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The path back to budget black

08 October 2020

Arguably the most important forecast in the 2020 Pre-election Economic and Fiscal Update (Prefu), and definitely the most significant for future generations, is that net core Crown debt will steadily increase over the term of the next government to hit 53.5% of GDP by 2023.

We look at the strategies on offer from Labour, the Greens, National and ACT to get the budget back to black. We have not attempted to list every policy, just those we regard as most significant and enough to give you a clear insight into the parties’ different priorities and preferences.

We have not included New Zealand First, even though it may once again be a party in government, because we expect that New Zealand First would do next time what it did this time – claim some policy trophies, score some big funding boosts for New Zealand First held Ministerial portfolios, and act as a brake on “bad ideas”.

We are taking an issues-based approach to our Election Series 2020, which necessarily involves some editorial content. The remaining areas we will cover are:

  • the path to a low carbon economy, and
  • how to build back better.

The election campaign has a while to roll yet so there will be policy announcements to come which we have not been able to capture here.

Getting the budget back into black

Debt target

Labour Greens National ACT
No debt targets

Accepts Treasury’s Prefu forecasts which have debt at 48% of GDP by 2033/34

Also tracks a lower debt trajectory – to 45% of GDP – which assumes the $12.1b left in the COVID Fund is not drawn down

Return to surplus by 2028

Core net Crown debt at 36% of GDP by 2033/34 1

Fund new transport infrastructure through increased crown entity borrowing (which would keep it off the Crown balance sheet)

Return to surplus by 2024 by slashing $7.6b off spending and delivering tax cuts of $3.1b a year 2

Increase revenue

Labour Greens National ACT

39c tax on incomes over $180,000 (estimated to raise $2.37b over the four year forecast period)

Digital Services Tax, $254m (although Labour has not committed to proceeding with this)

A 1% wealth tax for those with a net worth of more than $1m, 2% over $2m

Two new top tax rates:
37% on income over $100,000 and 42% on income over $150,000

No tax increases No tax increases

Cut spending

Labour Greens National ACT

No spending cuts

Labour’s campaign commitments are costed at $4.4b over four years

It has also budgeted for new spending allowances of $2.6b in each of the next four budgets (compared to a Prefu allowance of $2.4b)

No spending cuts

Suspend payments to NZ Super Fund for four years


  • the $1.1b package to create 11,000 Green Jobs
  • the $400m Tourism Fund
  • KiwiBuild, and
  • Fees Free

A slower expenditure growth track on core public services like health and education

National’s fiscal plan has new spending allowances of $814m and $704m in the next two budgets (the Prefu allowance for each year is $2.4b and Labour has allowed $2.6b)

Cuts of more than $7.6b by axing:

  • the Provincial Growth Fund
  • subsidies to the racing and film industries
  • KiwiBuild
  • Fees Free and interest free student loans
  • the weekly payment for families with young children
  • Government KiwiSaver contributions
  • R&D subsidies, and
  • Winter Energy Payments

Reduce the size of the public service and cut top salaries 10% across the board

Reduce welfare benefits

Stimulus – supply side

Labour Greens National ACT

Big boost to infrastructure investment

Extend the small business cash flow scheme ($10,000 loan plus $1,800 per FTE) for another three years

$75m fund to help small businesses to digitise and enable work from home

Redirect the money which would have expanded Fees Free to years 2 and 3 of study to provide free apprenticeships and targeted vocational training

10% of quarantine capacity to be reserved for critical workers from overseas

Continue recovery plans for the international education sector and tourism

Aim for government departments to pay 95% of domestic invoices within 10 working days

$200m Regional Strategic Partnership Fund

Green Energy Plan to:

  • upgrade 63,000 social and community homes with solar panels and batteries
  • provide 50% grants to install solar in privately owned homes, and 
  • offer grants and low interest loans to businesses to transition to renewable energy

Support campaign to promote New Zealand made products

Commit government agencies to source more locally

Big boost to infrastructure investment

Immediate deductions for new business investments up to $150,000

Double depreciation rates for investments over $150,000 in plant, equipment and machinery

$10,000 tax incentive for each new full time job created, and $10,000 credit for unemployed people to set up their own business

Raise the compulsory GST threshold to $75,000

$100m Tourism Accelerator fund

Allow tertiary education providers to bring in foreign students under strict safety protocols

90 day trials for all businesses

Public sector agencies to pay contractors within 7 days

Relax immigration rules for investors and technology workers

Postpone 2021 increase to the minimum wage

90 day trials for all businesses

Reduce minimum wage to $17.70 and freeze it for three years

Remove all regulations that do not pass a cost-benefit analysis

Stimulus – demand side

Labour Greens National ACT

Increase the minimum wage to $20 an hour by 2021

Implement industry wide fair pay agreements in competitive industries

Extend the living wage to all contracted public service workers

$56m to increase Warmer Kiwi Homes subsidy for low income homes from 67% to 90% of cost

A Guaranteed Minimum Income of $325 a week for students and people out of work “no matter what”

A Universal Child Benefit for each child under 3 of $100 a week

A simplified Family Support Credit of $190 for the 1st child and $120 a week for subsequent children

Additional support for sole parents through a $110 a week top-up

Reform ACC to provide support for everyone with a work-impairing health condition, at a minimum of 80% of the minimum wage

Implement industry wide fair pay agreements

Increase the minimum wage annually in line with the median wage

16-month tax cut from 1 December, achieved by lifting the bottom two tax thresholds. Costed at $4.7b, paid for from the COVID Fund

Maintain benefits at current rates

Tax cuts of $3.1b – reducing the 30% rate to 17.5% and cutting GST to 10% for 12 months

Allow the private sector to operate managed isolation facilities, including Airbnbs

1 The initial forecast had net Crown debt at 35% of GDP by 2033/34 but this was based on Budget 2020 assumptions of government contributions to the NZ Superannuation Fund.

2 ACT’s surplus and cost savings assumptions also contained errors but had not been adjusted at the time of writing, although the alternative budget had been removed from the website.

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