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NZ Herald
26-05-2025
- Business
- NZ Herald
Prime Minister Christopher Luxon, Finance Minister Nicola Willis to speak post-Budget in Auckland
'I think there are some benefits with universal superannuation … and if you are to make any change to that area we have to phase it in over a large period of time," she said. National previously campaigned on increasing the superannuation age gradually over many years, but the party's policy platform for the 2026 election has not yet been decided. Willis also confirmed yesterday that government departments and agencies were assessing the potential cost of the decision to phase in increased employer contributions to KiwiSaver. The default rate will reach 4% by 2028. She told RNZ any cost could be met with new spending in next year's budget, or be covered through cuts. Her comments came after the Green Party claimed the additional cost of potentially $700 million had not been accounted for in this year's Budget, which Willis deemed 'ludicrous'. Green Party co-leader Chlöe Swarbrick claimed the Government had failed to account for what could be $633m-$714m in additional costs. 'If she's honest with New Zealanders, that means the Government has intentionally hidden more than half a billion dollars extra in public service cuts to come,' Swarbrick said of Willis. The potential financial burden for the Government is referenced in the Treasury's Budget Economic and Fiscal Update, but it did not come with a cost estimate. Willis claimed Swarbrick's numbers were 'out of whack' and 'quite ludicrous' but acknowledged Crown agencies were currently assessing the 'potential implications'. 'They'll then provide advice to the Government. If additional funding is required, I expect it would have to take the form of a pre-commitment against next year's budget operating allowance,' Willis said. However, she later told RNZ it was possible any costs could be satisfied by cuts, while noting it was 'far too soon to say'. 'It may be that we say this needs to be met with additional funding, it may be that we say there's something we can reprioritise elsewhere.' Willis said she expected all government contractual obligations, including those regarding KiwiSaver, to be met and suspected employer contributions would form part of future pay round negotiations. She acknowledged the Government had 'limited visibility' of what its KiwiSaver obligations were. Swarbrick predicted the Government would cut spending from essential public services to make up the extra cost. 'If the Government doesn't front up with the funds between now and April next year when the first set of changes come into force, Christopher Luxon and Nicola Willis will be forcing immediate cuts directly to frontline services in health, education and social services to pay for their fiscal hole.'
NZ Herald
25-05-2025
- Business
- NZ Herald
Budget 2025: More cuts possible to cover Govt's extra KiwiSaver costs
The Government also halved its contribution to $260 for people earning less than $180,000 and scrapped it entirely for those earning more. Across the next four years, it would give the Government almost $2.5 billion in savings and more than $500m in expected revenue. In a statement this morning, Green Party co-leader Chlöe Swarbrick claimed the Government had failed to account for what could be $633m-$714m in additional costs. 'If she's honest with New Zealanders, that means the Government has intentionally hidden more than half a billion dollars extra in public service cuts to come,' Swarbrick said of Willis. The potential financial burden for the Government is referenced in the Treasury's Budget Economic and Fiscal Update, but it did not come with a cost estimate. Willis claimed Swarbrick's numbers were 'out of whack' and 'quite ludicrous' but acknowledged Crown agencies were currently assessing the 'potential implications'. 'They'll then provide advice to the Government. If additional funding is required, I expect it would have to take the form of a pre-commitment against next year's budget operating allowance,' Willis said. However, she later told RNZ it was possible any costs could be satisfied by cuts, while noting it was 'far too soon to say'. 'It may be that we say this needs to be met with additional funding, it may be that we say there's something we can reprioritise elsewhere.' Willis said she expected all government contractual obligations, including those regarding KiwiSaver, to be met and suspected employer contributions would form part of future pay round negotiations. Swarbrick predicted the Government would cut spending from essential public services to make up the extra cost. 'If the Government doesn't front up with the funds between now and April next year when the first set of changes come into force, Christopher Luxon and Nicola Willis will be forcing immediate cuts directly to frontline services in health, education and social services to pay for their fiscal hole.'
Otago Daily Times
25-05-2025
- Business
- Otago Daily Times
Greens claim $700m 'uncosted hole' in Budget
By Susan Edmunds of RNZ The government could face an unbudgeted hole of hundreds of millions of dollars in increased KiwiSaver contributions for public sector workers, the Green Party says. As part of the Budget last week, the government announced that the default KiwiSaver contribution for employees and employers would lift to 4 percent, in stages. But the Green Party said the government had not accounted for that increase for its own employees in its books, and over the Budget forecast period it could add up to $714 million in costs. Co-leader Chloe Swarbrick said last time the government increased the compulsory employer contribution, it set up a fund to help cover its costs. The increased cost to government as an employer was highlighted in the Budget Economic and Fiscal Update and in the KiwiSaver reforms regulatory impact statement. "What we've found is what we believe to be a hole in the government Budget, an uncosted hole of anywhere from $633m to $714m over the forecast period," Swarbrick said. "The Crown is obviously an employer of thousands and thousands of people with billions and billions of dollars in wage bills. If we're to project from the base line of around 72 percent of the population... at the default rate which is increasing, the Crown will have an increased liability to meet those employer contributions." She said the government either did not spend enough time working it out, or was "intentionally hiding or obscuring what I'm sure the minister will say are going to have to be new cuts that agencies and ministries will be forcing departments to make to account for the increased contributions". Finance Minister Nicola Willis's office said the potential cost had been noted. "Crown agencies as employers will assess the potential implications for agency budgets. If any additional funding is required, it would count against the Budget 2026 operating allowance." But Swarbrick said it was not being sufficiently upfront. She said it seemed the government did not want to be seen to be being "mean" by just halving the member tax credit, to $260 a year, and so had to increase contributions at the same time. It should have happened as part of more consultation and a full review of retirement settings, she said. "This will be an additional cost as soon as the changes come into effect." Employers who offer total remuneration packages to employees will dodge some of the increase but Swarbrick said it was clear that the government would not be able to shift people on to that arrangement to avoid the increase in a way that reduced their take-home pay. Craig Renney, policy director at the NZ Council of Trade Unions and a member of the Labour Party Policy Council, said it was an issue for the government as an employer. "It would be good to know what calculations they have made themselves as to their additional remuneration costs. Is the Crown going to force workers to eat the increase themselves? It would set a very bad example for the rest of the market." He said good employers should see the increase as an opportunity to improve employees' retirement outcomes. "The risk is that for some employers they might view the 'total remuneration' of their employees as a single package. That would mean they would expect any increase in KiwiSaver to come from the same money. That would mean lower real pay increases for employees and less cash in hand. "Given that we have very weak demand in the economy, there are probably limited opportunities for employees to get a different job - especially with unemployment forecast to keep rising. Ultimately, that would mean that the government has set up a system where employees end up paying for increased employers contributions to their own KiwiSaver. "There are some industries where there might be a simple pass-on to the consumer for these costs, but again, in a subdued market these are probably fewer than you might expect. These are probably also higher income earners, so the likelihood is that lower income earners will be more likely to face that 'total remuneration' issue. That will simply compound existing income adequacy problems in New Zealand." Employees will be able to opt to return their contribution to 3 percent, matched by an employer's 3 percent. Renney said there was a risk some people could face pressure to do so. "Again, it is likely to low paid/lower market power employee who face this challenge. Secondly, if we make it easier to become a contractor - where this is not an issue - this move will encourage employers to pretend that their employees are contractors. The current proposed changes by government in that regard might drive more of that behaviour, putting workers at a significant disadvantage."
Otago Daily Times
22-05-2025
- Business
- Otago Daily Times
Trump's tariff flames lick at incentives
You will not see the name Donald Trump anywhere in the Budget Economic and Fiscal Update, but the United States president looms large over the financial predictions contained within. The capricious, cavalier manner in which Mr Trump has upset the global trade system in recent weeks has done some serious damage to the vehicle Finance Minister Nicola Willis planned to drive to a prosperous future — an export-led economic recovery. "Going for growth" is a terrific slogan, but for it to mean anything someone actually needs to be buying what NZ Inc is selling. New Zealand stood a fighting chance of achieving that too, back when the economy of our trading partners was growing by an average 3.3% a year and some Silver Fern Farms lamb washed down by a Central Otago pinot noir was looking more and more affordable. But then came The Donald and his tariff blowtorch. International markets have been spooked, it is now more expensive to buy New Zealand goods in our second-biggest export market, the US, and all countries are scrambling to find more accessible markets for their goods. Treasury, in its reassuringly bland language, calls all this panic "heightened global uncertainty". The numbers are scary though: that average international economic growth is now forecast to average about 2%, global inflation is expected to be higher and demand for New Zealand's goods is expected to be "dented". Whether "dented" means Ms Willis' economic vehicle cops a minor fender bender or gets T-boned will take many months to become apparent. Much will depend on another word Treasury uses in such circumstances — volatility. Undaunted, however, Ms Willis has kept the accelerator pedal down when it comes to revving up the export sector. The main new initiative in Budget 2025, Investment Boost, is a tax incentive for businesses to splash out on machinery, tools and equipment. Firms will be able to deduct 20% of the cost of that shiny new processing chain on top of normal depreciation, in a balance-sheet adjustment which Ms Willis anticipates will be worth more to firms than a drop in the company tax rate. She further anticipates those firms will use those machines to generate more economic activity, take on more staff, and sell their products to the world, improving the government's books in the process. But here is where Dodgem Donald strikes again. Price increases for New Zealand's exports are expected to slow in coming months as global supply and demand factors "rebalance" — Treasury's way of crossing its fingers and hoping everything works out all right. Rural areas should be fine — dairy prices, for one, are still on the rise — but the cities where the factories, which are meant to be taking advantage of Investment Boost are largely based, are lagging behind, and tariff uncertainty adds to the worries of New Zealand manufacturers. In other words, Ms Willis' export-driven economic vehicle is spluttering along rather than smoothly going through the gears. Investment Boost relies, too, on many external factors for it to be a guaranteed win for the government, but in a Budget short of ground-breaking initiatives it should play well to the base of each of the governing parties. That lack of a sure fire spark plug and the flickering influence of the US president is reflected in the operating balance forecasts: the government's books are predicted to return to surplus in 2029, but by such an anaemic amount that it will be a close run thing as to whether it can be achieved or not. The good news for Ms Willis is that inflation is expected to remain at about 2% and that interest rates are expected to keep falling: they are the two main indicators households and businesses care about and they are in her favour. The bad news is that tax revenues are soft, debt remains high and there are three more years of Mr Trump still to be navigated.
NZ Herald
22-05-2025
- Business
- NZ Herald
Budget 2025: Young Kiwis, families, react to Kiwisaver, Best Start changes
KiwiSaver is also getting a shake-up, with the Government halving its yearly contribution from $520 to $260, and raising the default employee contribution from 3-4%. The Student Loan repayment threshold is being frozen at $24,000, rather than rising every year as it used to, meaning borrowers will have to start paying it back at a relatively lower yearly income. And the Budget Economic and Fiscal Update noted house prices were likely to jump 5.4% by 2026. The Government has defended the changes, saying tweaks to KiwiSaver would encourage people to save more and have little impact on KiwiSaver balances, while means-testing Best Start would help fund a boost for Working for Families. The Herald hit the streets of central Auckland to gauge young people's reaction to the Government's spending priorities and announcements, and ask if they would be directly impacted. 'It's kind of sad for people who don't really have much income,' two young parents, who asked not to be named, said of the change to Best Start. 'It would probably be a lot harder to look after the baby [if we did not have the Best Start payment], and just not being able to get him all the things he needs,' said the couple. 'It makes it harder for people who want to just live. I think it's a lot harder on the future generation. 'For younger people growing up, and especially younger families, buying a house ... it's just going to be a lot harder for everyone.' Others had similar concerns. 'I want to buy a house one day, so the lower the house prices, the better for me,' another young man told the Herald. Commenting on the Government's KiwiSaver contribution change, a third man said: 'I think, as a young person, it's quite appalling. 'KiwiSaver was meant to be a hope for people like us, investing in our long-term futures. 'I think some of these changes are not exactly optimistic and might actually contribute to more young people leaving this country as we go forward.' Two more young parents said some of the changes were 'a bit of a shame'. 'It [KiwiSaver] is to the benefit of the Kiwi person, it's a great scheme, and the more money that's in that, the better for all of our retirements. I thought that would be something that the Government could get behind, so it's quite disappointing. 'I guess, you know, they say when we get to a retirement age, there's potentially not going to be enough money for us to retire at the nice age of 65. So I thought the Government would be interested in trying to alleviate that issue by helping out now.' Raphael Franks is an Auckland-based reporter who covers breaking news and local stories from Tāmaki Makaurau. He joined the Herald as a Te Rito cadet in 2022. Do you have questions about the Budget? Ask our experts – business editor at large Liam Dann, senior political correspondent Audrey Young and Wellington business editor Jenee Tibshraeny – in a Herald Premium online Q&A here at at 9.30am, Friday, May 23.
