21 Sep 2023

Watch: ACT leader David Seymour reveals alternative budget

2:02 pm on 21 September 2023

ACT has unveiled changes to its alternative budget, softening its tax cuts to account for economic conditions after the opening of the government's books in the pre-election fiscal and economic update (PREFU).

It has also delayed its planned increases to defence spending, and will speed up the rate at which the superannuation eligibility age rises.

The party is proposing a three-tier tax system with a top rate of 33 percent, which compares to the previously proposed two-tier system with a top rate of 28 percent.

It would also be phased in slower than previously proposed.

The brackets would tax all earnings under $60,000 at 17.5 percent, between $60,000 and $70,000 at 30 percent, between $70,000 and $180,000 at 33 percent, and earnings above that at 39 percent.

From the 2025/26 year, the 30 percent bracket would be expanded to cover earnings between $70,000 and $180,000; and the following year the top tax rate of $180,000-plus would reduce from 39 percent to 33 percent.

Its earlier tax policy would have brought in three rates from next year: 17.5 percent for earnings under $70,000, 33 percent for $70,000 to $180,000 and 39 percent above that. The top tax rate would then have been removed from 2024/25 and reduced to 28 percent the following year.

The party has also long called for defence operation and capital spending to be increased to 2 percent of GDP in line with NATO, and comparable to Australia's 2.3 percent.

Lower and middle income earners would also still be supported by the party's plan for a tax credit for low and middle incomes - which, along with the proposed carbon refund would ensure no household was paying more tax.

ACT now says it wants to achieve this in 2030, which compares with the earlier plan to hit the target in the next four years.

The policy released today said it would in the meantime increase defence spending until New Zealand reached 1.5 percent of GDP.

Defence Minister Andrew Little in August said New Zealand was putting about 1 percent of GDP into the military, and while that would increase under the government's latest defence strategy it was not likely to reach 2 percent.

The party has also previously called for superannuation eligibility to increase to 67. This was to increase by two months each year from fiscal year 2023/24 - but the latest document has increased the rate of change to three months each year.

The policy would be fully implemented by 2032 and would not affect current retirees.

ACT's leader David Seymour said his amended plan reflected the challenging economic environment, and the tax cuts would leave every earner a few hundred dollars a year better off.

"PREFU showed that Labour has no plan for paying off debt, no plan for turning things around, every year forecast the country borrows more and more until we lose first world status. This means ACT has had to adjust its Alternative Budget accordingly. We can't offer the same tax cuts we previously proposed because Grant Robertson has left the cupboard bare. This budget is what's needed to balance the books.

The plan continues with previous policies to dramatically cut the number of public servants, increase prison beds, and provide a refund to taxpayers from the Emissions Trading Scheme rather than reinvest it back into emissions reduction projects.

Based on the latest Treasury forecasts, it said the money for the ETS refund would be about $243 per person in 2023/24, reducing to $140, $119, and $98 in subsequent years.

"Note that the annual Refund amount reduces over four years on current forecasts, if these forecasts turn out to be correct, then people will be paying less than half as much on their energy and other needs. Either way, they will be better off by roughly the initial amount each year," the policy said.

The party estimated its public service and welfare cuts could save more than $25 billion in spending over four years.

Decisions based on reality - Seymour

At a media briefing Seymour said the party's plan to speed up the rise in superannuation eligibility age was based on the fact that New Zealand has to be honest.

"We're in a hole: Australia, Germany, Britain, America, Taiwan, Spain, Italy, Israel - all of these countries are raising their ages of retirement to at or above 67. New Zealand is not the country amongst that group that is so much wealthier that it can afford to keep doing this, actually we're poorer."

He says the changes are based on the underlying economic forces.

Answering a question from a journalist, he says the party would love the taxes to be much lower and remains committed to an eventual flat tax rate, "but unfortunately after six years of Grant Robertson, the amount of spending expectation that is built into government and the amount of inefficiency means we can't get to the flat tax rate that was fiscally possible six years ago, or even the two-rate tax system that was just possible under the Budget numbers."

The real driver of economic growth at the moment is immigration, he says.

"You don't make individuals wealthier by adding more people at the same level of wealth, in fact we're going backwards in that sense ... we're not anti-immigration but we also believe that you can't take immigration, growing the population, and confuse that with productivity growth."

He says after the election, there's going to have to be negotiations "with fiscal reality" and he suspects the party's plan will become the reality because the numbers will have to add up.

Seymour says ACT doesn't want to work with New Zealand First, but "obviously if it's the difference between having a change of government or not then we'll find an arrangement, but it'll be as distant as possible".

On cuts to the public service, he says: "We don't believe that there should be what we term 'demographic ministries': ethnic affairs, women, Pacific peoples, TPK, [Te Puni Kōkiri] these are ministries who are entirely focused on an identity of person when what New Zealand needs is to be united around public services that serve each person to the best of their ability on their terms without fear or favour."

He confirms the party still wants to abolish the free school lunches programme, which National has committed to keeping.

"Very popular with Labour, it may be popular with some people who are fans of the programme, but the overall analysis from the point of view of taxpayers and citizens is that it hasn't been a good use of money," Seymour says.

He says instead schools should be given more flexibility on how to use their funding.

Read more of RNZ's full election coverage:

ACT Party leader David Seymour speaks to media following its campaign launch in Auckland on 17 September 2023.

ACT Party leader David Seymour. Photo: RNZ / Calvin Samuel

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