that gap between the haves and the have nots
is widen considerably again, and I don't think that that's
good for society.
Speaker 1 (19:13):
Thanks so much for joining us, Theresa, I really appreciate
your time. That's it for this episode of the Front Page.
You can read more about today's stories and extensive news
coverage at zidherld dot co dot mzed. The Front Page
is produced by Ethan Sills and sound engineer Patti Fox.
(19:37):
I'm Georgina Campbell. Subscribe to The Front Page on iHeartRadio
or wherever you get your podcasts, and tune in tomorrow
for another look behind the headlines.
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