National wants to slash the amount workers in New Zealand are taxed for 16 months, in an effort to pour extra spending into the economy.
It could mean the average worker, earning $64,000 per year, would get to keep an extra $3226 over a 16-month period, with the policy estimated to cost $4.7 billion.
The party also wants to suspend Super Fund contributions and “eliminate wasteful spending like Fees-Free and KiwiBuild”.
Today's campaign promise comes as New Zealand was officially confirmed as being in a recession after GDP fell 12.2 per cent over the June quarter – the second quarter of negative growth amid the Covid-19 economic fallout. Unemployment was also predicted to hit 7.8 per cent in March 2022.
“To keep our economy ticking, New Zealanders need money to spend,” National leader Judith Collins said.
“This will give Kiwis the confidence to go out and spend, which will be crucial for our retail, tourism and hospitality businesses to survive this economic crisis.”
National’s election promise is to implement short term personal income tax cuts – with finance spokesperson Paul Goldsmith saying it was clear that immediate fiscal stimulus is needed to boost New Zealand’s economy.
He wants to do that by “injecting cash and confidence into households and businesses”.
If National is elected to power, the tax cuts would take effect from December 1 this year until March 31, 2022.
“Our policy will generate significant savings for middle-income earners.”
All tax brackets would be shifted under National – with the biggest rise on the 17.5 per cent threshold going from $14,001 to $48,000 to $20,000 to $64,000 and the 30 per cent bracket going from $48,001 to $70,000 to $64,000 to $90,000.
Over the 16-month period, a person earning $50,000 a year would keep an extra $893, or $12.90 a week – where as a person earning $60,000 would keep $2559, or $36.90 a week.
Current New Zealand tax rates for personal income:
10.5% on the first $14,000 earned
17.5%: on all income $14,001 to $48,000
30%: on all income between $48,001 to $70,000
33%: on income earned above $70,001
National’s proposed temporary tax rates:
10.5% on the first $20,000 earned
17.5%: on all income $20,000 to $64,000
30%: on all income between $64,000 to $90,000
33%: on income earned above $90,000
National wants to restore the country’s debt to under 35 per cent by 2034.
“We have stepped back from getting back to 30 per cent in 10 years given the scale in the PREFU,” Goldmsith said, adding it was “just not feasible and practical to get back to that level”.
“We want businesses to be spending like crazy,” Goldsmith said.
The party promised instant capital write offs for business up to $150,000 and to double the depreciation for plant, equipment and machinery investment for a year.
It would cost $430 million a year for five years.
Summary of this week’s Pre-Election Economic and Fiscal Update (PREFU):
- Annual average GDP growth expected to fall to -3.1 per cent in the June 2020 quarter
- GDP forecast to contract by 16 per cent in the June 2020 quarter
- Unemployment rate expected to hit 7.8 per cent in March 2022 quarter
- Core Crown expenses expected to reach $119.5b in 2020/21
- Deficit reached $23.4b in 2019/20, expected to worsen to $31.7b in 2020/21, 7.7 per cent of GDP at June 30, 2020.
- Net core Crown debt increased by $25.7b to $83.4b, sitting at 27.6 per cent of GDP at June 30, 2020.