Debt: What's Labour's plan?
We’re committed to managing the Government’s books responsibly and keeping debt under control while supporting our people and our economy through the 1-in-100 year shock caused by COVID-19.
To do this, Labour will implement a new individual top tax rate of 39% on income earned over $180,000. This means the top 2% of earners in New Zealand will contribute a little more to help support our country's long-term COVID recovery. For 98% of New Zealanders – those earning under $180,000 – there will be no income tax changes.
Our COVID revenue policy is a balanced plan that protects vital services like education and health and keeps a lid on debt.
Labour’s track record
We have a strong track record of keeping debt under control. Under Michael Cullen, Labour repaid net debt inherited from the Bolger/Shipley Government of 23.9% of GDP to 5.4%.
Over the past three years, the current Government reduced the debt inherited from the previous Government to below 20% of GDP, and our current debt management plan means New Zealand’s debt will remain considerably lower than other countries.
We’ve managed the books responsibly. We’ve focused on getting debt down while investing in our vital services and infrastructure after years of neglect. Labour believes in putting the health and wellbeing of New Zealanders at the heart of everything we do and, with an ongoing global pandemic, that approach is more important now than ever.
Supporting people through COVID-19
The COVID-19 pandemic has sent shockwaves around the world, and New Zealand is not immune. There will be challenges ahead, but thanks to our careful economic management prior to COVID-19, we’re now in a stronger position than many other countries.
We went hard and fast in our response to COVID-19, quickly rolling out financial support for Kiwis like the wage subsidy and COVID-19 Income Relief Payment to cushion the blow. We’ve helped businesses stay afloat through initiatives like interest-free loans and tax refunds, and are supporting them to grow, export and innovate throughout our recovery, with e-commerce support and R&D loans.
We’ve also invested in shovel-ready infrastructure projects right around the country, which will create much-needed jobs and economic stimulus now, while also ensuring New Zealand is an even better place for our children and grandchildren.
Our plan to pay down debt
We’ve always known that the investments we’re making now to grow the economy will need to be funded by long-term borrowing. And while we must be mindful of the impact borrowing will have on future generations, it’s important that we do all we can to protect New Zealanders from the immediate impacts of COVID-19.
We will continue to grow the economy as we support people through the pandemic, so we can pay down debt over time. The initiatives we’re investing in now, such as upgrading key infrastructure and backing Kiwi exporters, will support this. Labour’s proposed new 39% tax rate that would require the top 2% of earners (those who earn over $180,000) to contribute little more to support our COVID recovery and rebuild, is forecast to generate $550 million of revenue a year, helping New Zealand to control debt and build back better.
Under our economic plan, Government debt at its peak will still be significantly lower than many other countries had before COVID-19. Forecasts show our net debt will reach around 53% of GDP, while the average for advanced economies around the world, before COVID-19 hit, was 80% of GDP.
Managing the economy responsibly
Most importantly, our plan will ensure that we do not repeat the failures of governments past. New Zealand has been through economic downturns before, and we’ve seen what bad economic policies can do to those left behind. In fact, we can still see the impacts of them: poverty, inequality, persistent unemployment and more. It doesn’t have to be this way though, and under Labour’s plan, it won’t be.
We will continue to manage the economy responsibly. And right now, being responsible means investing in our people, businesses and communities during these challenging times, so we can keep our economy moving as we rebuild New Zealand together.
Want to know more about Labour’s tax policy? Head here to find all the information you need to cast your vote on 17 October.
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