National Party leader Christopher Luxon says everything in its tax policy but indexed tax brackets is now under review, after today's cash rate rise.
The Reserve Bank today lifted the Official Cash Rate by 75 basis points to 4.25 percent: The highest level since December 2008, the biggest single rise since the OCR was established in 1999 and the ninth consecutive rise.
Luxon this afternoon told reporters National would review its tax policy as a result: It would still index tax brackets but other promises including cutting the top tax rate would be reassessed.
A major focus of National's tax policy is the indexing of tax thresholds to inflation.
Speaking after Question Time this afternoon Luxon said the Reserve Bank's actions were clearly necessary, but things had changed with the rising levels of inflation and the threat of ongoing recession.
"Indexation of tax thresholds we think is taking the current progressive tax system," he said.
"Let's get really sobering about the reality of this, interest rates are going to continue to rise because inflation is stubbornly high and we are now heading to recession."
He confirmed all other aspects of National's tax plan were on the table.
This would include promised cuts to what the party says is seven new taxes introduced by Labour: The regional fuel tax, a $1000-a-year payment for properties along the Auckland light rail corridor, the bright line test extension, interest deductibility changes, the income insurance scheme, the clean car discount, and removing the 39 percent top tax rate.
"We would like to offer people tax relief, but when I look ahead if I think about the 39 percent tax rate in particular that's something I really want to think about because ... in this environment, the situation has changed big time. Big time," he said.
"We've been crystal-clear to say that the economic conditions will determine what we can achieve in our first term in government and so we will take stock of where we sit today and we will revisit where we are."
Luxon said the record increase in the OCR and predictions of a year-long recession was evidence
"This is happening because the government has its foot flat on the accelerator with unprecedented levels of government spending," he said.
"It looks pretty clear to us that the public are going to need the National Party to demonstrate very good economic management. We've done it before and we're going to need to do it again in the years ahead."
The party's finance spokesperson Nicola Willis said her interpretation of the Reserve Bank's monetary policy statement was a message to Minister of Finance Grant Robertson: "Every single year you've blown your spending limit. Please for the good of New Zealanders don't do that again next year - this country can't afford it".
"This is the time for him to be answering the question 'do I really need all of those extra backroom public servants that I hired, do I really need to be spending $2 billion a year on consultants. Is this the time to be forking out millions in bribes to councils to push through three waters reform?"
Luxon highlighted the RNZ-TVNZ merger as an example of spending that could be cut.
"You could literally go in this week and knock on the head the RNZ-TVNZ merger and save New Zealand $6 billion over the next 30 years, good thing to do."
Robertson plays down recession risk, will consider further fuel excise cut extension
Robertson said there was good news among the predictions offered in the Reserve Bank's data.
"We continue actually for the rest of this year to be forecast to have strong economic growth and the shallow period of recession - while it is over a number of quarters - still doesn't match the economic growth of the last two quarters of this year," he said.
"The overall economic forecasts here are ones that are reflective of how tough 2023 is going to be. I've been saying for some time this is going to be a difficult year for many New Zealand households.
"Households are under pressure. The important thing to remember is they do that with record low unemployment, so people have been in work, with wages that have been outpacing inflation up to this point."
He again put the blame for inflation on international circumstances.
"We are not immune from what is going on in the rest of the world. If our trading partners find themselves in recession the waves of that end up here in New Zealand.
"If I was standing here today and New Zealand was an outlier and we had inflation at the levels that we do and the concerns about economic growth that are reflected here and no other country in the world had that, then it would be legitimate to say the government had played some disproportionate role here.
"Actually New Zealand's overall economic performance has been strong and we've ended up with the 10th lowest rate of inflation in the OECD."
He said the forecasts released today suggested there may be a need for targeted and temporary support sometime in the middle of next year.
Asked specifically about fuel excise cuts set to expire at the end of January, he said the government would wait for the Treasury's data in December before making a decision about whether to extend it.
"For now we don't have any plans for anything additional to what we've done ... obviously the fuel excise duty in particular has had the effect of keeping control, in some sense, of inflation.
"We've got new data today, we'll have the treasury's data in December and we'll make our decisions based on where we are."
He said reversing the RNZ-TVNZ merger would not
"If we're worried about inflation and we're worried about how to manage that the kind of fiscal response that would be required to have a dramatic, immediate effect it wouldn't be about a policy like that - it would be about doing something like stopping the state house building programme," he said.
"We're not prepared to do those kinds of things that actually are about the long-term health and wellbeing of New Zealanders. Overall, government expenditure is tracking down. We can make sure that we're careful fiscally without dropping policies that we think are important."
' You don't beat Labour by becoming Labour' - Seymour criticises National
ACT leader David Seymour criticised National, saying parties should defend their policies when attacked rather than back down.
"You don't beat Labour by becoming Labour - in fact if you try to fight labour by being more like Labour, Labour wins," he said.
"The gap between Labour and National is closing in terms of policy and that is the reason that ACT exists - to stand up on principle for policies that are better. Having an additional tax rate at 39 cents does not raise material amounts of revenue especially when you consider the amount of government expenditure increase that has occurred - around about a 50 percent increase in expenditure in the last four years."
The government did not appear to be changing its policy in response to the unexpected conditions outlined by the RBNZ, and it needed to cut spending, he said.
"The government has to look at its own books and ask where it can reduce expenditure - maybe putting some non-time-sensitive projects like the RNZ-TVNZ merger - back a year or two."
"I think the reserve bank is doing the right thing, however, it's doing it in an environment where the government has no appetite to reduce its own expenditure, which puts pressure on resources across the economy.
"And the government is still dragging the chain on immigration with the hangover of the so-called immigration reset that is putting huge pressure on the labour market and creating a wage price spiral and lower production as firms just can't serve their export customers."
He targeted a range of other Labour policies including the three waters reforms, the firearms register, Auckland light rail, and Kainga Ora "buying and building even more houses in a resource constrained construction sector".
"If Kainga Ora stopped competing with the private sector to buy the same land and the same project managers and the same builders I suspect construction would be better managed and there'd be less inflationary pressure on the costs of them.
"Yes we want more homes to be built, it's Kainga Ora entering a superheated market doesn't actually lead to more houses getting built."
Greens repeat call for tax on excess profits
The Green Party said the latest economic data only supported the case for a tax on excess profits.
"When interest rates go up, it is possible the super-profitable Aussie banks will further increase their profit margins. An excess profit tax is a simple and fair way to help families struggling to make ends meet," finance spokesperson Julie Anne Genter said.
She said banks were "practically immune" from the impact of inflation compared to families on low incomes.
"Not only have they profited from all the extra mortgage lending they were encouraged to do over the last couple of years, now they are profiting from higher interest rates," she said.
"Tens of thousands of people will be looking towards the prospect of higher mortgage payments and rightly wonder how it is that, as they struggle to make ends meet, banks can rake in eye-watering profits ... we cannot simply stand on the side-lines and ask the banks to play nice."