The ACT Party is proposing a wide range of cuts and an increase to the superannuation age to achieve tax cuts and return the government to surplus within a year.
David Seymour Photo: RNZ / Angus Dreaver
Its alternative Budget would also reverse various efforts to curb climate change, increase defence spending, freeze the minimum wage, abolish various government agencies including the Human Rights Commission, and create a fund to allow principals to garnish teacher wages.
Shares in various state-owned enterprises would be sold off, including 100 percent of LandCorp, and thousands of jobs in the public service would be cut.
Property investors would also see a benefit, with the bright line test abolished entirely and interest deductibility returned to residential property investment.
The headline tax cut change would create just two brackets - 17.5 percent for earnings below $70,000, and 28 percent for earnings above that - delivering significant benefits to those on the higher end of the pay scale.
This compares to the current brackets of earnings up to $14,000 taxed at 10.5 percent, between that and $48,000 at 17.5 percent, income between $48,000 and $70,000 at 30 percent, between $70,000 and $180,000 at 33, and income over $180,000 taxed at 39 percent.
ACT's proposal would be balanced with a tax credit scheme called the Low and Middle Income Tax Offset worth $800 a year for those earning between $12,000 and $48,000, to ensure those on lower incomes would not be stung by the changes.
The party also vows to cut public sector jobs - which increased 13.7 percent in the past five years, compared to an 8.9 percent bump in the private sector - to the levels they were at in 2017.
However, this would also mean thousands of redundancies, which could themselves prove costly, and the potential reversal of trends which have seen spending on contractors and consultants reducing.
It was also unclear how this would be achieved given the relatively low staff numbers at the organisations being abolished, and the potential increase to public service workload from ACT's policy of requiring all agencies to publicly review all major regulatory spending at least every 10 years.
"We would restrain the government's power to force new legislation through Parliament under urgency and automatically repeal all new regulations 10 years after they were passed, unless they are reviewed and actively re-introduced," the party says.
Cuts and asset sales
The party's budget proposes operating allowances above what the government had in 2021, but considerably lower than the one-off total of $6b to pay for reform programmes, including in health, proposed by the government.
ACT's budget states it would curb the increase in operating allowances to just 20 percent of what the government has proposed.
Other cuts include:
- Climate Change Commission, Energy Efficiency and Conservation Authority, Freshwater and Land Use Programme, Forestry Programme
- Climate Emergency Response Fund's operating and capital expenditure
- Contributions to Superannuation Fund halted, and the age of eligibility increased at a rate of two months per year until it reaches age 67, at which point it would be indexed to life expectancy
- Human Rights Commission, Office for Crown-Māori Relations abolished
- Ministries for Women, Māori Development, Pacific Peoples and Ethnic Communities abolished
- Fees-free programme for university
- KiwiSaver subsidies removed
- Winter Energy payment would be restricted to beneficiaries and Community Service Card holders
- First Home Grants and Progressive Home Ownership schemes
- R&D Tax Credit, Callaghan Innovation, Covid-19 Horticulture Subsidies, Growth and Development Spending, the Provincial Growth Fund, the Cultural Sector Regeneration Fund, New Market Operations Spending, Cultural Sector Regeneration Fund
- Domestic and international film subsidies
- Jobs for Nature, Biodiversity Jobs, Pest Control Jobs, Waterways Jobs, Pine Control Jobs and He Poutama Rangatahi
- Regional Skills Leadership Groups
- Workforce Development Councils
- "Shovel-Ready" infrastructure projects
The party also proposes selling off 49 percent of shares in various government state-owned enterprises, including New Zealand Post, KiwiRail, Transpower, Kordia, KiwiBank and its subsidiaries, and food testing and inspection organisation AsureQuality.
It would also sell off 100 percent of LandCorp, which operates dairy, sheep, beef and deer farms across more than 365,000 hectares and provides farm management services. Where lands cannot be sold due to Treaty of Waitangi concerns, they would be retained in Crown ownership and leased to LandCorp.
These sales would reduce dividends paid to the government, but as well as the sum from the sale, the party said it would be expected to increase the enterprises' overall profitability.
New spending
One of the few new budget areas ACT would spend on is a policy to set up a $250 million-a-year fund called the Teaching Excellence Reward Fund, apportioned to schools based on teacher numbers per school. It would allow principals to garnish the wages of teachers and senior leaders at the school.
ACT would also increase defence spending to 2 percent of GDP, a boost of $6.133b over four years.
Of course, much of the revenue recouped from ACT's widespread cuts would go towards the tax cuts, lowering net core Crown debt by $15b, and spending less.
Climate change
One of the big targets of ACTs cuts is spending on efforts to reduce climate change.
As well as disestablishing the climate-focused organisations listed above, the party proposes to repeal the Zero Carbon Act.
"The Zero-Carbon Act sets New Zealand's benchmark for CO2 emissions reductions dramatically above those likely to be achieved by our trading partners, especially our direct competitors in the Asia-Pacific," the party says.
It would also reverse the ban on companies exploring for oil and gas.
Other policies
The superannuation changes would mean increasing the age of eligibility by two months per year. ACT said this would be "ensuring that each generation was entitled to same period on the pension as previous generations". KiwiSaver withdrawals could still be made at 65, however.
The party would also see the government no longer contributing to the fund while the government has debt on its books.
It would also aim to help businesses by reintroducing the 90-day trial period for workers, freezing the minimum wage for three years, "to allow productivity growth to catch up with these higher costs", and abandoning fair pay agreements and the social insurance scheme.
Another proposal is to exempt OECD countries from the Overseas Investment Act unless the assets are important for national security.
Half of GST from home construction would also be shared with local councils, with the funding partially taken from the Housing Acceleration Fund.
Main benefits, and pay increases in the public service - except for police, front-line health and education, and defence personnel - would also be tied to inflation rather than wage growth.
