Use tax cut cash to pay off debts, experts say

NZ Herald Sep 29, 2010
The average family will be about $18 a week better off from Friday – but the experts advise not to go and spend it. David Kneebone, manager of the financial advice website sorted.org.nz, says most families should use the extra cash from the October 1 income tax cuts to pay debts. And Craigs Investment Partners private wealth research manager Mark Lister says that is exactly what most people will do.
..Mr Kneebone warned that people should budget for other price increases apart from Friday’s GST hike. Cigarette prices went up about $1 a packet when taxes were raised in April. Major power companies raised prices by about 3 per cent, and petrol prices went up 3c a litre when the emissions trading scheme started in July. ACC levies on employees went up in April from $1.70 to $2 in every $100, offsetting part of this week’s tax cuts, and the ACC part of car licensing fees jumped by $30 to $198 in July. About 11,000 families on incomes above $72,800 have had a cut in childcare subsidies this week, and almost half the country’s early childhood centres are expected to raise fees in the next few months because of a cut in the subsidy for qualified teachers. The Family First lobby group said yesterday that a basket of cheap-branded essential family groceries increased by 0.7 per cent in the past year at a Pak’nSave supermarket and by 6 per cent at a Foodtown store. “It comes as no surprise that families are struggling financially and that discretionary spending such as family trips, sports and school expenses are being reduced,” said the group’s director, Bob McCoskrie. The Reserve Bank forecasts inflation to peak at 4.8 per cent next June.
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