There is a part of New Zealand’s cost-of-living debate that is difficult to see in the usual statistics. It concerns people who are working, studying, running small businesses or trying to establish themselves financially, but whose income is too uncertain to provide the security normally associated with being employed.
A person running a small business might earn several thousand dollars when a project is completed and then go for weeks without another substantial payment. Over a year, the income may look respectable enough on paper. The experience of living on it can be quite different.
A salaried worker earning $70,000 knows roughly what will arrive in the bank next Thursday. A self-employed person who eventually earns the same amount might receive $9,000 in one month, $1,200 the next and almost nothing in the month after that. Yet the rent, fuel, insurance, software subscriptions, phone bills and other household and business costs continue at their usual pace.
IRD also measures the business over a much longer period than the owner experiences it. Tax is calculated on income earned across the year, but cash shortages happen on particular Tuesdays and Wednesdays when bills have to be paid and the next customer has not yet arrived.
With New Zealand heading towards the 2026 general election, this is a useful place from which to judge the competing economic arguments. National is asking voters to give it more time to complete an economic reset built around tighter government spending, lower taxes and stronger private investment. Labour is asking to return to office with a programme that includes a capital gains tax, broader public services and a new package aimed specifically at small businesses. For people whose problem is not simply low income but unstable income, neither case can be accepted on its political label alone.
This becomes more complicated for people who are trying to improve their position at the same time. Returning to tertiary study can offer another route into better-paid work or another industry, but it can also reduce the time available to earn. A full-time student who qualifies for Student Loan living costs can currently borrow up to $333.48 a week. StudyLink is explicit that this is part of the Student Loan and has to be repaid.
For somebody trying to build a business while studying, that payment can therefore become a bridge between periods of income rather than conventional welfare. Part of it may disappear into rent and transport before anything else is considered, while the debt accumulates in the background.
People in this position are difficult to place in the political categories normally used when governments talk about financial hardship. They may own a company. They may have qualifications. They may occasionally receive a relatively large payment from a customer. None of those things necessarily means they have financial security.
They are also unlikely to regard themselves as wanting to live indefinitely on government support. Their objective is usually the opposite. They are trying to reach the point where the business produces reliable income, where another qualification opens better opportunities, where a deposit for a home becomes achievable and where government assistance is no longer relevant.
This is one version of what might be called the squeezed striver: someone who is making a deliberate effort to become more financially independent but finds that the transition itself receives relatively little attention from public policy.
It helps explain some of the appeal of National’s economic argument. The party’s emphasis on controlling government spending and allowing businesses and households to retain more of their own money speaks directly to people who feel that every additional cost reduces the small margin they have available to get ahead.
National’s Investment Boost is one example of that approach. Since May 2025, a business buying qualifying new assets has been able to deduct 20 percent of their cost immediately and depreciate the remaining 80 percent under the normal rules. Inland Revenue describes the scheme as accelerated depreciation, providing a larger deduction in the first year rather than increasing the total amount that can ultimately be deducted.
For an established company preparing to buy machinery, computers or other equipment, bringing that tax benefit forward can influence an investment decision. The difficulty for a very small business is more elementary. It first needs the cash to make the purchase.
A tax deduction is valuable once there is sufficient income against which to use it. It does considerably less for an owner whose immediate concern is whether enough work will arrive next month to cover ordinary operating expenses.
Labour’s recently announced small-business policy approaches some of these pressures differently. It proposes increasing the low-value asset write-off from $1,000 to $10,000 for businesses with less than $10 million in annual revenue, increasing the compulsory GST-registration threshold from $60,000 to $80,000, and requiring large companies to pay qualifying small-business invoices of less than $25,000 within 15 days.
The invoice proposal is particularly relevant to very small operators because cash flow can matter more than accounting profit. A business can have completed profitable work and still have almost no usable money if the customer has not paid. Thirty or sixty days can be a routine accounts-payable cycle inside a large organisation; for the contractor waiting at the other end, it can determine whether the next rent payment comes from business income, savings or debt.
Labour’s proposed GST change deals with another feature of the same problem. The compulsory registration threshold has remained at $60,000 since 2009. Labour wants to lift it to $80,000 from July 2028, estimating that about 35,000 businesses within that income range would no longer be required to register. Businesses below the threshold could still register voluntarily.
These are policies that deserve to be considered on what they would actually do rather than simply according to which party proposed them. A person who instinctively prefers National’s approach to taxation may still conclude that Labour’s higher GST threshold would make running a very small business easier. Someone who generally supports Labour may nevertheless question whether continued increases in government spending and taxation make it harder for the same business owner to accumulate capital.
The broader argument between the two parties often loses this detail.
National began its current term arguing that government spending had become too high and was contributing to pressure in an economy already dealing with the aftermath of the pandemic and high inflation. Its response has included tighter operating allowances and efforts to redirect or reduce government expenditure. Budget 2026 provided for a $2.1 billion average annual operating package, consisting of about $3.8 billion in new initiatives offset by savings and revenue measures.
There is evidence that the economy has moved some distance from the conditions National inherited, although it would be difficult to attribute that entirely to the Government. Annual inflation had reached 7.3 percent in June 2022 and was still 4.7 percent in the final quarter of 2023. It subsequently fell to 2.2 percent by September 2024 as interest rates remained restrictive, international supply problems eased and domestic demand weakened. The Government’s tighter fiscal settings added to that disinflationary pressure, but the Reserve Bank and global conditions were also central to the result.
The picture in 2026 is less tidy. GDP expanded by 0.8 percent in the March quarter, following growth in the previous quarter, suggesting that the economy has begun to recover. At the same time, unemployment reached 5.6 percent in the June quarter. Headline inflation climbed back to 4.1 percent, although Stats NZ found that petrol, electricity and other fuel costs accounted for much of the increase; inflation excluding food, household energy and vehicle fuels was 2.5 percent. National can therefore point to fiscal restraint and a return to economic growth, but many households and small businesses are still waiting for that improvement to become obvious in their own bank accounts.
Labour approaches the problem from another direction. It is more willing to use government spending and taxation to provide services or reduce particular household costs, while its 2026 small-business programme suggests an attempt to address some of the complaints of smaller operators more directly.
Labour also has a record that voters are entitled to examine, rather than treating its 2026 programme as if the party were starting again. Its six years in government included the extraordinary circumstances of the pandemic, when large-scale spending helped prevent a collapse in employment and business activity. That intervention came with consequences. Government expenditure expanded sharply, inflation later became the highest New Zealand had experienced in decades and households entered the following years facing much higher prices and interest costs. Not all of that was created in Wellington, but neither can fiscal policy be removed from the story entirely.
The question for Labour in this election is therefore whether its new programme represents a more disciplined version of the same governing philosophy. Its proposed 28 percent capital gains tax would apply to future gains on residential investment and commercial property while exempting the family home, farms, shares, KiwiSaver and businesses. Labour says the revenue would fund health services, including three free GP visits each year. Its fiscal strategy also promises a return to an operating surplus by 2029/30 and core Crown expenditure and revenue at around 33 percent of GDP once the capital gains tax is fully implemented.
Those commitments deserve to be assessed seriously. So does the concern that governments can make life appear cheaper by subsidising more of it while eventually sending the bill back through taxation, borrowing or higher costs elsewhere. For someone already receiving little direct assistance and trying to retain enough money to build a business, that trade-off matters more than the headline value of a new entitlement.
Neither approach completely resolves the position of someone whose main difficulty is unstable income.
This is important because New Zealand’s economic system increasingly contains people whose working lives do not resemble the conventional permanent employee. Contractors, sole traders, small company owners and people moving between study and self-employment can have income that changes considerably from month to month.
Government systems, meanwhile, tend to require certainty. Tax thresholds are annual. Lending decisions rely heavily on documented income. Assistance is determined through eligibility rules. Mortgage lenders prefer evidence of stable earnings. Bills arrive according to fixed dates.
The person carries the volatility.
That distinction matters when politicians talk about helping people on “middle incomes”. Two households can report the same annual income while having very different levels of security. One may have two permanent salaries and predictable leave entitlements. Another may rely on a small business in which the owner has to find the next customer before the next payment can exist.
The second household is not necessarily asking the Government to replace that risk. Risk is part of running a business. What becomes frustrating is when public policy appears to add additional obstacles while offering assistance largely to people on one side of them and tax advantages largely to businesses that have already accumulated enough capital to invest.
A better economic debate would pay more attention to the period between dependence and prosperity.
That is the period in which someone is trying to turn occasional contracts into a sustainable company, another qualification into a new source of work, savings into a house deposit, or a one-person operation into an employer.
It is also a period in which a relatively small setback can erase months of progress.
The useful question for National is therefore not simply whether it can cut government spending or taxes. It is whether those decisions make it materially easier for a small operator to build stable income, retain capital and eventually purchase a home. Three years of fiscal restraint would mean little to the squeezed striver if the eventual result were simply weaker public services, fewer customers and no meaningful improvement in disposable income.
The equivalent question for Labour is not simply how much assistance government can provide. It is whether its tax, welfare and small-business policies make the path towards independence easier, or whether the cost of financing an expanding range of government programmes eventually falls back on the same people trying to establish themselves. Labour’s invoice-payment rules, higher GST threshold and small-business procurement proposals are among the more practical ideas offered in this campaign, but they sit beside a broader programme that still relies more heavily on government collecting and redistributing money.
There is room in New Zealand for a government to help people who cannot support themselves. There should also be room for a much clearer policy towards people who are doing everything they can to make sure they will not need that support.
They are not necessarily poor, and they are certainly not rich. Their finances may look quite different from one month to the next. What defines them is less their current income than the direction in which they are trying to move.
That is the group the usual political argument about tax cuts and government assistance has trouble seeing. It is also the group that makes the choice between National and Labour more complicated than either party’s advertising suggests.
On this particular test, National currently has the stronger case for another term, although not by enough to justify an unconditional endorsement. Its basic argument that government cannot indefinitely spend its way out of every social and economic problem is important after the inflationary period New Zealand has just experienced. A country in which government continually expands its claim on income eventually makes it harder for households and small businesses to accumulate the capital needed to become independent.
National’s weakness is that restraint is a means rather than an outcome. The Government now has to show that lower spending growth and business investment incentives can produce stronger employment, productivity, real incomes and opportunities. An unemployment rate of 5.6 percent is a reminder that economic discipline can carry real costs while an economy adjusts.
Labour, meanwhile, has produced several small-business ideas that National would be unwise to dismiss simply because they came from the opposition. Faster payment of small suppliers, a higher GST threshold and easier access to government procurement address problems that small operators actually encounter. Labour’s difficulty is one of confidence. After its previous period in office, voters who felt squeezed by rising costs and expanding government have reason to ask whether the party can provide those improvements without returning to spending growth that eventually requires more revenue from the same taxpayers it is trying to help.
The election therefore need not be reduced to a contest between tax cuts and government services. For the squeezed striver, the more useful choice is between two different ideas about how people get ahead. One puts greater faith in creating space for households and businesses to keep, invest and build more of what they earn. The other puts greater faith in using the state to lower selected costs and provide services collectively.
At this stage, the first approach has the stronger claim to more time, but the verdict should remain conditional. If another National-led government cannot turn fiscal restraint into greater economic security for ordinary working people and small businesses, then restraint itself will not be enough. If Labour wants another chance, it needs to demonstrate not only what it would provide, but how it would prevent the cost of providing it from returning to the people who are already struggling to get ahead.
That is a more useful election test than asking which party promises the largest tax cut or the most generous benefit. After the tax system, the cost of living, business expenses and the rules governing assistance have all had their turn, how much room is left for someone who is working, studying and building something of their own to actually move forward?
