What the NZ election means for you and your finances

NZ election voting
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So the election’s done and dusted – but with the government still not actually determined and old Winny holding the balance of power it’s still pretty up in the air which policies are going to come into play over the next three years.

Throughout the election, housing, taxes, and the economy were three of the biggest issues driving people to vote one way or another. Each of the parties have put out several policies around each of these issues (some more extensive than others) and figuring out which party you actually support could be pretty tricky. Especially when – let’s face it – the main two parties aren’t REALLY that different from each other on lots of the main issues. They just have slightly different ways of approaching them.

Disclaimer – we’ve only looked at National and Labour’s policies in this article, with the odd addition from the Greens. This is because we believe that these are the finance policies most likely to affect Kiwis (plus, let’s be honest – this article would never end if we included all the minor parties!)  These are all our own opinions based on policies provided publically by the parties and are in no means an endorsement of any of the parties!

 

Housing

 

Auckland housing crisis, Housing policy

 

With the major parties unable to agree on whether there is, in fact, a housing crisis in New Zealand, they approach housing fairly differently.

National are focusing on growing the housing stock. They will continue to create Special Housing Areas, to fast-track building consents for homes in high demand areas, while increasing grants to first home buyers under their Homestart programme.

Both they and Labour are looking to build many new homes over the coming years (100,000 for first home buyers by Labour and 200,000 private sale homes by National).

However, where Labour differs is in their approach to investment properties, with an extension to the capital gains tax (so any investment property sold within five years of purchase will face the tax, as opposed to two currently), restrictions on residential property ownership by non-residents, and the changing of negative gearing rules to discourage speculative investment. Their likely coalition partner, the Greens, are aligned with them on most of these key points, meaning that they’re particularly likely to be followed through on.

Finally, Labour has publically come out against blanket debt to income (DTI) ratios, which could “lock first home buyers out of the market’, according to Labour’s Finance spokesperson Grant Robertson. Prime Minister Bill English has said he doesn’t see the need for them currently, but has called on the Reserve Bank to look at an exit plan for loan to value ratios (LVRs) as he doesn’t see them as a “permanent feature of the market”.

So what does that mean for you?

IF YOU’RE A PROSPECTIVE FIRST HOME BUYER:

Both are aiming to make the property market easier for you to enter. If you earn a combined income of under $130,000 annually, National’s Homestart extension will be great for helping you add to your initial deposit. However, Labour’s efforts to restrict the growth of the property market may help cool prices further, which could be in your favour. If the LVRs are dropped, then there may be additional opportunities to get bigger loans as well. So long as DTI ratios don’t come in to play, you should see some (hopefully) positive changes whichever way the election goes.

IF YOU OWN YOUR OWN HOME:

You’re unlikely to be affected unless you decide to sell following the NZ election. Because you live in your own home, you won’t be subject to capital gains tax, but you may find that the attempted slowing of the market or new addition of housing stock could lead to a slight drop in your prospective profit, as supply starts to better meet demand.

IF YOU’RE A PROPERTY INVESTOR:

You’re the ones most likely affected by any potential changes – you may end up needing to pay tax on gains made from your investment properties if you’re into quick turnaround, but if you’re all about those long-term profits and finding bargains, then some of the restrictions could help you invest in further properties. And with most parties creating extra housing stock, there may be further opportunities for investment in growing areas.

 

Income

 

Income tax policy

 

When it comes to income, people tend to fall into two main brackets – those who support lower taxes and people paying for more services themselves, and those who support higher taxes in order to fund infrastructure and services to benefit everyone. Unsurprisingly, party policies also tend to fall along those lines, although neither major party is likely to increase taxes at this point.

The main differences are National’s pledge to reduce tax on income up to $52,000 compared with Labour’s abolishment of secondary tax and the establishment of a Tax Working Group to identify structural issues facing the tax system.

Both are planning on increasing Working for Families payments, as well as payments for accommodation costs through the Accommodation Supplement, while Labour would also pay $60 to all families with babies and toddlers. This would replace the current Parental Tax Credit.

So what does this mean for you?

IF YOU’RE A LOW EARNER:

A National government could certainly mean more money in your pocket, which could enable you to save more – however, on a particularly low income you may benefit more from some of the other Labour policies, which aim to put more support around lower earners and not penalise them for earning money from multiple channels.

IF YOU’RE A YOUNG FAMILY:

Under Labour, the increase in parental payment would amount to an additional $920 for all families in the first year of a child’s life. In the second and third year of a child’s life, families on less than $79,000 income would gain an additional $3,120 each year, with that amount decreasing the more your household income is.

IF YOU’RE A HIGH EARNER:

In all honesty, it’s not likely to affect you much. Labour’s already said that any findings from their Tax Working Group won’t get put into practice until the next NZ election, and while the Greens want to increase tax to 40 per cent for income over $150,000, that is still unlikely to happen anytime soon as neither major party will want to renege on their main promises early in their term (plus the Greens are likely to fight harder for their more core policies, such as those around the environment).

 

So that’s our look at how the major parties’ different policies could affect you and your finances. We’ve tried to keep it pretty unbiased, but hopefully it might help you prepare – no matter who gets elected!

And hey, whoever gets in, we’re here to help you achieve your financial goals and build that empire you’ve been dreaming about – so get in touch!

 

Note: Our huge thanks to the Spinoff Policy NZ election tool, which we found incredibly helpful in writing this article. If you want to explore the policies that each party has on all the other issues, we’d definitely suggest you check it out!

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