Get ready, your much-hyped tax cut is almost here

The success of the tax package is hugely important for the coalition government, but especially National.

Mōrena, and welcome to The Bulletin for Tuesday, July 30.

In today’s edition: The state of the health sector remains in the spotlight, the many truths of the Darleen Tana saga, and the potential cost of cutting taxes from heated tobacco products. But first, there’s a lot riding on the success of the government’s tax plan.

It’s tax cut week

From tomorrow, income tax brackets will be adjusted in line with the plan outlined by the coalition government back in its May budget. Or, in other words, tax cuts (and a new FamilyBoost childcare rebate) are finally here. This 1News explainer breaks down what you can expect this week, with roughly 3.5 million people set to benefit. It’s been in the pipeline for a long time – a similar proposal was first outlined by National back in mid-2022. Since then, throughout an election campaign, the formation of a three-party coalition and intense scrutiny over the cost, the tax cut promise has largely survived, with some minor jiggles such as retaining (and not reducing) the top tax bracket. "We hear the pleas of struggling Kiwis and we say: 'National has your back',” said Nicola Willis, then finance spokesperson, in August 2022.

Those words were echoed almost verbatim yesterday by the prime minister Christopher Luxon and Willis – except this time it’s the “government” that has your back – as they gave the weekly post-cabinet press conference. In short, there’s a lot riding on this. 

The landscape in which tax cuts land

The tax cuts were pitched to voters as cost of living relief, but they’re kicking in as things start to cool down. The Herald reported on the latest household inflation figures before the weekend, noting that while it was still up 5.4% in the June quarter, that was a drop off from a peak of 8.2% at the end of 2022. The state of the wider economy appears to be looking up as well, with The Post’s Tom Pullar-Strecker reporting on claims by Kiwibank that traders believe the official cash rate could be slashed by 75 basis points by the end of November, a pivot from recent expectations that it wouldn’t be until next year before interest rates were lowered.

At the supermarket, food prices, which have one of the most immediate impacts on family budgets, have started to drop too. As things become less gloomy, might the government attract less attention than it once would have for its long-awaited tax cut package? Possibly, with Liam Dann at the Herald (paywalled), going as far as to describe a mood of “economic optimism”, though caveating that by saying “we’re still in a downturn and it still sucks”. In The Post today, Luke Malpass argued that while the tax cuts were once key to the government’s economic plans, it could be the impending rates cuts that earn them the biggest plaudits (even if it’s, partly, just a matter of good timing).

What this means for the government

As mentioned up top, there’s a lot riding on the tax cut package. It’s no longer just National policy, but coalition government policy. That means while it differs from the proposals put forward in the campaigns by Act and New Zealand First, they too will be held accountable. But National would bear the biggest brunt of any ill feeling. Even as the cost of living eases, the limited polling data available suggests tax cuts are a popular move. A Taxpayers’ Union Curia poll reported by the Herald’s Thomas Coughlan in April showed 53% of those surveyed wanted a tax cut, while 29% didn’t. Shortly before last year’s election, a Newshub Reid Research poll provided a similar response – 51% wanted tax cuts, and the policy was more popular than Labour’s pledge to dump GST from fruit and vegetables. So we know tax cuts were, as recently as April, a reasonably well-supported measure. As Interest’s Dan Brunskill wrote yesterday, however, there is a challenge for the government: keeping voters convinced of that. Given the tax cuts come amid public sector cuts, finance minister Nicola Willis will need to prove that a little bonus each pay day is worth it. 

Labour does its own math

We already know that Labour is against cutting taxes in the current environment. As mentioned, their cost of living proposal in the election was around GST rather than income tax. Following budget day, leader Chris Hipkins urged followers to donate their tax cut to his party. Now that tax cuts are about to become a reality, Labour will be stepping up its attacks on the government. The party’s finance spokesperson Barbara Edmonds has tallied up the costs the coalition has reinstated, such as on prescriptions, and argued families will be worse off even after pocketing their tax cuts. “Kiwis have been sold a lemon with the National Party promising a lot but delivering peanuts for most people,” she said. Writing for The Spinoff in April, Shanti Mathias did some maths as well, looking at whether people will end up spending their tax cuts on public transport that, until May, had been discounted. In her scenario, a 23-year-old on the minimum wage using public transport 10 times a week would be worse off.

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A ‘botched merger’ and a doctor-less hospital

As the government continues to take aim at the “botched merger” that formed Health NZ, and moves to reshape the health sector, one regional hospital has become a focus after no doctor was on-site to treat a patient suffering cardiac arrest. As 1News reported, the patient at Dargaville Hospital was left in the care of a “nervous, worried, concerned nurse” who had to rely on contact with a doctor 40km away by video link. Prime minister Christopher Luxon wouldn’t comment specifically on this situation, but admitted there were lots of pressures in the health care system. He also signalled that jobs from Health NZ’s executive team could be culled as he attempts to rein in spending at the mega agency, reported the Herald. Labour has called for the books to be opened at Health NZ, accusing the government of manufacturing a crisis to meet their agenda.

• More reading: Community pharmacists say they are concerned about patient care as the rise of bigger discount pharmacies could force the closure of smaller businesses (RNZ).

The other tax cut in the spotlight…

Tax cuts of another kind have been facing scrutiny over the past week, with RNZ’s Guyon Espiner breaking the news recently that the government had quietly slashed excise on heated tobacco products. In a follow-up this morning, Espiner’s reported it may cost $216m to do this and, according to a cabinet paper, it’s still unclear whether the savings will be passed onto consumers. However, in a statement, the minister who signed off on the move, Casey Costello, said she expected users to benefit. “This is what we were advised would happen by officials and it is something we will also be monitoring," she said. Costello also estimated the costs would be well below the initial modelling.

Listen: NZ media news and analysis, with Glen Kyne

In a new format for The Fold, Duncan Greive will be joined by a rotating cast of co-hosts as he responds to the latest ebbs and flows of our media landscape. In this pilot episode, former WBD boss Glen Kyne joins Duncan to take a broad look at local and international media.

Listen below or wherever you get your podcasts.

Click and Collect

• Two things can be true at once: The Spinoff’s Madeleine Chapman looks at the many truths of the Darleen Tana saga and how they, sometimes, conflict.

• Liz Gunn’s New Zealand Loyal party is no longer registered as a political party with the Electoral Commission.

• You’re going to be reading/seeing/hearing a lot in the news about the Polkinghorne murder trial over the next couple of months. Steve Braunias was in court for day one and wrote a typically Steve Braunias report (paywalled).

• Remember how Christopher Luxon wouldn’t live in Premier House due to renovation work? That’s nearly been completed, at a cost of $180k. (paywalled)

  

• Food minister Andrew Hoggard will soon need to decide whether New Zealand should opt in or opt out of a new trans-Tasman standard for infant formula.

• Jacinda Ardern was “pretty fucked off” about major technical issues when New Zealand hosted the virtual Apec conference back in 2021. (paywalled)

• New Zealand is yet to win a medal in Paris. Could today be the day?

Right now on The Spinoff

20 years on from Apple winning digital music and Amazon winning online bookselling, Duncan Greive assesses how the business of both mediums is working out. Alex Casey interviews Gypsy Rose Blanchard about life in prison, becoming a mother and her new TV show. Jeremy Hansen talks to Auckland CBD residents about why they love the inner city. Thomas Giblin lists 10 must-see movies at the New Zealand International Film Festival. Claire Mabey discovers why Libro.fm is a worthy audiobook successor to Audible. Here are all the new movies and TV on streaming services this week.

A note from the editor

To finish, just a note to say I’ll be on leave until the end of next week but The Bulletin will be left in the incredibly capable and familiar hands of Catherine McGregor starting from tomorrow. I’ll be back in mid-August. Until then, make Catherine feel welcome and if you want to get in touch, The Bulletin email will still be monitored in my absence – get in touch via thebulletin@thespinoff.co.nz. Talk soon!

That’s it for today, thanks for reading.

Let me know in the comments, or get in touch with me at thebulletin@thespinoff.co.nz, if you have any feedback on today’s issue or anything in the news.

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