Tax and immigration changes looming in election year

3:14 pm on 28 April 2017

Power Play - With Budget Day looming and the election following fast on its heels, the spending and policy promises are starting to roll in.

This budget will be the seventh for Finance Minister Bill English (right - pictured with Steven Joyce on the way to the lock-up at Parliament's Banquet Hall).

Steven Joyce and Bill English will deliver their first government budget as Finance Minister and Prime Minister next month. Photo: RNZ / Alexander Robertson

National already has a big spend planned for schools, transport, housing and hospitals, and is now offering hints of what a Budget package for low and middle income families might look like.

In what has been a drawn-out political strip-tease, the government's intentions for a tax reductions package are becoming clearer, after plenty of talk but little detail about a $3 billion tax package from former Prime Minister John Key throughout this past term.

Cuts to income tax rates are off the table, but changes to tax thresholds are looking more likely, as Finance Minister Steven Joyce prepares to deliver his first Budget.

Mr Joyce has already talked about wanting to raise the threshold for the median wage. At the moment a 30 percent tax rate kicks in for earnings over $48,000.

But it is difficult to target one particular group of taxpayers, especially those in the lower brackets - partly because it costs so much to give them a decent increase because their earnings are proportionally lower, and also because any changes benefit those in higher brackets too.

The Budget package could therefore also include changes to entitlements like the accommodation supplement and Working for Families - and because it is election year, the package is likely to come with a hefty price tag.

That would leave Labour in an interesting position.

If the government times the introduction of the package for next year, Labour would either be faced with accepting the package within its own spending budget - curtailing the amount it could allocate for other election promises - or tell low and middle income earners that under Labour, they would not get the income relief promised by a fourth term National government.

The government has also talked up this week's $11bn infrastructure announcement but the real increase happened late last year when the new infrastructure spend was almost trebled from the 2016 Budget to $9bn.

Despite denials from Mr Joyce, it is difficult to separate that spend from the relentless pressure the government faces over housing and, to a lesser extent, Auckland's clogged roading networks.

The Property Council has said infrastructure investment has been noticeably "throttled back" in recent years, which is severely impeding the supply of residential housing - a fact this new spending allowance seems to acknowledge.

The council has argued you cannot create new suburbs, or put more houses into existing ones, without having roads and public transport to get people around, or schools to educate local children.

Net migration figures remain stubbornly high and although the government relented over opposition criticism - or pre-empted formal Labour Party policy - and will crack down on the number of work visa approvals, it still argues there is no need for a broader review of immigration numbers.

While challenges with housing affordability are spreading to other parts of the country, many new arrivals are heading straight to Auckland, with no sign those numbers will abate any time soon.

That is not a situation the government can afford to ignore, particularly in election year, with about a third of the voting public resident in Auckland.

Labour leader Andrew Little has talked about cutting immigration by "tens of thousands" but has yet to give details.

His focus has been on the number of work visas and whether those jobs could be done by New Zealanders - so it would come as no surprise if Mr Little fleshed out Labour's immigration policy at the party's election year congress to be held in Wellington next month.

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