12 Mar 2024

Prime Minister Christopher Luxon unable to assure promised Budget surplus amid tax cuts

10:17 am on 12 March 2024
Prime Minister Christopher Luxon at Parliament on 30 January 2024.

Prime Minister Christopher Luxon. Photo: RNZ / Craig McCulloch

The Prime Minister is refusing to give any assurances the government will be able to get back into surplus by 2027 as promised.

Finance Minister Nicola Willis has indicated she is not confident the government will be able to achieve that commitment.

While campaigning last year, Willis was confident that National could deliver a $2.9b surplus in 2026-27 which was "$0.8b higher than Labour".

Christopher Luxon told Morning Report he would not be able to give any concrete guidance until May's Budget.

"It is a challenging time for the economy."

He blamed a "massive blowout in government spending" as the reason for domestic inflation and high interest rates.

"It's quite obvious to us that we're dealing with a deteriorating economic set of circumstances."

Luxon said the Budget would refocus spending on frontline services and deliver tax cuts.

Tax deductions for landlords

The government has increased allocations for the landlord tax deductions by $800 million, from $2.1 billion to $2.9b.

On Monday, Luxon said he has not seen updated costs for the reinstatement of interest deductibility.

From 1 April, landlords will be able to write off 80 percent of their mortgage interest on residential investment properties, and 100 percent from April 2025.

"We've made a commitment around interest deductibility - it's actually good policy. What has been insane is that we've seen average rents go up $170 per week," Luxon said on Tuesday.

"We want to increase the supply of houses available in the rental market and you know passing costs on to landlords that then end up passing it straight through to renters is just not the way to deal with it."

He said his government was focused on getting things done and fulfilling its election promises.

"We care about renters."

Rushing through legislation

Luxon also defended his government's move to bypass the select committee process for legislation to lower tax costs for landlords.

The new law is not being given the same amount of scrutiny due to a truncated debating process.

Luxon's explanation for the process was the party campaigned on it, "people understand this is our policy and we're implementing it".

Already, 14 laws have been passed under urgency by the government, while the average is 10 across a whole term.

"Yeah, isn't it great? We're elected to get things done. We've got an ambitious work programme. We said we campaigned on ideas and policies were well framed, well articulated. And we make no apologies."

He said policies that required to would go through the full select committee process.

"We're moving forward. Where it makes sense, we will move with great speed; where we need to make sure that we follow proper process, of course we will do that."

'We do have money'

Without delving into details, the government was not cutting school lunches, Luxon said.

"It's hard to cut something that doesn't exist."

Under the Labour government, there was no funding for school lunches from 1 January 2025, he said.

"We are committed to a school lunch programme. We just want to make sure it's working effectively.

"We do have money. We're going to support the school lunch programme, period."

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