A leading economist is predicting soon-to-be-announced tax cuts will be "quite sizeable" given how high inflation is still running.
Chief Executive and Principal Economist at Infometrics Brad Olsen said he is expecting decent tax cuts for most Kiwis in the upcoming Budget.
"We are all waiting to see just how big the tax cut might be for Kiwi households. We do expect the numbers that do get thrown around will be quite sizeable just given how large we've seen the inflationary boost in recent years, and the Government wanting to try and reverse out some of that," Olsen told AM on Monday.
"Infometrics has done some work to show that just to correct for some of last year's inflation of around 4 percent would cost the government around $630 million in the first year.
"If you wanted to correct for all of the inflation we've had since tax brackets were last set in 2010-2011 it would cost something like $4.7 billion, so a lot of money the government will have to forgo that they won't be able to use but a lot more, or at least some, going back to households at a time when costs are high."
Olsen said economists will be watching closely to see what impact tax cuts will have on the wider economy.
But he added while it's likely some Kiwi households will spend more as a result, the Government won't be spending it and is implementing cost-cutting, so it shouldn't be adding to inflation.
He said a fairly small amount of families will probably save their tax cut, but many will be putting it into things like their mortgage, groceries and other key costs.
Earlier in the month, Finance Minister Nicola Willis said 83 percent of New Zealanders can expect to see tax relief in Budget 2024.
Willis said the tax cuts will be aimed at middle and lower-income workers across the country.
She stressed the importance of needing "a different sort of Budget from those we've had in recent times".
Willis said "it won't be a big-spending Budget", but rather "moderate" and "responsible".
"The Budget will deliver personal income tax reduction for working Kiwis," she added. "We will be sticking with Kiwis through the economic rough patch and ensuring you get to the other side, stronger and better-off than you are today."
"I can confirm that our Budget will deliver further tax relief. Its focus will be income tax relief aimed at middle and lower-income workers. The relief will be meaningful, but modest.
"Our tax relief package will increase the take-home income of 83 percent of New Zealanders over the age of 15 and 94 percent of households."
