30 May 2024

Budget 2024: What's in it for households?

9:18 pm on 30 May 2024
Nicola Willis at Budget 2024

Finance Minister Nicola Willis. Photo: RNZ / Angus Dreaver

It is a "clean-up job" according to the Finance Minister, but a "mean and nasty Budget" according to Green Party co-leader Marama Davidson.

As everyone pores over the latest Budget, in which the government outlines how it will spend its money, you might be wondering: What's in it for me?

Here are 10 things that affect households in this year's Budget.

Working for Families credit

From 31 July, the in-work tax credit will be increased by $25 a week. This is part of the Working for Families package that is paid to families who have some income from paid work.

It is not available to people who are receiving an income-tested benefit or student allowance.

Once a household earns $42,700, Working for Families entitlements are clawed back at a rate of 25c per $1 earned. These settings will not change.

Tax bracket changes

The government is making adjustments to the incomes at which each tax rate takes effect.

The new bands will mean that the 10.5 percent tax rate applies on income to $15,600. The 17.5 percent tax rate will apply to income between $15,601 and $53,500.

The 30 percent rate will apply between $53,501 and $78,100, the 33 percent between $78,101 and $180,000 and 39 percent will still apply to income above $180,000.

Read more on Budget 2024:

What this means for your household will depend on your income, but a household made up of two people earning $65,000 each with no children would have an annual tax cut of $2639, according to the government's calculator.

ASB chief economist Mike Jones said the tax cuts were likely to be "out the door pretty quickly" to pay bills for most households.

"For many households, the tax cut has already been spent in advance of these numbers."

Independent earner tax credit

The independent earner tax credit is being made available to people who earn between $24,000 and $70,000 a year.

The previous upper limit was $48,000. The credit will be $10 a week for people earning up to $66,000, then reducing.

This is not available to people who are receiving an income-tested benefit, superannuation, or Working for Families. The government expects 725,000 people to qualify.

Fees-free study

The free year of tertiary education will switch to the last year of study rather than the first, so only those who persist will benefit.

This is expected to save the government $877 million over four years.

Family Boost

Households paying for childcare will receive a credit of 25 percent of their costs up to $75 a week for those earning up to a combined $140,000, reducing to $37.50 for families earning $160,000 and nothing for those earning more than $180,000.

This instead of the previous government's plan to extend 20 hours' free childcare to 2-year-olds.

Warmer Kiwi Homes

The government is scaling back the Warmer Kiwi Homes scheme, which covers up to 90 percent of the cost of efficient heating.

As part of cuts for the Energy Efficiency and Conservation Authority, subsidies for hot water heaters, energy-efficiency measures, and an LED lighting scheme will stop.

Prescription fee for people aged 14 to 64 and public transport fares

As we already knew, the government has put an end to free and half-price public transport for children and young people.

Prescription fees will also return for people aged over 14 and under 64, except for Community Services Cardholders and their dependants.

Infometrics chief executive Brad Olsen said these sorts of changes might have some people wondering what they were going to "not get into the future".

"They might get a tax cut but if they are young people getting the half-price discount, they probably won't be getting a tax cut or much of one because they are a low earner or a no earner. It's a bit of an open question, how everyone feels at the end of the day."

Revised free school lunches

The Budget confirms already revealed plans to scale back the cost of the free lunch programme.

Overseas borrowers student loan interest rate rises

The interest rate paid by student loan borrowers living overseas will rise from 3.8 percent to 4.8 percent from 1 April.

This usually applies when someone is out of the country for six months. The late payment interest charged for all borrowers will also increase by 1 percent.

No initiatives on the horizon

The bigger picture for households may be that the Budget leaves little room for more spending in future.

Jones said: "There's a fairly strong statement from Treasury that the $2.4 billion operating allowance going forward from here will be lucky to cover cost or population increases. It's going to be a tight fiscal situation for the foreseeable future."

Olsen said it was clear there was not really any new spending likely to happen in the next couple of Budgets.

"Anything new will have to be met with a cut in other areas. The government has enough money each year to keep the lights on but not a lot more than that."

Infometrics chief forecaster Gareth Kiernan said households could not look for the government to help turn the economy around.

"That's a reflection of the government being one of the reasons for the economy being so overstimulated in recent years. It can't very well go supporting it now. But monetary policy is also restraining things and the world economy is not doing us any favours."

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