Tax cuts and tourist fees in NZ budget 'clean-up job'

Income tax relief is the centrepiece of the NZ budget delivered by Finance Minister Nicola Willis. (Ben McKay/AAP PHOTOS)

New Zealand will slug tourists and immigrants with higher fees as the government pulls every lever to pay for tax relief and reverse a lurch into structural deficit.

Finance Minister Nicola Willis on Thursday handed down the coalition government's first budget since winning office in 2023.

The headline result was a deficit of $NZ11.1 billion ($A10.3 billion), with a deteriorating outlook pushing a return to surplus back to 2027/28.

Despite the budget's red ink, the government has still found enough to deliver its election promise of tax cuts.

The suite of tax relief includes income tax cuts flowing to 3.5 million Kiwis, costing the government $NZ3.7 billion ($A3.4 billion) of revenue in 2024/25.

"This is a budget for every New Zealander from every walk of life who gives their best and wants a fair deal in return," Ms Willis said.

Finance Minister Nicola Willis
Finance Minister Nicola Willis has delivered the first budget of NZ's new coalition government.

Lower and middle-income earners win out, with poorer families with young children the biggest beneficiaries through a childcare rebate.

Those families could be up to $NZ135 ($A125) a week better off, while an average-income household with two young children stand to benefit by $NZ126 each week.

In contrast, higher-wage earners will be $NZ20 a week better off, minimum wage earners will see an extra $NZ12 a week, and retirees living off the pension will get just an extra $NZ4.50 a week.

Opposition Leader Chris Hipkins derided the tax cuts for pensioners as "less than a packet of chewing gum".

Broad public sector cuts also feature in the first budget of a coalition comprised of the centre-right National party, free-marketers ACT and populist right-wingers NZ First.

After forming office, Ms Willis ordered departments and agencies to cut spending by up to 7.5 per cent, with Thursday's budget the big reveal of around 240 initiatives that have been scrapped or shrunk.

Among programs facing the axe are a string of climate programs, including $NZ180 million for a plan to price agricultural emissions and $NZ178 million for energy efficiency programs for low-income Kiwis.

New Zealand Opposition Leader Chris Hipkins
Chris Hipkins derided the tax cuts for pensioners as "less than a packet of chewing gum".

Helping to boost revenue is the proposed doubling of the International Visitor Levy, currently $NZ35 but budgeted to grow to $NZ70.

The levy, which Australians are exempt from paying, will bring in $NZ261 million.

The government will also hike immigration fees and support services to save $NZ530 million.

Also on the chopping block is the First Home Buyers Grant, saving $NZ245 million, and switching Labour's policy for free tertiary study from students' first year to their final year, saving $NZ900 million.

Departments and agencies have worn billions in cuts, for the loss of around 4000 public servant jobs.

The government has booked $NZ1.2 billion in savings from this exercise, redirecting the rest into "frontline" health, education, police and corrections roles.

A handful of agencies have been spared deep cuts including prime minister and cabinet, foreign affairs and the Defence Force.

Ms Willis took aim at the Labour-led governments for blowing out public spending as they steered New Zealand through the pandemic.

"This year's budget is the clean-up job New Zealand needs after six years of economic mismanagement," she said.

"We are getting the country's finances under control and establishing foundations for growth."

The tax cuts are almost precisely what was promised by the National party, the biggest of the three-party coalition government, during the 2023 election campaign.

Ms Willis said the ACT party's plan to flatten the tax scale "had a lot of merit" but did not benefit Kiwis in the way she wanted.

"It remains, however, an idea for the future," she said.

* 1 Australian dollar = 0.92 New Zealand dollar

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