The government of New Zealand presented a picture of a soft economy in Thursday’s Budget, increasing unemployment and a weaker balance sheet.

While it introduced modest tax relief, it reduced new spending, and drew criticism for neglecting the country's Indigenous population.

“This budget won't fix all of New Zealand's economic challenges on its own and there is much more to do, but it does show what is possible with care and discipline,” said New Zealand Finance Minister Nicola Willis in her inaugural budget statement.

Since taking office last October, the centre-right coalition government has grappled with a deteriorating economic scenario. New Zealand has entered a technical recession, and domestic inflation has remained at high levels, Reuters reports.

Prime Minister Christopher Luxon’s National Party has pledged financial relief for middle-income New Zealanders grappling with mounting living expenses, soaring mortgage rates, and record-high house rental prices.

Modifications to personal income thresholds and tax credits are expected to deliver a NZ$3.7 billion boost to lower- and middle-income earners.

Changes to personal income thresholds and tax credits are projected to offer a NZ$3.7 billion uplift to lower—and middle-income earners.

“Even as wages have struggled to keep pace with inflation, Kiwis have been dragged into higher and higher tax brackets,” Luxon stated.

Some of the funding for these changes is derived from reductions in back-office functions and initiatives implemented by the previous government. 

However, criticism has been levelled at the current government, suggesting that these measures unfairly impact New Zealand's Indigenous Maori population. 

Additionally, the budget, which trimmed new operating expenditure and detailed significant savings in housing, tertiary education, conservation, and environmental spending, as well as smaller reductions across various agencies, allocated NZ$2.68 billion for infrastructure projects including roads, rail, and public transport, alongside NZ$2.1 billion for law enforcement and public safety initiatives.

Yet Chris Hipkins, leader of New Zealand's largest opposition party Labour, criticised the budget for its lack of significant capital expenditure in crucial areas such as health and education.

“In New Zealand we work together for the good of the many – not the few. This budget does not deliver in that spirit,” Hipkins said.

Moreover, the government forecasts a budget deficit of NZ$11.07 billion or 2.7% of GDP for 2023/24 and predicts it will return to surplus in 2027/28.

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