The New Zealand Labour Party's long stint in power has come to and end after voters backed the centre-right National Party and its plans to cut income tax at the weekend.
The Nationals took 45.5% of the vote in Saturday's election, giving them 59 seats in the 122-seat parliament. Prime Minister-elect John Key can also count on the support of the conservative ACT and United Future parties, giving the government an additional seven seats and a parliamentary majority.
During the election campaign, the Nationals set out a three-year programme of personal tax cuts beginning on April 1 next year. It delivers rate and threshold adjustments that will see those on the average wage better off by NZD47 (USD28) each week.
The Nationals will also introduce a weekly rebate for independent earners. These are personal income-tax payers with an annual income between NZD24,000 and NZD50,000 and who do not receive any form of financial entitlements from the government. The rebate in 2009 will be NZD10 per week (NZD520 a year) and will increase to NZD15 per week (NZD780 a year) from April 1, 2010.
The new government also plans to lower personal income tax rates, and from April 1, 2010, the top rate of income tax will fall to 37% from 38% on income of NZD70,001 and over. From April 1, 2011, the second tier of income tax will fall by 1% to 20% on income between NZD14,001 and NZD50,000. As a result of extending the middle income threshold to NZD50,000, most people with second jobs will pay a secondary tax rate of no more than 20% under the Nationals' tax plans.
"We have ensured that our 2008 package is appropriate for the current conditions. We have also ensured that it does not restrict future movement on rates and thresholds," Key stated in announcing the tax package.
"Our medium-term goal is to deliver a three-tier personal tax system with the highest rate of no more than 33% on income above NZD50,000. This is what we will work towards as future economic conditions allow," he added.
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