budget 2022 - what it means

Yesterday, the NZ government released their budget for the next financial year. Remember the government financial year ends on the 30th of June.?

The budget gets a lot of people talking and debating about what should or shouldn’t be there. What is fair and what isn’t? How do we even define fair??

Recently, I listened to a politician speak (I won’t name them as we all may overlay our bias toward that party or politician) and they said something that stuck out to me.

They explained that we need to move away from thinking along the lines of ‘what's in it for me?’ and instead think about what sort of person you want to be yourself and what sort of values we want to live by as a nation.

This is all pretty deep stuff and I'd guess that most people never sit down to think about their own values, let alone a nation's values. We have spoken about values before, so maybe this is why it stood out to me.

In parts of my role, we work with businesses to clearly define the values that govern their business. These values help the business owner with decision making, how to act, hiring and setting standards. There is no reason why we can’t do this exercise individually.

It does seem like a lot of chat recently is centred around ‘what’s in it for me?’. Even articles about yesterday's budget were titled 'The Budget - whats in it for you?'. Naturally, how we think, right?

With an election coming up in 2023, we will only see and hear more of this.

After all, a politician's key job is to look after you and I. Just kidding, it is to get re-elected. Apologies to any politicians reading this. We know you are well intentioned etc etc etc.??

What I have noticed is that we don’t stop to ask too many questions either. There has been plenty of chat lately about removing the top 39% tax bracket. I think a lot of people forget that this was only introduced from the 1st of April 2021 so it’s only been in for one financial year.

When this rate was introduced it was thought that 2% of our working population would fall into this new tax rate but they underestimated this by 44,000 people. They’ve collected way more tax than they had expected.?

I’ve not seen many people say ‘hey what did we do with all of that new tax? What is that being spent on?’.?

Also, as wages have risen, people are moving up tax brackets and consequently paying higher taxes (more on this below).

Yesterday we got a bit of an insight as to what our country will be spending money on and here is a bit of a summary taken from One News updates:?

• New 'cost of living payment' for people earning up to $70k ($350 administered by the IRD from the 1st of August. The payment will be available to eligible individuals who earned up to $70,000 during the period from 1 April 2021 to 31 March 2022. No need to apply, you'll be paid if eligible. Can't be receiving the winter energy payment(most beneficiaries)).
• The fuel tax and road user charge cut, as well as half-price public transport is to be extended for another two months.
• Ongoing half-price public transport for community service card holders (I think students can get these).
• Urgent new law to go through Parliament to try to get down grocery prices by introducing more competition.
• $3.1b for Health NZ over two years, $168m for Māori Health Authority over four years, $191m over two years to Pharmac to buy medicines, 248 new paramedics.
• Scrapping rule that denies sole parents on benefits, their child support payment.
• Emergency dental grants increased from $300 to $1000.
• House price caps for First Home Loans to be removed.

There is something in there for 2 million Kiwis directly as this is the number of people estimated to be eligible for the $350 cost of living payment.

For many, this will be soaked up by rising inflation and increasing interest rates.

If we think about this some more, the tax threshold changes from 17.5% to 30% above $48,000. In the 2022 financial year, if you received a $1,000 pay rise to take you to $49,000, the extra $1,000 is taxed at 30% and you will pay $300 tax on that $1,000.

A number of people have received pay rises as their incomes have increased. For people over $48,000 who did, the ‘cost of living payment’ will effectively refund them just over 1 year's tax on $1,000 of their income.

This would even include a number of people who are on minimum wage and do some overtime.

Hey at least this is something to be grateful for right? Although temporary, I am sure that this will be of great help to some New Zealanders.

For some of you, you may not necessarily NEED it, so perhaps think about how you can use it to speed up your financial goals - i.e. clearing debt or investing. Set calendar reminders ahead of the payments so that you don't miss it going into your bank account and fritter it away.

We can dig into some of these other points in further lessons, but for now...

There is a high chance that this budget isn’t as important as?YOUR?budget. How the government spends its income is important because it is tax payers (and future taxpayers) money, but?YOUR?budget is more important.

This week, there will be people who spend more time focussing on the country's budget than they will on their own.

Not you, though?you know how important it is to manage your income and outgoings. If you don't take time to review your budget and cash position each month, then why not?

Crush it out there,

Luke

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Did you know: the cost of living payment?is expected to apply to 2.1 million people and cost $814 million. The winter energy payment also gets paid to over 1 million beneficiaries.?

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