Tax cuts still in the mix for budget

New Finance Minister Steven Joyce speaking to media at Parliament. Photo / Mark Mitchell

Tax cuts for lower and middle-income earners are one of four key areas Finance Minister Steven Joyce is looking at for his first Budget in May.

Speaking at an event hosted by Massey University and the Auckland Chamber of Commerce, Joyce outlined the strength of the country's economy and the Crown's own books, and said his focus for the May 25 Budget will be on improving public services, building infrastructure, repaying debt, and cutting taxes.

Joyce has carried on with his predecessor's target of reducing net debt to about 20 percent of gross domestic product by 2020, from the 25.5 per cent level it's currently at, "to make sure that we can manage any shocks that may come along in the future", and "remained committed to reducing the tax burden and in particular the impact of marginal tax rates on lower and middle income earnings, when we have the room to do so."

New Zealand's economy is still forecast to experience robust growth over the next couple of years, fuelled by low interest rates, strong construction activity, and high rates of tourism and migration. That's also likely to bolster the Crown's coffers, with figures today showing an operating surplus of $9 million in the six months ended December 31 on higher consumption tax take than expected.

Joyce didn't announce any details about potential tax cuts, although work to investigate demand management tools for roads could see petrol taxes and road user charges replaced with other initiatives, such as electronic road tolling. He also ruled out introducing a regional fuel tax, saying "they are administratively difficult, prone to leakage and cost-spreading, and blur the accountabilities between central and local government."

The Crown is also interested in looking at other options for longer-term funding for new infrastructure, including the use of private finance for certain projections, he said, name-checking the proposed Penlink alternative route between the Whangaparāoa Peninsula and State Highway 1 at Redvale in Auckland.

New roads have been a core part of the government's infrastructure programme over recent years, and the Crown's capital spend will be about $7 billion this year, about twice what it's been in recent times, Joyce said.

On housing, Joyce said the government has received $1.79b of proposals seeking support from the $1b housing infrastructure fund, which could help build 50,000 new dwellings.

"At this stage, however, only a small number of the 17 proposals received through the expressions of interest phase would result in projects being advanced earlier than previously planned by councils," he said. "We want to see more ambitious projects that will have a more positive impact on housing supply over the next five years."

The government will also investigate other financing options to introduce private sector capital to site alongside council and government funds.