Prime Minister Chris Hipkins has ruled out an additional levy to pay for the recovery from Cyclone Gabrielle and the Auckland floods, and says the upcoming Budget will be "no frills".
He has also ruled out a capital gains or wealth tax from the 18 May Budget - but this leaves open the option for Labour to campaign on such a move at this year's election.
In his pre-Budget speech at the Employers and Manufacturers Association offices in West Auckland, Hipkins laid out some of the government's thinking ahead of unveiling its spending decisions on Budget Day.
Hipkins said he had made cost of living one of his top priorities in his time as prime minister.
"The government previously was doing too much, too fast, and the effect of that is that we've been tied up on those issues, taking up time and taking time and money away from where our focus needs to be.
"I want to be really clear I acknowledge that times are pretty tough for a lot of new Zealanders right now. I get that and I hear that from my local community in the Hutt Valley. Family budgets are tight and a lot of people are now going without. It puts a lot of stress on families and on parents."
Hipkins said he knew it had not been easy and the government probably had not acknowledged it enough.
"There does come a point where businesses have no choice but to increase costs."
The government will have to be weighing its spending priorities carefully this year, with the cost of living continuing to rise and the costs of Cyclone Gabrielle likely putting a real dent in Hipkins' and Finance Minister Grant Robertson's ambitions.
The speech also follows the release a day prior of a tax report by Inland Revenue and Treasury which found the country's wealthiest were paying tax at a much lower rate of their total income than most New Zealanders.
The median effective tax for those with a net worth of $50 million was calculated at 9.4 percent - well shy of the 20.2 percent paid by "middle wealth New Zealanders".
While Revenue Minister David Parker insisted the report was not an excuse to attack the rich, the report has prompted speculation Labour was preparing to revive a campaign to bring in a capital gains tax.
Hipkins said Treasury had put the cost of asset damage from the Auckland floods and Cyclone Gabrielle at between $9 billion and $14.5b but - despite some suggestions a levy could be brought in to pay for this - the costs could be largely met within the Budget's operating and capital allowances.
However, some borrowing would also be required.
"While Auckland and the eastern parts of New Zealand have had it pretty tough lately, you have demonstrated your resilience time and again," Hipkins said.
"In a cost-of-living crisis, now is not the time to be asking Kiwis to pay more though a levy for cyclone repair costs.
"The government has taken the decision to fund the recovery from here on through a combination of the annual operating and capital allowances we set each year for the Budget, savings and reprioritisations, and some debt as we invest in infrastructure repairs."
He said the expected cost of the recovery was higher than for the Kaikoura earthquake, but significantly less than the Canterbury quakes.
"Half of the total estimated costs relate to 'public infrastructure' - assets owned by central and local government such as roads. The bill for these assets is usually spread over a longer period, so it is appropriate to do so for this."
"I think of it like this: when you have to do major repairs to your house you usually have to borrow a little and cut back on expenses elsewhere. Households generally can't increase their income to pay for repairs, and it is not the right time for the government to either."
He said in the past three months the government had extended the fuel excise subsidy and half-price public transport, and increased support for superannuitants and minimum wage earners.
Hipkins ruled out any major tax changes in the upcoming Budget, saying while Wednesday's report on the tax paid by high-wealth New Zealanders had highlighted gaps, the government would stick with the tax policy announced at the last election.
"The government will not introduce any major tax changes like a wealth tax or CGT in this Budget," he said.
He highlighted "restraint" as a key message of the upcoming Budget.
"We are taking a balanced approach that reduces our spending while also delivering core services," he said.
"This will be an orthodox no-frills Budget focused on funding the things most important to New Zealanders like support with the cost of living and cyclone recovery. There will also not be any major new tax changes like a wealth tax or CGT," he said.
He said he wanted the government to do "a small number of things very well" focused on growing the economy, rather than carrying out "a long laundry list of worthy ideas".
Non-cyclone spending priorities would include investment in skills, science and infrastructure, he said.
"They are areas I have a personal interest in and reflect where I think there are real opportunities to lift our economic performance."
Hipkins also made a point of talking up the government's work so far, saying they had listened to business leaders' calls for more workers to fill shortages.
He said adding jobs to the straight-to-residency path, the special visa to assist with cyclone recovery, and boosting allocations for working holiday visas and Recognised Seasonal Employer spots had made a difference.
"You asked the government to take steps to attract more labour to New Zealand, and we have, and those actions are working.
"In March, the number of arrivals on work visas exceeded pre-pandemic levels for the first time. It was also the most arrivals on work visas in the month of March since MBIE began collating the current data series in 2012. Our provisional annual net migration gain for the past 12 months of 52,000 is up there with pre-Covid levels."
"A recent report from the OECD has ranked New Zealand as the number one country in the world for attracting highly skilled workers. We're also in the top five for attracting entrepreneurs."
He said the survey also measured quality of life, inclusiveness, family environment, income and tax, and "we come out well ... considering the OECD results, I do worry we talk ourselves down too much."
Hipkins said it was the Reserve Bank's core job to bring down inflation and it would have been a relief to many to see headline inflation figures drop to 6.7 percent last week, now lower than Australia, the UK and the EU-zone average.
"It appears that we are now past the inflationary peak, and inflation is trending down here and globally. We expect that should continue, and inflation should continue to fall domestically this year although we also have to acknowledge that the impact of the cyclone rebuild could mean that the inflation number moves around a little bit on its trend downwards."
Hipkins said Treasury had found government spending was set to fall by the largest amount since at least 1987 due in part to the rapid rollback of Covid-19 spending.
"So despite what you might hear in political circles, the fact is that government spending is actually trending down towards the low 30s as a percentage of GDP and that's about where we intend for it to settle."
He said getting to the lower level of spending would require some dramatic cuts to services, which would likely impact the cost of living as well, "so we're taking a balanced approach that reduces our spending while also delivering core public services".
https://www.rnz.co.nz/news/political/488777/pm-chris-hipkins-lays-out-priorities-ahead-of-budget-2023