Wednesday, March 27, 2024

Point of Order: Buzz from the Beehive - 27/3/24

After hogging out on the Budget Policy Statement, media had less appetite for science reform “plan” (which is to seek advice)

The media – sure enough – have been binging on Finance Minister Nicola Willis’ release of the Budget Policy Statement and a statement headed Government announces Budget priorities

This assures us – or rather, this parrots the Luxon team mantra – that the Budget “will deliver urgently needed tax relief to hard-working New Zealanders” while putting the government’s finances back on a sustainable track.

Point of Order did not have to look hard to find the minister’s handouts had been quickly turned into a raft of media reports:

Newstalk ZB




NZ Herald

Mirage News




At time of writing, not so much media attention had been paid to the news from Science, Innovation and Technology Minister Judith Collins and Tertiary Education and Skills Minister Penny Simmonds about their plans to lift the economy by transforming the science and tertiary sectors.

Mind you, maybe the media looked into the “plan to transform our science and university sectors to boost the economy” and found it amounts to no more than putting things in the hands of two committees – or advisory groups – which one day will provide the government with guidance and advice.

But back to Nicola Willis. She had another crack at winning media attention by joining Revenue Minister Simon Watts in announcing the passage through Parliament of “a major tax bill”.

The Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Bill
  • restores interest deductibility for residential investment property;
  • reduces the bright-line test for residential property to two years;
  • removes depreciation deductions for commercial and industrial buildings that were reinstated by the previous government as part of the economic response to COVID-19;
  • provides for parents to receive government contributions to KiwiSaver contributions while they are on paid parental leave so long as they continue to make contributions themselves;
  • adjusts the tax treatment of trading stock disposed of by businesses, making it easier for businesses to donate surplus stock to charities;
  • imposes gaming duty on offshore online casino operators, closing a loophole that enables offshore online casino operators to pay less tax than New Zealand;
  • introduces a transitional provision for the new GST rules for short term accommodation;
  • aligns the trustee tax rate with the top personal tax rate of 39 per cent to ensure that people pay the same rate of tax regardless of whether they earn income directly or through a trust;
  • enacts an OECD-led global tax initiative aimed at ensuring large multinationals pay a minimum tax rate of 15 per cent in participating countries;
  • makes adjustments to the tax treatment of back-dated lump sum payments from ACC and MSD to ensure they are taxed fairly.
The bill is expected to pass into law before 1 April 2024.

Other ministers meanwhile were announcing….

This looks like a statement intended to mollify Queenstown voters by suggesting someone is on the case.

Social Development and Employment Minister Louise Upston announced the Government “will look at options” to address a zoning issue that limits how much financial support Queenstown residents can get for accommodation.

This is a response to Parliament’s Petitions Committee, which had recommended the geographic information used by the Ministry for Social Development to determine how much accommodation supplement can be paid in different parts of the country be updated every time Stats NZ updates its own geographic boundaries.

That recommendation is not being adopted.

Upston did acknowledge that the use of outdated geographic information and classifications by MSD had resulted in some households receiving a lower accommodation supplement than they otherwise would.

She agreed the issue is particularly pronounced in Queenstown and exists in a small number of other areas where there has been rapid urban expansion.

The Government decided the Select Committee’s recommendation could require sporadic updates to the accommodation supplement in different parts of the country at different times, and the administrative cost to taxpayers would likely outweigh the value.

It did agree that more regular updates would help the accommodation supplement remain fit-for-purpose and has commissioned “further advice on a financially sustainable way to do this.

This was announced by Internal Affairs Minister Brooke van Velden, who said the final reporting timeframe has been extended from 28 March 2024 to 26 June 2024.

She said the Royal Commission advised it needs more time to complete natural justice processes related to its findings and recommendations, a requirement under the Inquiries Act 2013.

“However, I have made clear my position to the Royal Commission that this is the final extension request that will be considered. It is simply not tenable to prolong the delivery of the findings and recommendations any further.”

Health Minister Dr Shane Reti says mileage and accommodation rates under the National Travel Assistance (NTA) scheme were last increased back in 2009.

The changes include: 
  • Mileage rates rising from 28c to 34c a kilometre and nightly accommodation rates from $100 to $140 a night.
  • The rate for those staying with friends or whānau will increase from $25 to $35 a night.
  • More flexible payment options, including pre-payment and the ability to do more online, will also be piloted and phased in. While some districts offer pre-payment options, most whānau currently need to fill out paper-based forms to seek reimbursement after travelling.

The changes will be delivered in tranches, with the rate increases and an easier email claiming option first up from 1 April 2024.

Latest from the Beehive

27 MARCH 2024

The passing of legislation giving effect to coalition Government tax commitments has been welcomed by Finance Minister Nicola Willis.

Science, Innovation and Technology Minister Judith Collins and Tertiary Education and Skills Minister Penny Simmonds today announced plans to transform our science and university sectors to boost the economy.

The Budget will deliver urgently-needed tax relief to hard-working New Zealanders while putting the government’s finances back on a sustainable track, Finance Minister Nicola Willis says.

26 MARCH 2024

The coalition Government will look at options to address a zoning issue that limits how much financial support Queenstown residents can get for accommodation.

Cabinet has agreed to a short extension to the final reporting timeframe for the Royal Commission into Abuse in Care from 28 March 2024 to 26 June 2024.

The coalition Government is delivering an $18 million boost to New Zealanders needing to travel for specialist health treatment, Health Minister Dr Shane Reti says.

In their announcement, Judith Collins and Penny Simmonds said two advisory groups, chaired by Professor Sir Peter Gluckman, will advise the Government on how the science and university sectors can play a greater role in lifting New Zealand’s productivity and economic growth.

Collins said the new Science System Advisory Group will help the government explore the well-documented issues facing the science sector.

“There is a proven link between science and innovation and economic productivity, so it is critical the sector is operating efficiently,” Ms Collins says.

“We will bring about the changes needed to ensure the science and higher education systems are well-placed to deliver maximum benefit for the country.”

The two groups will operate separately.

But having the same Chair is intended to ensure that any changes made can benefit both the science and high education sectors.

Penny Simmonds said the Government is committed to supporting universities as part of a thriving higher education sector.

“This sector is a key contributor to New Zealand’s economic performance, our ability to grow and innovate and to achieve better social outcomes,” Ms Simmonds says.

“The University Advisory Group will consider the effectiveness of the current university system – including looking into the Performance Based Research Fund, ways to best achieve equity for all learners, including Māori, Pasifika and disadvantaged learners, and the role of international education.

“High performing science and tertiary sectors are vital parts in the Government’s plan to rebuild the economy – and it is only through a strong economy that we can reduce inflation, lift incomes and afford the public services Kiwis deserve.”

Good luck with that while Nicola Willis has her eye on public spending.

She said the government’s priorities for Budget 2024 are to:
  • deliver meaningful tax reductions “to provide cost of living relief to New Zealanders who have seen no change in personal income tax rates and thresholds since 2010”;
  • identify “enduring savings” across government departments and agencies
  • improve public services by focusing new spending on priority areas including health, education and law and order (te universities might be favourably treated un=der “education”);
  • keep tight control of government spending while funding a limited number of high-priority Government policy commitments and urgent cost pressures that cannot be funded through reprioritisation; and
  • develop a long-term, sustainable pipeline of infrastructure investments.
Tax reductions will be funded within the operating allowance through a mixture of savings, reprioritisation and additional revenue sources, Willis said.

“Funding tax relief in this way means we won’t have to borrow extra to provide tax relief and we won’t be adding to inflationary pressures.”

“As things currently stand inflation is pushing low and medium-income workers into higher tax brackets, meaning they are paying more tax.”

Willis said the operating allowance – the amount of money allocated to fund new spending and revenue initiatives – will be set at less than $3.5 billion for the coming Budget.

The exact amount of the operating allowance and the timeframe for a return to an operating balance before gains and losses (OBEGAL) surplus will be specified in the Budget after Cabinet has had the opportunity to consider the updated fiscal forecasts and projections that are currently being prepared by the Treasury.

The Treasury’s “forecast scenario” (is this different from a forecast?) suggests the economic outlook has deteriorated since the December Half Year Update and that economic activity has been weaker than previously thought, Willis said.

“This reinforces the importance of bringing government spending back under control by embedding a culture of responsible spending, restoring fiscal discipline, right-sizing the government’s footprint and improving the efficiency and productivity of spending.”

This would not be achieved in a single Budget, Willis advised.

She spoke of international evidence that reducing deficits is best done over the course of several years by focusing on structural reforms to expenditure and revenue settings.

Point of Order is a blog focused on politics and the economy run by veteran newspaper reporters Bob Edlin and Ian Templeton

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