Olivia O’Malley is a former press secretary to a Leader of New Zealand’s Opposition and a long-time Conservative staffer. She currently works in public affairs.
It wasn’t an earth-shattering tax cut, but a modest one. An average of $20 (around £10) a week for the squeezed middle. This small tax cut is unlikely, on the face of it, to make a huge difference to the household finances of everyday New Zealanders, but it is nonetheless a politically important move.
Vital, in fact, because it allows the new government to be able to say that it has cut taxes despite challenging economic conditions – a key commitment from last year’s general election campaign.
And so last Thursday Nicola Willis, New Zealand’s newly minted Minister of Finance, delivered her first Budget.
What is interesting, particularly from the perspective of people outside New Zealand, is quite how momentous this is. In a typical New Zealand parliamentary term, which lasts three years, a government delivers three budgets. By international standards, these terms are short, which means that no matter how well the Budget landed, Willis only has two more to give.
In sheer timing terms, it has been just over six months since the centre-right National Party took office in coalition with partners ACT and New Zealand First, on its right and populist flanks respectively. Yet a sixth of the new government’s time in office has already passed.
This helps to understand the rush to roll back the laws and regulations passed under the previous government in the first 100 days. With its own agenda, and only a relatively short time in which to make an impact, National – and ACT, and New Zealand First – have repealed significant chunks of legislation with urgency in an attempt to wipe the slate clean.
Back in March, at the 100 day mark, new prime minister Christopher Luxon hailed this as a significant victory: “We committed to 49 actions in 100 days, and we have delivered 49 actions in 100 days.” Not bad considering that 100 days included New Zealand’s traditional summer shutdown over the Christmas break.
But where does Willis’s first Budget leave New Zealanders?
Contextually, for readers in the UK, it’s important to understand that New Zealand’s economic indicators are worse than the UK’s. New Zealand is currently in a recession, reporting negative GDP figures in four of the last five quarters.
Mortgage interest rates are above seven per cent, with fixes typically shorter than what we see in Britain, at just one or two years. Inflation has come down slightly, but is still around four per cent.
In this context, the challenge of delivering tax cuts and giving New Zealand’s economy the boost it needs was always going to be a challenging task – especially considering that plans to rein in government spending include thousands of public sector job cuts, which particularly affect the economy of Wellington, the nation’s capital.
It was impressive, then, that the Budget, which was heavy on fiscal discipline and light on new spending, was largely well received. Indeed, the key, lingering criticism – including from former party colleagues – had little to do with the economy and everything to do with poor communication.
While in Opposition, the National Party committed to funding 13 specific cancer drugs. Pharmaceutical funding in New Zealand is typically done through the resolutely independent Pharmac, the country’s equivalent of NICE, which uses a complex methodology to determine what gets paid for and what doesn’t.
This regularly comes in for criticism, especially when the lack of a specific medicine is a matter of life or death, as in the case of cancer. Numerous examples can be found of New Zealanders funding cancer treatment through ‘Give A Little’ fundraising pages, similar to GoFundMe, often with incredibly difficult stories to tell.
In 2019, Willis herself tweeted that New Zealanders “shouldn’t have to set up Give A Little pages to stay alive”. Often, the specific medicines in scope are readily available in places like the UK and Australia.
Yet despite the explicit commitment to the 13 cancer drugs, speculation has been mounting for months that funding will not be made available.
This is something the government should immediately have nipped in the bud: in holding off, people were allowed to remain hopeful, making the devastation – especially for those where a particular medication might be their last resort or only chance to stay alive – all the more acute.
This is what has lingered. In a largely unremarkable Budget, with modest tax cuts, the one sour note is that cancer patients were essentially led up the garden path, only to be told the money was not available.
The government does not have long to make an impact. Year three is almost always devoted to election campaigns and big pledges, meaning there are around 18 months left to implement new policies and create a record on which the three parties can positively campaign. Broken election promises won’t be easily forgotten.
Tax cuts are one part of the puzzle, but whether the government has done enough to get New Zealand out of recession and provided enough fiscal headroom to allow for spending on the kinds of lifesaving treatments that are available in other countries, only time will tell.
