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Watch onWELLINGTON - A National Party-led government has promised to cut government spending in New Zealand, reduce taxes and return the government accounts to surplus. But with coalition agreements yet to be sorted, there remain some questions about its economic policy.Centre-right National won the biggest share of the vote in the general election on Oct. 14. With preferred coalition partner ACT New Zealand, it has a razor thin majority of just one seat.
To do so, National plans to cut spending on the public service by around NZ$600 million annually, while promising to boost spending on frontline staff in the health and education sectors. ACT wants to go further. It has said it will scrap a number of ministries and axe around 15,000 public service jobs, reducing the headcount to levels seen in 2017.National intends to allow foreigners to buy houses worth more than NZ$2 million but tax these purchases at 15%. It forecasts this will provide NZ$700 million more in revenue annually. This has been heavily debated by economists in New Zealand.
Both ACT and National want to reintroduce a tax break that lets property investors deduct some of their mortgage interest costs against what they pay on rental income taxes. "Looser housing-related policy could add a bit of momentum to the housing market, and thereby possibly inflation and interest rates. But meaningful headwinds cap the upside," ANZ economists said in a note, pointing to high mortgage rates and affordability constraints.National and ACT are both keen to return the central bank to focusing solely on inflation, rather than having a dual mandate that takes employment into consideration.
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