Budget 2022: National's Christopher Luxon would axe property tax, makes wages gaffe

Leader Christopher Luxon speaks at the National Party post Budget breakfast at Eden Park. Photo / Jed Bradley.

National leader Christopher Luxon says Labour's tax changes for investment properties would be gone "immediately" if the party won the 2023 election.

Treasury forecasts published at the Budget on Thursday estimated this would cost $490 million in 2024 and $650m in 2025.

The party has four key planks to its tax policy, but it has been coy about when they would be implemented - saying only that they would be implemented in its first three-year term. Luxon wants to adjust tax brackets at a cost of $1.7 billion, axe the 39 per cent top tax bracket at a cost of about $600m, and bring the bright line test back to 2 years.

Landlords had previously been able to deduct interest costs from their tax bill, like other businesses. However, the Government removed this ability last year arguing it gave landlords an advantage when it came to purchasing homes over owner-occupiers as landlords would have lower real interest costs.

Answering question in a post-Budget speech organised by Grant Thornton, Luxon said the interest deductibility changes would be gone "immediately".

"We are going to remove interest deductibility immediately, we'll unwind the bright line test as well," Luxon said.

"We're going to unwind all of that - they're taxes the Government has put in place this term," he said.

"Interest deductibility is a legitimate business expense everywhere round the world, it is not a tax loophole - it's had a huge impact and it's lifted rents $50 at a time when we need more housing security," he said.

Luxon was also asked a question about comparing growth in the LCI versus CPI.

The acronyms stand for two important measurements in the changing cost of things - LCI is the Labour Cost Index, measuring the cost of work, and the CPI is the Consumers Price Index which measures the changing cost of goods and services in the economy (inflation). It is the main measure of inflation.

The questioner asked Luxon to give his thoughts on LCI versus CPI, because over the longer term the cost of labour had increased more than the cost of goods and services.

The question appeared to stump the moderator Russell Moore, a National Managing Partner at Grant Thornton.

"LCI - local c..?" Moore said.

Luxon was not sure either.

"Sorry, I want to clarify - LCI, what do they mean?" Luxon asked.

"Are they talking about the local cost index," Moore asked?

"Or are they talking about wages - because there are a couple of acronyms I just want to make sure we're getting it right," Luxon said.

Luxon said under the previous National government wages had risen faster than costs.

He said under the current Government, wage growth too often had been outpaced by inflation.

"Under 19 quarters of this Government, I think 10 ten of them we've actually had inflation ahead of wage growth," Luxon said.

Wages have grown higher overall than costs under the current Government - however this year costs are growing far faster than inflation.