Gone By Lunchtime x When The Facts Change: A Budget special
In the year of growth, Nicola Willis has presented a growth budget. But does the Investment Boost initiative, which speeds up depreciation for businesses, promise the kind of growth that the economy needs? In this special Spinoff pod for budget day, Toby Manhire asks Bernard Hickey for his take on the headline changes, and whether or not David Seymour's earlier commentary that his colleague Brooke van Velden had 'saved the budget' through its controversial and hurried changes to the pay equiry scheme, has been proven true.
Plus: what are the cumulative impacts of the changes to KiwiSaver and Best Start, as compared to the SuperGold cohort? And how much did the global political and economic volatility influence the documents published today?
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NZ Herald
7 hours ago
- NZ Herald
Nicola Willis criticised for cost of living ‘sermon' during post-Cabinet press conference
'Spending more, taxing and borrowing more as Labour and other parties advocate for, didn't work in the past and it won't work in the future,' Luxon said. Finance Minister Nicola Willis during the post-Cabinet Press conference at Parliament. Photo / Mark Mitchell 'The most important thing we can do to make you better off is to double down on our economic plan,' he said. Hipkins called Willis' and Luxon's address a 'sermon' that showed the pair was out of touch with the daily reality of New Zealanders. Although the party said they were going to get 'New Zealand back on track' as per their election campaign slogan, Hipkins claimed 'across the board, New Zealanders can see the country is going backwards.' 'Yet Christopher Luxon and Nicola Willis just say – 'oh, that's all part of the plan, we've got this' – they haven't got it. 'Things are getting worse for the vast majority of New Zealanders and no amount of spin from them is going to change the reality that things are getting worse for New Zealanders under their leadership. 'I think we should start calling them Fisher and Paykel because they've got more spin than a front load washing machine.' Tax relief was a major part of National's 2023 election campaign amid flaring inflation and a cost of living crisis. The party campaigned on a series of policies aimed at helping the 'squeezed middle', including adjusting tax rates, increasing tax credits and FamilyBoost. These policies came into effect in July last year. Willis said today the average household is $1,560 better off after the Government's tax relief package. 'We have also introduced FamilyBoost, which with the latest expansion gives families up to 40 per cent off their childcare costs. 'We have removed the Auckland fuel tax, introduced 12-month prescriptions, increased the rates rebate for 66,000 seniors and increased Working for Families payments.' Finance Minister Nicola Willis and Prime Minister Christopher Luxon arriving for the post-Cabinet Press conference. Photo / Mark Mitchell Luxon stressed that a year and half into the term, he and his party were still fixated on improving the economy and the cost of living. Things were still tough for many families but the economy was 'expected to grow on average 2.7% per year creating 240,000 jobs over the next four years. 'In the short term we are pulling every lever we can to help Kiwi families with the cost of living.' The Government also announced the scrapping of surcharges at the till, such as when a customer uses PayWave or their mobile phone to make a payment. 'New Zealanders are paying up to $150 million in surcharges every year. That's money that could be saved or spent elsewhere.' Luxon also said the changes the Government were making to construction would help reduce costs for businesses and New Zealanders. Earlier in the day, Workplace Relations and Safety Minister Brooke van Velden announced she would review safety rules for scaffolding, saying she had received many complaints from the construction industry that current regulations were too complex and expensive. Van Velden was light on the details of what specifically would be reviewed, but said officials would consult on proposed new rules that would give people a selection of safety options depending on how dangerous the job was. 'If it's not very risky, they will not need to use expensive scaffolding. 'For example, they will be considering whether a ladder could be used instead of scaffolding for a simple roof gutter repair or minor electrical maintenance when working at height.'
Otago Daily Times
8 hours ago
- Otago Daily Times
NZ 'back on course', govt says
By Russell Palmer of RNZ The government has launched a defence of its record on tackling the cost of living. Finance Minister Nicola Willis joined Prime Minister Christopher Luxon at the Beehive Theatrette for the weekly post-Cabinet briefing. She spent much of the previous week facing questions about her meeting with Fonterra chief executive Miles Hurrell. Luxon said this week marked a full year since the tax bracket changes National campaigned on had come into effect. "It's only through a strong economy that wages rise faster than inflation, that Kiwis can get ahead of their daily costs and our businesses can take risks that can mean that they can invest, grow, and create more jobs," he said. He directly targeted National's main rival in opposition. "Other parties in Parliament believe that raising taxes, growing the public sector, and giving more handouts to those who refuse to work is the answer. Taxing more, spending more, and borrowing more as Labour and others advocate for didn't work in the past and it won't work in the future." The government's decision to increase fees paid to board members on Crown entities - in some cases up to 80 percent - may undercut the messaging that National is prioritising low and middle-income New Zealanders' interests. But Luxon today pointed to the building products changes announced over the weekend, and the proposed ban on payment surcharges as recent examples. He then pointed to other items in the government's agenda, including: the current pipeline of infrastructure projects, Roads of National Significance, completing the City Rail Link, signing trade deals with the United Arab Emirates and Gulf Cooperation Council, starting negotiations with India, the digital nomads visa, and the Investment Boost policy. Willis soon picked up the baton, rattling off her own list of changes the government had made which she said had helped lower costs, including: the Family Boost policy, ending the Reserve Bank's secondary mandate to account for unemployment, curbing government spending, changing residential tenancy laws, tax deductability changes for landlords, delaying the previous government's petrol excise increases, scrapping the Auckland Regional Fuel Tax, increasing rates rebates for seniors, increasing Working for Families support, and extending maximum subscription lengths. She said National had campaigned on tackling the cost of living crisis, and pointed to rising GDP per capita and wages rising faster than inflation as a result of the government's interventions. "Taking the pressure off inflation - that is the general level of price increases across the economy - helps with the cost side of the cost-of-living equation. Lower inflation means less pressure on prices... it's pleasing to say that wages are now growing faster than inflation and forecasts show this trend continuing over the next few years." She said the government's tax changes meant "households have benefited by an average of $60 a fortnight". The change to interest deductibility for landlords had helped to take the heat out of the rental market, she said, noting "the 2.6 increase for the year to June was the lowest since 2011". She said the government was also making big structural changes, saying "the last government conclusively proved that band aids are not enough" and pointing to a series of policies yet to come to fruition: the Going for Housing Growth policy, Fast-tracking renewable energy consenting, work to address supermarket competition, and to curb council rates increases. "Economies are like oil tankers, you can't turn them around on a dime. But New Zealand is back on course," Willis said. The lists of government achievements kept coming, with Willis also pointing to: education reform, the investment boost (again), promoting global trade and investment, changes to the research and development sector, and "delivering infrastructure projects faster and better". Meanwhile, a Cabinet Office Circular reveals the government signed off on increases to fees available to board members of Crown entities. This includes increases of 30 percent for Group 2 and 4 boards and Audit and Risk committees, and an increase of 80 percent for Group 3 bodies. Luxon said the public sector director fees "have got completely out of whack compared to private sector fees". "Obviously we will never pay as much as someone in the private sector but when you are spending $32 billion on healthcare for example, it's important that we are actually able to attract really good governors for the Health NZ board, for example," he said. The changes took effect at the start of July.
Scoop
10 hours ago
- Scoop
Duck, Dive…Revive?
Indicators partially correct May's stumble But sense of the recovery failing to launch remains, pushing back timing of labour market recovery Sluggish property market turns up in Q2 inflation figures Downtrend in rent inflation has further to run Runway to a sub-3% OCR looking clearer Here's our take on the learnings and implications from the past few weeks' worth of econo-news. 1. Tariffs, but with happy markets US tariffs and trade negotiations are back on the front page. That's dashed some hopes the prior 90-day tariff pause might slide into permanency. But a string of recent trade deals has helped produce a vastly different reception amongst financial market participants and forecasters this time around. Indicators of global risk appetite remain healthy and global equity markets have blasted through record highs. That's helpful for confidence, to the extent it lasts. Alongside this and, most importantly for NZ's economic plight, the recent trend stabilisation in global growth expectations has held. Consensus forecasts for global growth were even nudged up a touch this month, for both 2025 and 2026 (to 2.3%y/y and 2.4% respectively). Continued resilience in the global economic data pulse, particularly in the US, has helped. We won't add to speculation on whether this is all too optimistic ahead of another trade deal deadline on Friday, and the effective US tariff rate rising above 15%. Suffice to say, the dragging uncertainty associated with US trade policy, while lower than previously, looks set to stick around, a negative impost on investment particularly. 2. Investment appetites stirring? Despite this uncertainty, we're encouraged by a sprinkling of indications NZ investment appetites may at least be stirring. Surveyed investment intentions have not only established a foothold at above average levels but have pushed on further in recent months (ANZ survey, July edition out Wednesday). Admittedly, buoyant rural sector cash flows are having an outsized impact here, per the chart. Boosting the odds these intentions are ultimately acted upon is anecdote suggestive of reasonable interest in the government's Investment Boost scheme. And perhaps also the lift in investment-related imports we noticed in last week's merchandise trade figures. There's a heap of month-to-month volatility in these data, but in June we saw plant and machinery imports up 13%y/y, imports of transport equipment rising 19%, and those for intermediate goods up 21%. It's all partial stuff but, taken together, helps assuage some of our prior concerns sluggish business investment might be a dragging anchor for the broader recovery. 3. Steadying of the wobble Other June economic data to hand paint a picture of a partial steadying from May's surprise and unwelcome wobble. Most 'high frequency' indicators have pulled back a bit from the brink (chart next page). The underlying sense of the recovery so far failing to launch remains though. Indicative of such, two of the better monthly indicators we watch – the Performance of Manufacturing and Performance of Services indices – continue to openly question the extent of growth uplift we've got on the board. And that's even after our second quarter GDP forecast was pruned to -0.2%q/q. The Reserve Bank's new Kiwi-GDP 'nowcast' sits at -0.3%. We still think the mid-year activity air-pocket will pass. The underlying drivers of the recovery remain in place and should reassert themselves in coming quarters. But the recent weakness does push back the likely timing of the eventual labour market recovery. We doubt the current undershoot of firms' labour requirements relative to worker availability will change appreciably this side of Christmas. Our forecast peak in unemployment has been shunted out to 5.4% in the final quarter of the year. Wage growth should thus continue to slow through to the middle of next year. 4. Inflation (slightly) less threatening We think the supply overhang in the labour market is symptomatic of what's going on in the broader economy. And it's central to our expectation the current burst of inflation will peter out early next year. Our updated forecasts have CPI inflation peaking at 2.9% y/y in the current (third) quarter (forecast table at back of document). That's a touch lower than previously and follows the nudge up to 2.7% in Q2 revealed by Stats NZ last week. Hikes in food and energy prices are expected to feature prominently again in Q3, as well as this year's annual rates increase. Thereafter, a brisk return to the mid-point of the Reserve Bank's 1-3% target range is anticipated through the first half of 2026. An eye-catching but perhaps not surprising feature amongst the detail of the June inflation numbers was the downward pressure on many of the components linked to the sluggish housing and construction markets. Construction costs fell outright in Q2 for the first time since 2011. We've got additional declines pegged for the next two quarters, in part reflecting past weakness in house prices. Annual inflation in property maintenance prices fell to 1.4%, with that for household supplies and services at 1.5%. Meanwhile, household appliances and domestic accommodation experienced annual deflation in Q2 of 0.9% and 6.3% and respectively. Notably, these CPI subgroups comprise five of the top ten most sensitive to interest rates, according to recent research by the Reserve Bank. 5. Rent declines confirm excess supply Annual rent inflation was marked at a still robust 3.2%y/y in June. Rents in the CPI are measured on the stock of all rental properties. But note that rents for new tenancies – a flow measure collected by MBIE more closely aligned to market conditions – are now deflating at a (smoothed) annual rate of around 2%. That's around the weakest in the history of a series going back to the mid-90s. It puts the median new tenancy rent back at late 2023 levels around $560/week. It fits with the general state of rental market oversupply highlighted in our recent research, a development noted as most obvious in Auckland and Wellington. Heightened supply, alongside the fact net migration remains, not only weak, but also subject to continued downward revisions, points to the strong likelihood CPI rental (stock) inflation falls back towards 2% over the coming 12 months. till, one development worth highlighting is that available rental listings, according to the data we collect from Trademe, appear to have stopped rising. On our estimates, rental vacancy rates have tracked roughly sideways at 3.3% for the past two months. If sustained, this would cap a multi-year uptrend and mean rental supply capacity, while still large, is no longer expanding. 6. Runway to a sub-3% OCR looking clearer It's been relatively quiet on the interest rate front recently. There's been a pause in the trend declines in most retail interest rates (chart opposite). However, the net of recent growth and inflation goings on described above is sufficient in our view to reintroduce some gentle downward pressure, should the RBNZ resume Official Cash Rate cuts in August as we expect. A 25bps cut in August is as close to fully priced as it gets and we think the combination of sputtering demand and contained inflation supports the case for a follow up in October. That is, there's no change to our long-held forecast for a 2.75% low in the OCR cycle. At a high level we still think the risks are falling evenly either side of this view but more recently there's probably been more of a skew to the downside.
