The ACT Party has pulled back on the scale of its tax cut promises, rejigging the numbers in its alternative Budget to account for the tight economic conditions laid out in the Government's latest update.
The political party's headline tax promise was previously to reduce New Zealand's five-rate income tax system down to two by 2025/26.
However, it confirmed on Thursday that it now plans to have three tax rates by 2026/27.
Currently, any income up to $14,000 is taxed at 10.5 percent, income between $14,000 and $48,000 is taxed at 17.5 percent, income between $48,000 and $70,000 is taxed at 30 percent, income between $70,000 and $180,000 is taxed at 33 percent, and any higher income is taxed at 39 percent.
Under ACT's new plan, by 2026/27, any income up to $60,000 would be taxed at 17.5 percent, income between $60,000 and $180,000 would be taxed at 30 percent, and any higher income would be taxed at 33 percent.
The previous plan would have seen income up to $70,000 taxed at 17.5 percent and all other income taxed at 28 percent.
Leader David Seymour said "tough circumstances call for responsible economic management".
"Now is not the time for big spending promises or significant tax cuts. It is time to end the waste and fix the economy," he said.
"We can deliver modest income tax cuts of $16 billion over four years beginning with $2.9 billion in year one, rising to $5 billion in 2027.
"Under ACT's Alternative Budget, every earner would be at least a few hundred dollars a year better off. These very modest changes, where nobody is worse off, reflect the challenging circumstances Grant Robertson has left New Zealand in. We immediately reintroduce the ability for residential landlords to deduct interest and abolish the bright line test."
He said the revision of ACT's alternative budget was required after the Government released the Pre-election Economic and Fiscal Update (PREFU).
"PREFU showed that Labour has no plan for paying off debt, no plan for turning things around, every year forecast the country borrows more and more until we lose first world status. This means ACT has had to adjust its Alternative Budget accordingly.
"We can't offer the same tax cuts we previously proposed because Grant Robertson has left the cupboard bare. This budget is what's needed to balance the books."
PREFU was released earlier this month and showed a surplus had been delayed a year until 2026/27, mainly due to a shortfall in tax revenue.
Core Crown expenses rose from $125.6 billion in 2022 to $128 billion in 2023, however, this was $200 million less than expected. Spending included on the cost of living payments, the North Island weather events, increased spending on benefits, and a higher cost of servicing debt.
Net debt was just $5.4 billion in 2019, but has risen to $71.4 billion. The COVID-19 response was a big reason for that, but it's $400 million more than what was expected in the May Budget. As a percentage of GDP, net debt is 18.1 percent. The forecast shows net debt to reach 22.8 percent of GDP in 2025, before then falling to 21 percent by 2027.
Robertson said the debt levels compare favourably to countries New Zealand compares itself with. For example, net debt in Australia will reach 36 percent, while in the United Kingdom, it will reach 95 percent.
Seymour said ACT wants to cut "corporate and middle-class welfare" and reduce the size of the public service. This would cut $25.5 billion in spending over four years, he said.
"This means we can afford to make essential investments like boosting GP capitation grants, paying good teachers more, increasing prison capacity, increasing defence spending, and sharing GST with councils to build infrastructure.
"Under ACT's Alternative Budget, net core Crown debt will be lower that Labour's path every year. Operating deficits in 2023/24, 2024/25 and 2025/26 are smaller, and the surplus in 2026/27 is larger."
The ACT leader has previously said he expects about 15,000 public servants to lose their jobs due to his party's proposed cuts.
The alternative budget proposes a number of savings, including getting rid of the school lunches programme, gradually increasing the Superannuation age, ending fees-free, targeting the Winter Energy Payment, stopping film subsidies, and abolishing a number of "demographic ministries".
The Government last month announced a series of measures to create about $4 billion in savings. That includes trimming some current programmes, pulling back future Budget operating allowances, and making baseline savings.
Robertson said at PREFU that the $4 billion in savings - which came on top of $4 billion of savings in May - showed the Government acting "swiftly" to respond to economic conditions.
The key points from ACT's alternative budget:
Lowers net core Crown debt every year. While ensuring operating deficits in 2023/24, 2024/25 and 2025/26 are smaller than forecast, with a larger surplus in 2026/27.
Creates a more competitive tax system that encourages work, savings, and investment. By 2027/28, we will have flattened and simplified the income tax system, with three rates instead of five, and a top rate of 33 percent.
Reduces the number of public servants and removes whole departments that add no value for the public.
Invests in safer communities by increasing the number of prison beds so dangerous criminals can be kept off the streets.
Provides the ability to lock up serious youth offenders with the construction of 200 new youth justice beds under the management of the Department of Corrections.
Increases capitation rates for GP practices, ensuring New Zealanders can get an appointment with their GP when they need one.
Pays good teachers more and pay the best teachers a lot more with the Teaching Excellence Reward Fund.
Protects New Zealand and its allies by increasing defence spending to 1.5 percent of GDP, with a long-term target of reaching 2 percent by 2030.
Shares over a billion dollars a year with councils for infrastructure through GST-sharing, but only if they say 'yes' to building more homes.
