Release: Labour tackles cost of living for families

Labour Leader Chris Hipkins has launched a major cost of living package that removes GST from fruit and vegetables and delivers the largest ever boost to the In-Work Tax Credit to approximately 160,000 families.

  • GST to be removed from fresh and frozen fruit and vegetables from 1 April 2024
  • Boost to In-Work Tax Credit by $25 a week to $97.50 – largest ever increase to IWTC will benefit approximately 160,000 families
  • Lifting the Working for Families abatement threshold to $50,000 in 2026
  • Once full Working for Families changes are implemented, 175,000 families will gain on average $47 a week

Further changes to Working for Families abatement levels that take effect in 2026 will see 175,000 families $47 a week better off on average.

“The cost of living is the biggest issue facing New Zealanders in this election. Cutting GST from fruit and vegetables and boosting Working for Families will ease the pressure on families as we get through this inflationary cycle,” Chris Hipkins said.

“Inflation is tracking downwards, including food price increases, but food is always a big cost for families - so this is a good policy for today and the future.

“Other countries, including Australia, take GST off fruit and vegetables. In fact, most countries that have a form of GST have carve-outs for certain items, and if anything, New Zealand is currently an outlier.

“In the modern world with electronic transactions it’s a fairly simple policy to implement. Our aim is to have it in place as soon as 1 April next year.

“As a result of taking GST off fruit and vegetables and increasing Working for Families many low and middle income Kiwi households with young children will be around $30 a week better off next year.

“Once fully implemented, low and middle income families with kids will be over $50 a week better off on average, and when you add other components of the package such as 20 hours free ECE some families will be saving hundreds of dollars a week.

“A lot of the people who oppose these changes aren’t the ones worrying about their weekly food bills. This policy is aimed at New Zealanders for whom every dollar at the checkout matters.

“To ensure retailers are passing on the full impact of the GST removal, the new Grocery Commissioner will be monitoring supermarkets’ pricing behaviour and will take action if it’s not happening.

“Since becoming Prime Minister my focus has been on delivering cost savings across the key expenses families face. While taking GST off fruit and vegetables isn’t a silver bullet, alongside other measures to reduce costs we’re delivering a meaningful difference.

“Our 10-point cost of living package includes free doctor’s prescriptions, cheaper childcare and 20 hours free ECE for two-year-olds, free or half price public transport for children and young people and now GST off fruit and vegetables and a $25 boost to Working for Families – and there’s more to come.

“The current economic environment means now isn’t the time for unfunded and inflationary tax cuts. Providing targeted support to cut the costs of the basics for those who need it the most is a better plan and smarter economics.

“New Zealanders now have a clear choice in this election. Huge tax cuts for millionaires and CEOs under National, or relief at the checkout and support for working families under Labour.

“For those who like this policy, my message is to give your party vote to Labour.

“Christopher Luxon won’t remove GST and has said he will reintroduce $5 prescription charges. This policy will only happen under a Labour Government,” Chris Hipkins said.

Working for Families

Labour Social Development and Employment Spokesperson Carmel Sepuloni said since Labour introduced Working for Families in 2004, it has been a cornerstone of the Party’s commitment to lifting incomes and supporting families in work.

“This increased support comes at a time when New Zealand families need it most. We are providing practical cost of living support and helping make things a little easier for parents and families,” Carmel Sepuloni said.

“As part of the Working for Families review, we’ve already made changes that mean 346,000 families will be better off by an average of $20 per week, and we lifted it even further on 1 April this year.

“Increasing the In-Work Tax Credit by $25 from $72.50 to $97.50 per week from 1 April 2024 will deliver targeted meaningful cost of living support to around 160,000 low and medium-income working families.

“We will also lift the Working for Families abatement threshold by more than $5,000 to $50,000 from 1 April 2026, to ensure working families keep more when their pay increases or they pick up extra hours.

“Half of Working for Families recipients earn over $40,000, and with record wage growth fewer Kiwis have received Working for Families tax credits as their incomes have grown.

“The combined impact of the $25 increases to the In-Work Tax Credit and lifting the abatement rate will see 175,000 households gaining $47 per week on average during the next term of Government.

“These increases are in addition to the steps we’ve taken to make our welfare system fairer.

“The Families Package, consecutive and historic increases to Main Benefits, increase in thresholds for childcare subsidies and our investment in getting people into work are all continuing to make a difference in the lives of many low and middle income people and families.

“Today’s policy comes at a time when New Zealanders need it most, providing practical cost of living support and helping make things a little easier for parents and families.

“We need a Labour Government that puts families first.

“National will pull the ladder up from hard working New Zealanders. We saw that when National froze income thresholds for childcare assistance in 2010 and took away the Training Incentive Allowance — both of which we reinstated. That’s what New Zealanders can expect with the Coalition of Cuts,” Carmel Sepuloni said.

Labour’s Tax Plan

Labour Finance Spokesperson Grant Robertson said the GST announcement and Working for Families Tax Credit changes are the centrepiece of Labour’s tax policy for the election. There are no changes to income tax levels and no introduction of new taxes such as a Wealth Tax or Capital Gains Tax.

“As part of Labour’s responsible management of the Government’s finances, we propose to remove the last remaining large COVID-19 economic stimulus measure,” Grant Robertson said.

“In March 2020 we reintroduced depreciation for non-residential buildings to support commercial property owners through the pandemic, after it was removed by the previous National Government. Removing this will help fund the commitments being made today.

“We have taken the decision that now is not the time for widespread changes to our tax system. Our focus is on doing what we can to support Kiwi families in a tight global economic environment.” Grant Robertson said.

Alongside these main announcements, Labour’s tax policy for the election is:

Ongoing Digital Services Tax work
Work is ongoing to ensure that multinationals pay their fair share of tax, particularly in the digital space. We are playing an active part in negotiations at the OECD to get a multi country agreement.

“In line with Labour’s 2020 manifesto, if a multilateral solution isn’t found in an appropriate period of time, we would be ready to introduce a DST ourselves, like other countries around the world.

“Both streams of work are ongoing, and this remains our position – we will be ready to implement a DST from 1 July 2025 if required. The final rate for this would be set once the international position is clear.”

Regular fees, duties and levies
Labour’s responsible management of the books will include returning to the positions of previous National and Labour Governments of making gradual increases in levies and duties and cost-recovery fees for specific areas of government operations if required, to account for inflation or new investment. This will be done in a measured and considered way, taking current inflation into account as part of the decision-making process.

“In uncertain economic times, our view is that it is best to be consistent and stable. The times call for restraint and simple, clear and smart policies which grow our economy, help drive inflation down and provide targeted help to those families who need it the most.

“Now is not the time for new taxes or to promise tens of billions of dollars in unfunded tax cuts which would add to inflation and take money away from health, education and housing to line the pockets of the wealthy,” Grant Robertson said

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