It’s Budget Day. You’ll be hearing lots from us over the next few days and I hope many of you will join our Finance Team live here on Red Alert tonight at 8.30 pm.
Most New Zealanders already understand that a Budget that (at best) delivers only marginal gain to middle and lower income earners and a whopping great windfall to the top end, is not fair. It is however, precsely what you would expect from National.
Equally important, the Budget as it has been foreshadowed will not fix the underlying problems of this economy: lack of savings, skills, innovation and exports. These are exactly the themes Labour is pushing – as reflected in todays Dominion and Herald (note the Herald got the headline wrong).
If you don’t believe me on this – just refer to Swtizerland’s IMD World Competitiveness Ranking, which shows NZ slipping back for exactly the reasons Labour has been saying.
Think about it, if the problems are insufficient savings, exports, skills and innovation, how on earth is raising GST and an income tax windfall for the wealthiest possibly going to address that?
It proves our underlying critique of this visionless National Government - they had “nine long years” to think up policies to take the country forward, to deliver on the step change they campaigned for – and so far, nothing.
Shudder
Go get ‘em! 
Yee gawds Spud your emoticons still rule
Good grief!
The budget has not even been read and yet you are critical!
At least have the decency for it to be announced.
You may end up with egg on your face.
what’s not fair was Labour putting the 65k rate up to 38% in the first place. A CGT would have raised more than the top tax rate increase and would have increased savings and other investments. Tax people’s income less, the less they spend the more they get to save.
“The NZ Institute of Management for IMD identified the challenges for 2010 as being:
Encourage savings, create incentives and boost productivity through taxation reform; Initiate long-term growth by improving access to capital and world markets; Begin building a nationwide ultra-fast broadband network to underpin growth; Invest in transport development programmes to lower cost and remove blockages; Address education gaps and skills shortages in a limited population environment.”
Gee … sounds like everything National is trying to do eh David?
I agree with Spud, go get them!
The spin that will follow this budget will be enormous. In sure the right wing’s familiar faces; such as Armstrong, Hooton, Farrar, have all been readied to announce that the Budget will be the soul of moderation, linked to incredible foresight and moral correctness.
It’s not of course, so far it is a tax burden shuffle, which has been conducted for reasons that are no longer clear, but not linked to improving the nation’s economic prosperity.
Go to it David, you and the rest of the team can, and will.
It proves our underlying critique of this visionless National Government – they had “nine long years” to think up policies to take the country forward, to deliver on the step change they campaigned for – and so far, nothing.
Yup. I have no idea what they did with their time either.
Andrew it was 60k rate up to 39c…….!
I am with Pentwig…although I’m 50/50 as to who will end up with egg on their face.
The Beach is on TV3 tonight at 8.30pm so not sure if I can be pulled away from such a great film to chat taxes!!!
@Pentwig – much of this Budget has been well telegra\phed – including a change to the IETC that will not alter the bottom line – it’s an old fashoned National Party transfer of wealth adn income to the upper echelons of the income scale. No amount of the best PR that money can buy will change that.
@Rebecca – Well that just shows my memory is as bad as i think it is
@David, No it’s not … it’s just reversing the wrongs of the last administration.
No, it’s what they are claiming to do Andrew.
Instead of encouraging savings the National party have reduced Kiwisaver, suspended the Cullen fund. As for infrastructure, where is the movement on broadband, where are the transport initiatives that will deliver to the nation? R&D getting a fraction of the government support that it previously had, and the science sector is being told that it should be grateful.
The National party is addressing education gaps, and skill shortages, with cut backs and a reform pushed through without either adequate trialing or support for the staff to impliment it.
One thing I must note, their seems to be alot of right wing commentators spending time on Red Alert this week. Some are relative fresh faces. I wonder if this is because the National party site is so boring that there is no point being there, or that this year an organised pro-government pre-attack is needed to defend the budget because it is simply going to be that bad?
Agreed. Taxes are getting boring. Lets talk about the many ingredients needed to turn NZ into an advanced high value added economy…when that happens tax rates can be dropped across the board without cutting services and infrastructure!!!
Even Ewan McGregor and Scarlett Johanssen couldn’t save that movie.
Sean – yeah, Red Alert seems to be a real magnet for the right wing. Great discussions! LOL
Labour wants NZ to be a rich country, NACTs primarily want their mates to be rich. Same difference? No, didn’t think so
Pentwig. You amaze me! Surely the bulk of the Budget contents has been delivered usually by Mr Key, and his using the opportunity to spin it as well as he can. Are you saying that Key’s words should be ignored or should they be examined for comment? Shape up old chap!
David,
You and Labour obviously dont care about the youth of today as all your policies would involve having to borrow more money. Our children will be really really poor as you burden then with huge debts for them to pay off, as well as pay for the cost of running the country.
Looks like a very shortsighted and selfish attitude from generation X and Y. Buy hey, you’ve ridden the property boom and have your house in Herne Bay so youre ok eh.
How much of the budget will go to the panacea of all problems – the cycleway!!
I don’t know if wanting to see fair taxes is right wing – the Rudd government hasn’t put them back up….
Loota “NACTs primarily want their mates to be rich” – I find comments like that just so incredibly irksome! To me, Labour looked after the rich much more than they claimed to have looked after the rest of us (my husband and I were on very low incomes for much of Labour’s tenure).
However, while a little begrudgingly they do still seem to accept they could have done things differently & better and seem to be saying the right kind of things now that could see this country move forward.
Despite their critcism I would imagine that Labour will also be disappointed if 2pm unveils another unimaginative budget.
On a personal note though – last year was fabulous for us as NACT removing the estimated 5% on provisional tax payments had a huge impact and enabled us to better absorb the ever increasing business costs.
David said
Oh brilliant logic, lets scrimp on and starve the children now, not pay for their uni educations or invest money in the technology which will power a high earning advanced economy. At least today’s children won’t have debt in the future to deal with even though they also won’t have the income, and overall will be poorer off because we didn’t invest in them or the economy.
Next?
Speaking of extremely rich mates Rebecca, I see John Key is hobnobbing it with the very elite of wealthy world leaders these days.
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10646211
However, I am glad that Labour’s 9 year tenure helped boost you and your husband up from very low incomes to where you are today.
@Sean, yes it is, tax reform, closing loopholes, increasing consumption tax and reducing income tax. That is an incentive to save more and spend less.
Reduced Kiwisaver – only to the point of reducing the employer subsidies to 2% from 4% in a time of massive recession. There is nothing to stop anyone from paying more into it, and some companies still do. You still get your $1000 free kick start and $1000 a year from the government (for free!)
suspended the Cullen fund – this has been done to death already, but no rational person would borrow to invest.
movement on broadband – its getting there, do you think that multi billion $$, NZ wide broadband infrastructure projects can be done in 18 months … good on ya!
transport initiatives that will deliver to the nation – investment in roading projects and rail projects as the budget allows. cant have them all at once you know.
R&D getting a fraction of the government support that it previously had – once again, where do you think this money comes from, remember the recession and 1000’s of people out of work and companies closing all over the place?
Your last paragraph pretty much sums you up completely. you want your little left wing jerk fest to stay untouched by the bad right wing bullies. Poor Sean.
I have been reading red alert and the standard since they began, i comment every now and then where i see fit, but there has been a lot of crap that i don’t agree with sprouted out of this site over the last week and i felt the need to comment a bit more.
Labour looked after the rich much more than they claimed to have looked after the rest of us (my husband and I were on very low incomes for much of Labour’s tenure).
I had the opposite experience Rebecca, 1999 through to 2008 was the first time a government noticed me, my wife, and our family, and actually did something to support us.
The fact that the last government did that while improving the financial position of the country proved to me what good economic management is at the heart of the modern Labour party.
Indeed Sean, even though NZ continues to fall behind Oz in competitiveness, the new report says that NZ’s good public debt position is clearly an insulating advantage during financial crisis (unlike the situation the UK/Greece find themselves in).
Thanks for the sound financial management Labour/Cullen.
Ianmac says:
May 20, 2010 at 11:34 am
Pentwig. You amaze me! Surely the bulk of the Budget contents has been delivered usually by Mr Key
It was at Q time yesterday that Key said middle income earners may be in for a surprise.
The hype by all so far has been middle income earners will be worst hit.
For Key to say that I assume that the negative hype is wrong.
In about 3 hrs we WILL know.
Andrew, thanks for justifying NACT reducing investment in NZ’s future and in NZ’ers savings. Makes so much sense now :rolleyes:
Sean I can see where you’re coming from. What I meant was however, that while they were seen to be helping families like yours, by ignoring the rorters they were by default looking after the rich & Mum & Dad investors – all of whom failed to pay what they aught, continue to get super rich & drive property prices up to the point where families like us had to save an extraordinary amount of money to even get into the property market…so as to avoid paying the exorbitant rents that were being charged by the rich & MUm & dad investors!
Oh well, like Pentwig said – in a few hours time we will all know whether NACT will do anything that will make a difference.
Tick, tock, tick, tock …
@Loota … thanks for arguing my points, I must therefore be incorrect and we have not just come out of a massive recession and still teetering on the edge, where borrowing billions more would be a sound step forward for our economy.
:rolleyes_evenmore_than_loota:
@Sean, yes it is, tax reform, closing loopholes, increasing consumption tax and reducing income tax. That is an incentive to save more and spend less.
They are closing the loophole by legalizing it. That isn’t closing a loophole. And the term consumption tax just makes it more expensive for people making unavoidable purchases, and thereby discouraging extra spending, which will contract the economy.
Reduced Kiwisaver – only to the point of reducing the employer subsidies to 2% from 4% in a time of massive recession.
So we agree they reduced it, not increased it.
There is nothing to stop anyone from paying more into it, and some companies still do. You still get your $1000 free kick start and $1000 a year from the government (for free!)
At this point, not sure if I believe the current government will continue with those incentives.
suspended the Cullen fund – this has been done to death already, but no rational person would borrow to invest.
Actually, models show investing now while the market is low would make better returns than cost of borrowing to do so, and to be blunt, the baby boomers will be retiring very soon. Has Bill English got a plan, given the length of time he is suspending the fund?
movement on broadband – its getting there, do you think that multi billion $$, NZ wide broadband infrastructure projects can be done in 18 months … good on ya!
They had nine years in opposition; this was a feature policy of the last election. Something concrete should have happened by now. I don’t mean the broadband crews should be stringing up wire on my street, but a project plan at least.
Transport initiatives that will deliver to the nation – investment in roading projects and rail projects as the budget allows. cant have them all at once you know.
So, you’re going back on your earlier statement that something has happened here, by saying it is something for a future time? Okay, then we are in agreement, except I’m not sure the funding will come.
R&D getting a fraction of the government support that it previously had – once again, where do you think this money comes from, remember the recession and 1000’s of people out of work and companies closing all over the place?
Yet it is seen as a key point for economic growth. Surely it should be a priority area.
Your last paragraph pretty much sums you up completely. you want your little left wing jerk fest to stay untouched by the bad right wing bullies. Poor Sean.
Thanks for the tone of abuse Andrew. Actually, my concern is not individuals holding different political beliefs than me, I’m more concerned that I may get drawn into a pointless debate with a paid hack, on a party funded computer, arguing under a pseudonym, then the same person under a different pseudonym supporting their previous comment.
Essentially, I don’t want to waste my time in discussion with someone who’s opinion has been paid for.
I have been reading red alert and the standard since they began, i comment every now and then where i see fit, but there has been a lot of crap that i don’t agree with sprouted out of this site over the last week and i felt the need to comment a bit more.
Fair enough.
What I meant was however, that while they were seen to be helping families like yours, by ignoring the rorters they were by default looking after the rich & Mum & Dad investors – all of whom failed to pay what they aught, continue to get super rich & drive property prices up to the point where families like us had to save an extraordinary amount of money to even get into the property market…so as to avoid paying the exorbitant rents that were being charged by the rich & MUm & dad investors!
But National’s solution to this rort (income going into trusts to take advantage of the low tax rate, then claiming WFF), displayed so far, is to make it legal by lowing individual tax rates. This makes me wonder if the present government have the nerve to improve things.
Oh well, like Pentwig said – in a few hours time we will all know whether NACT will do anything that will make a difference.
True Rebecca. One thing I am certain of, the government spin will be like a tornado. We will need to get clear analysis before proclaiming any heros this budget night, that could take some time.
Sean – Thanks for the well thought out reply. Please excuse the tone of abuse, but get sick and tired of being abused all day long as RWNJ’s and the like, by people that are more interested in abusing and belittling people rather than argue the points.
Anyhooo, i dont have time to reply to your points, but will after work is done for the day. Let’s just say that each side believes they are 100% correct and never the twain shall meet so to speak. We could both argue until we are blue in the face and nothing would have changed. I still believe I am correct as do you.
Nothing like politics to insight heated debate
“by people that are more interested in abusing and belittling people rather than argue the points”
People have been addressing your points, but they have quite rightly in my opinion accused you of spin dressed up as facts. If you are making empty arguments you will be called on it. Saying something is so does not make it so. If you wish to discuss the economics of a budget you should understand the implications on wider areas and weigh up alternatives and opportunity costs rather than just Labour Bad National Good. Also a budget is about telegraphing intentions, most of your points actually demonstrate the negative intentions many of those decisions will have on our long-term economic position. I know Andrew is a common name, I have used on here since the beginning but will use another one in future
@Andrew – “People have been addressing your points, but they have quite rightly in my opinion accused you of spin dressed up as facts”
First off, having 2 andrew’s arguing different sides of the coin is rather confusing so have changed my name.
Second, “spin dressed up as facts” is the argument both sides make when arguing the other sides arguments. Neither side will ever agree so whenever someone makes and argument for something it is always noted as spin by the other side. I could repeat exactly what you have said and it would be true from my side as well.
Both sides use think Labour good, National bad or visa versa, i happen to agree with a lot that National do, but am more than happy to criticise when they are stupid, such as mining conversation land, etc. Likewise Labour have some good policy as well and some bad, but for the most part i prefer Nationals.
Why am I in Moderation?
Sean: “….is to make it legal by lowing individual tax rates. This makes me wonder if the present government have the nerve to improve things”
I agree. I am absolutely against lowering the tax rate and believe more in closing the loopholes and increasing the income tax thresholds. That to me would be indicative of a well thought out budget.
We need a higher top rate of tax than 33c coming in at some level as we are a tiny country & money to make us tick along smoothly has to come from somewhere.
Please tell us David if 10% of the population paying 75% of income tax is fair and sustainable? The Labour “Rich Prick” tax forced the middle classes into property to minimise the tax burden (and making us even wealthier while depriving the low income classes the opportunity to even buy a modest house.
This budget is (as you know) about rebalancing the tax base. The working poor basically pay now due to WFF. National’s budget wll be well received. I look forward to the moaning that is going to follow. Your biggest problem is no one can be bothered listening to Labour at present.
Please excuse the tone of abuse
Happily excused, Andrew. You are right that politics bring out the passions. But, after work I suggest you go home, or out, and have some quality time. By this time tomorrow my comments will be outdated in that the debate will move onto this measure and that measure brought in by the budget.
And Andrew2 (or should I call you Andrew1?), unsurprisingly, I too have had a ‘multiple Seans’ problem. Fortunately, we seldom comment on the same sites, so I kept my name.
@A ndrew S – Dude,
“First off, having 2 andrew’s arguing different sides of the coin is rather confusing so have changed my name.” – Yep, that’s why you’re in m oderation
Aw, there I was thinking you had a split personality
“National do, but am more than happy to criticise when they are stupid” And we WELCOME that
@Monty – Cheer up, man, you still have 18 more months.
Spud – there is no way Labour will win the next Election. Goof was installed as leader only until the expected Labour loss in 2011. then The real leader will be installed. In about 2017 or 2020 Labour may be able to scrape together enough for a victory. Until then we will enjoy John Key as PM.
Just heard some of the budget now……certainly seems a little more fair!
1 Oct 2010: $0-14k 10%, $14-48k 17.5%, $48-70k 30% & $70k + 33%
plus company rates will drop to 28% from 1 April next year.
GST will go up in oct as predicted as will all the main benefits & WFF.
Hmmm, wonder how Labour will argue against this one.
@Monty – Goff is no Goof and I doubt that even you believe that. I’m not giving up on Labour winning in 2011.
@Rebecca – Labour probably hasn’t got through reading the budget yet.
Okay, a commercial break during Goff’s turn is plain undemocratic!
Spud No they haven’t – Phil Goff is pretty fired up!!! Budget sounded okay to me but then I don’t know what the normal spending is for education etc…
I am just trying to work the tax out – he thinks families will be worse off by $30 but yet I just had a look at the various tax calculators and it looks like everyone bar some of the rorters who will be brought into line a little more, will be better off.
Oh well, enough tax for me – I have to do my bookwork!
No doubt there will be plenty of dissection over the coming weeks!
TV one still hasn’t cut back to Goff, so now I have to stream it.
Did I just hear Phil Goff complaining that the budget would do nothing to halt the property market industry? After he said the other day that changes to property tax law were a bad thing because they would put up rents? I wish Phil would make up his mind which side of the fence he is on regarding property speculation.
I would prefer the analysis after all have spoken.
SEan Plunkett fails maths. he said the largest tax bracket drop was to middle income… By my estimates the top bracket dropped by 5% making it the largest drop. I concede he is right if middle New Zealand are on 70k+
I’m struggling to understand (economics and maths not my thing) how all these tax rate drops can be covered by increasing GST 2.5%
I also understood (again could be wrong) that the economy grew even after Labour raised the top tax rate, so it doesn’t automatically follow that a tax cut = growth in economy?
Confused of Epsom
Rebecca last year the Govt cut the amount they spent on teacher costs, it’s been reinstated by this announcement. Admission of a boo-boo perhaps? I just wish they’d openly admit it, rather than trying to slide it under the radar. Everyone makes mistakes, no matter which party, if some would admit it they might find us very forgiving.
Politically one should note
The government broke its promise not to increase GST.
The government broke its promise to offer a tax neutral budget change. Their tax changes increased the deficit by $460M a year. That’s $9M a week.
They have effectively cut the health budget over the next 4 years as the $500M allocated is insufficient to cope with demographic change and the introduction of new technology/medicine.
The increase in education is less than inflation, etc.
At an economic level.
The retention of a significant gap between the top rate of income and the company tax – at 28%, maintains the incentive to transfer income into a company (doctors run surgeries through companies to reduce their tax liability etc, some accountants and lawyers probably do to). Many will also turn their trusts into companies – now that trusts will be at a significantly higher rate and are also being investigated for diversion of income from tax.
Allowing Oz banks and Contact and various other foreign corporates to transfer more of their profits out of the economy will only increase our BOP deficit.
There is still not any R and D tax credits to allow smaller company start-ups to grow into companies exporting abroad. Thus people are still directed to non productive investment -property, land, PIE accounts, unit trusts and Suoer funds. There is no encouragement to entrepreneurship, venture capital development and R and D based company start-ups. There is no real change, just placation of existing business interests (investment vehicles and foreign service sector corporates, rather than any new economy or added value development growth).
It’s ideological, not tranmsformational. Just6 more of the same right wing neo-con speak – all sizzle and no substance apart from more money to the boys via tax cuts and more money flowing through banks (and then out of the country) and ivnestment vehicles bit still no where to invest in real production and no direction to improve productivity.
It’s all smaller government is good for business, same old same old that left us with a specualktor economy that fued the private debt explositon. There is nothing here to change any of that. Which leaves us fighting over the pie, rather than increasing it.
We will remain a low wage economy, and we will continue to see (25% currently) of graduates going offshore. I expect these facts top continue in their trend and worsen (the wage gap with Oz will continue to worsen during this governments term in office and it will be 33% of graduates offshore within a decade).
“The Government’s coffers are expected to be boosted by at least $2.48 billion over the next four years as a result of changes to property tax, which would then be returned to taxpayers as part of across the board tax cuts.” is another source
spc – heard anything about changes to Trusts? I had the same thought as you about company tax rate… 5% difference between it and top tax rate… going on the Govt’s theory that is an invitation to rort?
I guess we will know by this time next year if the economy grew, if we became more productive…