The bits to watch out for
Every year there is no announcement on shifting tax brackets, hurts middle income earners a little bit more. A full-time earner on minimum wage earns around $44,000 a year, which is only $4,000 below the 30% tax threshold. Until recently that threshold was the second highest in the country, which should technically be reserved for the wealthy. As wage inflation creeps up, the government will do well out of tax revenue from middle and low-income earners, and this will be funding a lot of the projects announced today. We appreciate that this government has campaigned strongly against moving the tax thresholds, however every year that goes by creates a stronger argument for action.
The Emissions Reduction Plan (ERP) was great, but there could have been more around sustainability. A few weeks ago, we published this article, which highlighted our shopping list to truly meet our climate change action needs. While there were some good announcements today, if we review this wish list, we see a lot is missing, for example, the transport subsidy isn’t the same as spending on updating the public transport network.
The unknown is how the government’s ERP will impact ETS prices, which is important to those businesses that have been stock piling credits in anticipation of prices going up. You can read more on our view around that here.
The government will also have to be careful it hasn’t just kicked the cost-of-living crisis down the road. The cost-of-living payments only run for three months, while the public transport subsidies also run out in two. If everything comes off at the same time, it could create a spike in living costs and inflation could come back strongly. According to today’s speech, inflation has reached its top. However, with the supply chain issues ongoing, as well as a number of government initiatives artificially reducing costs, we think that was an optimistic call to make. The Covid response fund was officially closed today, with around $3b yet to be spent. We wonder if Minister Robertson is planning to use that to help temper inflation over the coming months?