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Sticky Fingers Key

Posted by Brendon Burns on August 18th, 2010

John Key’s all but endorsement of Christchurch Mayor Bob Parker last night indicates how out of touch he is with Christchurch voters. Key attended a widely-promoted ‘John and Bob’ gathering at Sticky Fingers in Christchurch last night, their handshake making the front page of The Press. http://www.stuff.co.nz/the-press/news/christchurch/4034228/Praise-from-PM-but-no-endorsement

Key praises Parker as having done “a very good job.”

Ok, as a Labour MP I’m not dispassionate here. I totally support Jim Anderton’s bid (though I will say Parker is an extraordinarily gifited speaker and his full-time unpaid Mayoress wife Jo deserves better than to be remembered for having muffins and coffee with the Mayor – (even Key referred to ‘muffingate’ last night)

Point is that it’s not just Labour supporters who are openly saying they want to see Parker go. So are card-carrying Nats and many others. On Monday my dentist, just returned from his European holiday, couldn’t wait to say  how much he wanted to see a change. Last night at Saunders Unsworth’s bash, yet another senior Christcurch business leader told me he won’t be voting for Parker. His reason? The way Parker responded to criticism of the $17m bail-out of property developer Dave Henderson. To compound matters for Parker, ‘Hendo’, once praised, defended and befriended by Rodney Hide, has recently been exposed as having not paid IRD for the GST on the $17m paid  to him. So ratepayers and taxpayers are both out of pocket from the deal.

Add to that, the council’s attempt to hike council tenants’ rents by 24% in one go (defeated in the High Court) and the $3m purchase of the “Ellerslie” flower show for Christchurch, have all led to a city-wide view that Bob has to go. Not that Jim is resting on his laurels; he has had a large and vigorous  campaign team from before his launch several weeks ago capitalising on the mood for change.

Key’s handshake alingment with Parker at Sticky Fingers might be a touch of the tar baby for both of them.

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Filed under: GST, local government
18 Comments

GST increase and rates

Posted by Grant Robertson on August 10th, 2010

The GST increase on 1 October is going to have a lot of consequences, from the price of stamps going up, to schools struggling to work out how they will pay for an additional costs. Marcus Ganley, the Labour Candidate for Lambton Ward of the Wellington City Council has drawn another matter to my attention in his recent post.

The Wellington City Council has sent out a note to ratepayers suggesting that one way they can avoid the GST increase is to make their next three rate payments before the 1st of October. A nice idea, but many Wellington ratepayers are struggling to make one payment at the moment, let alone, as Marcus says three payments in the next seven weeks.

Filed under: GST, Tax, local government
52 Comments

BUDGET 2010: feedback so far

Posted by David Cunliffe on June 22nd, 2010

Hi RA readers – I’ve been off air a bit lately due to running around the country on the post- Budget speaking tour, and because my laptop died!

Today parliament shifted into a new stage of the Budget debate – the Appropriations Bill that legitimises the Supplmentary Estimates (amended spending lines) between Budgets 2009 and 2010.   It was remarkable for what it does not say – nothing about a plan for protecting  jobs or lifting incomes during the worst of the Great Recession.   No new ideas over there.

Quick feedback from the Budget tour: spoke to about 20 groups, a mixture of Labour-organised public meetings, community sector groups and businesses.  Hard to tote up exactly but would have seen close to 800 people face to face: groups of 160 down to about 25, plus individual business site visits.

The feedback was clear:  most Kiwis understand that by the time inflation of 5.9% next year eats away the tax swindle, and wage growth is held down, they will be worse off.   That includes increased govt charges like ACC and ECE, plus power bills, rent and higher mortgages.  The Government made the classic mistake of overpromising and under-delivering.   Kiwis hate the rise in GST.   They know the tax cuts aimed primarily at the wealthy are unjust and inefficient. 

Was it a coincidence the govt’s polling fell 5% in the week after the Budget?   

Second, businesses and commentators understand that the Budget lacks a real plan for jobs, incomes and growth.  Fiscal prudence matters, but it is no substitute for a strategy to address the yawning triple deficit around the savings gap, current account deficit and innovation deficit.  Gutting Kiwisaver, the R and D tax credits and NZSF prefunding made these worse.  The Govt’s innovation package, which represents only 39% of the value earlier striped out, has been almost universally panned.     

Third, the added debt from the unaffordable tax cuts has opended up $1.1 bn fiscal hole over 4 years, $9.2bn over 12 years, and that makes the job of turning the boat around ever harder.  National will seek to fill this “strategic deficit”  through asset sales and service cuts.  Don’t let them!

Future posts are going to broaden out somewhat to the rlated issues of monetary and fiscal settings that surround the needed economic strategy.

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Filed under: Budget, GST, Tax, blogs, business, economic, economy, finance, inequality, polling, science, wages
122 Comments

BUDGET 2010: English – A Fudge Too Far

Posted by David Cunliffe on June 1st, 2010

Good fun in the House today grilling Bill English here and here on why the Government’s online tax/benefit calulator leaves out the forecast inflation rate of 5.9% in 2010, and thus overstates benefits.  Its a blatant case of misleading the public.   The Speaker rules it is a straight question that deserves a fair answer: Bill English doesn’t get it, and digs a hole deeper than the original mistake…

…It would be funny except it has misled many average income Kiwis who were encouraged by the Govt to believe that the budget left them “better off”, when in reality it left them behind until at least 2014.   It will be no fun at the checkout queue for many hard working families.

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Filed under: Budget, GST, Tax, economic, economy, finance
50 Comments

BUDGET 2010: Jigsaw Pieces Click

Posted by David Cunliffe on June 1st, 2010

The jigsaw pireces of the Budget are starting to click in the public mind if recent polls are any indication.  In the last week :

  • The IMF described NZ’s savings gap and net international indebtedness as “among the largest of any advanced nation”
  • Analysis shows a $9.2bn additional fiscal hole in the Budget by 2023 arising from the tax changes
  • Budget documents show expenditure as a % of GDP falling from 33% to 28%
  • Bill English floats Kiwibank sale as one example of a number of SOEs ripe for partial privatisation.

In other words: give away taxes up front (very largely to their mates); run an out year deficit (deliberately); compress spending (as ‘prudence ” then demands); and flog off what is left of the family silver to fill the remaining gap (dressed up as mum and dad savings products, of course).

What does all this mean for the average Kiwi?

  • despite the govt spin, they are worse off for the next four years at least due to the toxic cocktail of GST, inflation, other govt charges and taxes, and slow wage growth;
  • public services like Heatlh and Early Childhood Education will be slashed as new spending lags inflation ($300m short in Health) or deliberate policy changes bite;
  • the outlook for public services gets dramatically worse as the National Party tries to resize the state to 28% of GDP – although they won’t want to talk much about that before the election;
  • the underlying economic problems reamin unresolved and get more intractable over time.   There is no credible plan for growth and jobs.

Moral of story: do NOT let National get a second term   Stop the malign juggernaut before it does irrepairable damage.

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Filed under: Budget, GST, Household income, Tax, business, economic, economy, education, finance, poverty, privatisation, productivity, public services
52 Comments

Another Budget Video

Posted by Chris Hipkins on May 25th, 2010

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Filed under: Budget, GST, Tax
6 Comments

BUDGET 2010: The Sucker Punch

Posted by David Cunliffe on May 25th, 2010

We all know Budget 2010 was full of broken promises – from NOT raising GST  – to being “fiscally neutral” while borrowing an extra $1.1 billion to fund tax cuts - to being “fair” while giving a third of all those tax rebate $ to the top 5%.

Most people now realise that the gains they thought they might get are more apparent than real:  the proof – even on the Governmnet’s own numbers average gross incomes don’t catch up with inflation unitl 2014!  That’s two elections away!

 Most now know the results are economically desultory – the current account blows out to 7% of GDP, growth is static (taking 7 years to accumulate a measley 1% extra), and what empoyment growth there is is largely unrelated to Budget meaures.  

What has become clearer as the debate has progressed is just how cynically National has attempted to buy votes through a Budget increasingly seen as highly political.   John Armstrong - who is no Labour acolyte to say the least – politely nailed that in Saturday’s Herald.

The game afoot is this: fool middle income voters into thinking they have a win.  Push through much larger tax cuts for the upper end under this smokescreen.  Deliberately stretch the government balance sheet by borrowing more to fund the cuts.  Begin compressing public services, but slowly, and hope the rosy glow lasts until the election…

But Bill English could not help the Freudian slip about selling off KiwiBank.  (As if anyone believes that a mom-and-pop share issue would mean shares didn’t end up in institutional hands eventually – remember Contact Energy?)

This is important as a foretaste of things to come: extensive privatisation of assets the public already owns, and deep Budget cuts to balance the books that this Government has deliberately run up by cutting taxes too far.   Both add up to shrinking the state, and with it the essential services that all Kiwi families need.

Budget 2010 is not a step change,  and not a step up.  It’s a set up - a sucker punch for the full flowering of the Right’s agenda should New Zelanders allow them a second term.

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Filed under: Budget, GST, Tax, Uncategorized, Unemployment, economic, economy, education, finance, health, inequality, public services
68 Comments

Trotter gets it right

Posted by Clare Curran on May 22nd, 2010

Haven’t been feeling on the same page as Chris Trotter for a while, but think he nailed it with his piece on the Budget in yesterday’s ODT (and other papers). I’ve linked to it from his blog Bowally Road

He described the Budget as self serving lies. Which it is. Designed to make people think they’re getting something, when in reality they’re losing.

But this government may not be as clever as they think they are. I haven’t come across anyone in the community yet who thinks this Budget is going to make them better off. Short-termism doesn’t always pay off.

I know my Dunedin South constituents will find tax cuts and benefit hikes fade pretty quickly as the GST rise kicks in and electricity, rents, mortgage rates start to rise along with petrol ACC levies, you name it. Pretty dire. And then there’s the prospect now being raised of selling off some of our prize assets.

Not to mention the fact that people’s wages aren’t going up and don’t look much like they will. Unemployment in Dunedin leapt from 4.9% to 6.3% in the last quarter.

I wonder who the people are who did get a sense of hope and a boost out of this Budget.

Trotter says:

Perhaps it would all be bearable if, in return for the extra $300-$500 per week we’re allowing them to keep, our captains of industry, financial wizards and heroic entrepreneurs would guarantee the “step-change” this country so desperately needs.

But if History is any guide, that’s not what we will get. If History’s any guide, we’ll just see more of our industries fall into the hands of foreigners; more “Mum & Dad” investors lose their life’s savings; more holes in the ground; more half-finished palaces; more angry denials of any and all social responsibility.

And why, in God’s name, would we expect anything else? The Rich did not get rich by giving – but by taking. It’s what they do. It’s all they’ve ever done.

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Filed under: Budget, Cost of Living, GST, Tax, Unemployment, economy, jobs
53 Comments

Labour’s Budget video

Posted by Chris Hipkins on May 21st, 2010

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Filed under: ACC, Budget, Cost of Living, GST, Tax, economy, education, public services
15 Comments

BUDGET 2010: Pass the Berocca

Posted by David Cunliffe on May 21st, 2010

After the beehive-spin induced euphoia wears off and the hangover sets in, middle New Zealand will reach for the Berocca and try to work out what the Budget really means for them.

Not to add to the inevitable headache, but here are a few of the facts of life for the morning after.

  1. For at least 3/4, and maybe 90% of the country, by the time they eat a whopping 5.9% inflation next year (Treasury Budget forecasts, not NZLP numbers!) they will be worse off until at lesst 2012/13.   For a family with 2 kids on $72k for example, $55 a week worse off.
  2. That inflation will feed into mortgage costs and rent rises.  It will result, quite rightly, in pent up wage demands from workers who have gone without wage rises for the last two years. 
  3. While its ok that the middle income brackets got some income tax relief, and would have likely got more relief from us, the tax cuts are way too skewed to the top.  You just can’t get around the fact that someone earning a $million a year gets $1000 a week back.  That is going to make the haves/have nots gap wider.  And that gap will inevitably worsen over time, undermining the Kiwi dream and taking us further from the “fair go for all” kind of place we want to be.
  4. That is made worse by the underlying agenda of shrinking the state and the services it can provide.  We have already seen home help for the elderly branded “low quality” spend and cut.  Health’s new money in the Budget is, we reckon, about $270 m short of standing still given next year’s inflation forecast.  That means more cuts to the services and more pain for the vulnerable.
  5. My personal gripe is early childhood education.  What has the Govt got against quality preschool education?  Why is it swiping $100m pa from that?  Labour will lead in this area and every family with young kids will hear us. 
  6. Rebalancing the econmy is way undercooked.  Take away the smoke and mirrors of the tax switch, and we are still left with residual taxt incentives for property and LAQC avoidance mechanisms.   Proof:  LAQCs sheltered $2.3 billion of taxes in 2008.  The tinkering in the Budget trimmed only $70m p.a. of that.  
  7. There is STILL no credible plan for growth in this Budget.  The National Govt seems intent in relying on “passive” instruments. I have no problem with dropping the company rate – provided the fiscal balance can support decent public services (personal view – see “About” on the blog site) – but that cannot be enough to get the export sector going on its own.  What about the R and D tax credits?

The strucutral problem remains: we don’t export enough, we don’t save enough, and we don’t innovate enough.  As an economy we are short on capital, technology, skills and IP.  Budget 2010 does not fix that.  Time is short and the job is urgent.  When NZ wants positive action, Labour will be ready to lead.

As the bubbly wears off in the Beehive and the Berocca gets passed around the country; the poor, the forgotten middle class and the structural problems of the economy have not been moved forward by this Budget.

It remains a suger-coated tax swindle.

It remains a step back, not a step up, and certainly not a step change.

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Filed under: Budget, GST, Household income, Labour Party, Tax, Uncategorized, business, community, economic, finance, health, inequality, poverty, productivity
88 Comments

BUDGET 2010: Broken Promises and Lost Opportunities

Posted by David Cunliffe on May 20th, 2010

Budget 2010 is a tax swindle, a lost opportunity and a massive broken promise to New Zealanders.

It rewards the wealthiest, but swindles the middle class by gobbling up their small change tax switch in the highest (5.9%) inflation in decades.

Most Kiwis tax cuts will be wiped out by inflation before they even get to the checkout.

By the Government’s own figures an average wage earner will be $30 a week worse off after inflation and a person on $70, 000 will be $45 a week worse off.

The tax cuts are unfair; a third goes to the top five percent and fifteen percent goes to the top one percent. People in the middle and bottom will go backwards after inflation.

The upper income tax cuts are unaffordable. The Government is borrowing an extra $450 m next year, and a billion over 4 years.

This Budget therefore breaks a string of hollow promises:

  • not to raise GST
  • to leave the “vast majority” of Kiwis better off – most won’t be after inflation and rent taxes
  • to be fiscally neutral: the Budget borrows $450 m next year to fund upper income tax cuts
  • to return to prefunding superannuation when in surplus (no prefunding until 2019, surplus 2016)
  • to compensate pensioners and Working for Families recipients for ST (this a one-off, not indexed)
  • to maintain Health and Education: wrong – Health is some $300m p.a short of keeping up. Education some $200m p.a short; including a savage $120m cut to Early Childhood Education.
  • to rebalance the property/business tax divide: this is underwhelming – building depreciation is partially taxed, but there is no ring fencing of losses; and the changes to LAQC and PIE rules are minor.

Overall the Budget fails both tests of fairness and growing jobs and incomes.

Lower and middle income earners are left behind while the top end reaps a windfall.

The old, the young, the sick and frail are left worse off.

The Government is borrowing to favour its mates, once again.

It is a tax swindle, a lost opportunity and massive broken promise.

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Filed under: Budget, GST, Tax, economic, economy, finance
50 Comments

A Budget of Broken Promises

Posted by Grant Robertson on May 20th, 2010

To remind, John Key’s 2008 election promise to not increase GST.

Filed under: Budget, GST, Tax
33 Comments

BUDGET 2010: Neither Fair Nor Fixing

Posted by David Cunliffe on May 20th, 2010

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.

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Filed under: Budget, Cost of Living, GST, Tax, Tertiary education, Uncategorized, business, economic, economy, finance, food, low pay, politics, productivity, science
57 Comments

Bollard in 1992 on the impact of GST increases on the economy

Posted by Stuart Nash on May 19th, 2010

Reserve Bank Governor, Alan Bollard, wrote a paper in 1992 titled “New Zealand’s Experience with Consumption Tax”.  It dealt with the implementation of GST in NZ.   He wrote “in 1989 when GST was increased to 12.5% the effect on retail sales and subsequently on growth was marked; after experiencing signs of a pick-up the economy dropped back to recession the following year”. 

When asked about history repeating itself in the FEC select committee today, Dr Bollard said that the impact of the proposed GST increase on the economy would depend on the total tax package balance.  Interesting.  Remember when GST was increased by 2.5% in 1989, kiwis at the top end had just received massive personal tax cuts in 1988: the top rate dropped from 48% to 33%. 

I hope for NZs sake, history does not repeat itself with this current budget, because it all looks awfully familiar.

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Filed under: GST, Tax, economic
20 Comments

BUDGET 2010: Will they fix the rorts?

Posted by David Cunliffe on May 19th, 2010

Interesting piece in the Dom front page today about the tax avoidance around trusts – but mostly interesting for what it does not say. 

The National government has spent much of the last year cutting “low quality” services like home help for frail elderly because of the supposed fiscal crunch.

Tomorrow they will announce billion dollar plus tax cuts, overwhelmingly benefitting the wealthy few, while the many just tread water in the face of rising GST, rent, power and food costs. 

They lamely justify the top end tax cut as either a growth stimulant (which is nonsense – much more stimulus results from good investments or tax cuts at lower income bands)…

…or a way or retaining talent (branding Kiwis as “envious” is rubbish, as not all talented people are wealthy and NZ already has the third lowest taxes in the OECD!  Our real need is to lift wages and sustainably grow the economy)….

….or a way of stopping the $300 m tax fiddle arising from the abuse of Trusts.  Ironically the way they plan to do that is by giving all top rate earners the same rate as if they too werre fiddling.  (Of course, without sin there would be no sinners)….

But here’s the real rub: even that trust tax avoidance is puny compared with the writeoffs around loss attributing companies (LAQCs) – $2.3 billion in 2008 alone.   Plus a $500m writeoff around rental property losses.  Plus more around the abuse of savings vehicle (portfolio investment entities – PIEs). 

Not to mention the wider issue of the income/capital boundary and the incentives created to hock off small companies too soon, taking the tax free proceeds to buy the bach and the BMW rather than to grow the business.

Does this government have the nerve to address these issues, which have spiralled out of control since the election?   Or will it just continue to take home help off oldies and special ed services off crippled kids?  Will it penny pinch on night classes while boosting private schools? 

Will it stop the rorts?  Is it capable of governing for the many not the few? 

Increasingly, Kiwis are coming around to the view that it cannot, but Labour can and will.

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Filed under: Budget, GST, Labour Party, Tax, Tax Working Group, Uncategorized, business, economic, economy, finance, labour
46 Comments

PM – “Don’t be jealous – rich are crucial to economy”

Posted by Stuart Nash on May 18th, 2010

Who is as insulted as I am over PM Key’s statement, reported in today’s Dom Post, around why the highest earners will get the tax cuts in this week’s budget, at the expense of the 92% who earn under $70k/ann (http://tinyurl.com/23natqb)? “We can be envious about these things, but without those people in our economy all the rest of us will either have less people paying tax or fundamentally less services they provide”

Well, my daughter is taught by a teacher earning under $70k, most of the police who put their lives on the line for us earn under $70k, nurses who fix us up when we fall over earn under $70k, and the vast majority of people who actually make this country tick – the backbone of the nation – earn under $70k.  Are these people any less deserving?  Do they not ensure that the wheels of industry are well oiled, the streets are safe and our citizens are provided with the services required of a first world country?  Of course they do.!

How bloody insulting.!  As I blogged earlier this year, there are a myriad of reasons people live and work in New Zealand – and tax is way down this list.  These changes will, if anything, drive middle NZ across to Australia and further afield.  Mr Key – just be honest with Kiwis and stop feeding us your propaganda: these tax cuts are not about creating equality of opportunity, driving higher productivity, developing a fairer tax system or building more equitable society – because they will not achieve any of these goals.  If you believe they will, then I suggest you start studying your economic and financial text books and reading your case studies –  those published this century – not last.!

Don’t get me wrong, I am not saying that our high achievers are not deserving – they are – but so is everyone else.  The increase in tax through the GST hike to 15% is broad and all-encompassing – so should the tax cuts be.!

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Filed under: GST, Tax
63 Comments

Paul Henry – put your money where your mouth is.

Posted by Stuart Nash on May 14th, 2010

Here’s a challenge to TVNZ’s Paul Henry – lets see if you can live on the Auckland median wage for a month, and then lets see if you change your mind about Labour’s idea of removing GST from fresh fruit and vegetables. 

Why the challenge..?

Watched Paul Henry interview Phil Goff on Thursday morning, and one of the issues that came up was Labour’s idea around removing GST from fresh fruit and vegetables.  Phil reiterated that this was not Labour party policy, but an idea that the caucus was considering in light of the increase in GST to 15%. 

Paul banged on all morning about what a silly idea this was.   I suppose when you are one of TVNZ’s highest paid presenters (I don’t know exactly how much he earns, but if you look at TVNZ’s annual report its not that hard to figure out…), then a simple 2.5% increase in GST will be much more than off-set by the massive personal tax cut you are going to receive. 

Personally, I think Paul has lost touch with reality.  Two points Mr Henry: 1) there are many kiwi families who are really struggling to make ends meet, and a 2.5% increase in GST on fresh fruit and veges will be a killer.  An Auckland University study has shown that if you drop the price of fresh fruit and vegetables, people will buy more; and 2) in this day and age of obesity-related diseases, anything that can be done to increase the consumption of fresh fruit and vegetables must be good.

As mentioned, this is not Labour party policy, but it is something that we re looking at and will make a call once we have all the information and evidence.

So come on Paul Henry – lets see how you survive on the Auckland median wage for a month – and then lets see if you change your mind about doing something to drop the price of fresh fruit and vegetables.!

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Filed under: GST, Tax, Television
78 Comments

Higher Incomes, Better Jobs

Posted by Grant Robertson on May 13th, 2010

Phil’s speech in Nelson yesterday can be found here.

Obviously I think it is a good speech. It is exactly the kind of speech an Opposition Leader should be making in the lead up to the Budget in the middle year of the electoral cycle. It lays out the fundamentals of Labour’s approach to the economy and gives an indication of our priorities, and the areas where we are doing further work.

Actually it does have a number of quite specific commitments as well. In particular re-focusing tax cuts to middle and low income earners, changes to monetary policy, restoring government contributions to Kiwisaver and the Super Fund, restoring incentives for R&D.

Looking ahead we are finalising a fairer tax package. This includes investigating raising the thresholds for a top tax rate to around $100,000. Phil does not rule out reversing the increase to GST, but we are also investigating the possibility of removing it from fresh fruit and vegetables.

One area that has not received much attention in the media are Phil’s comments on overseas investment.

Foreign investment will continue to be important and encouraged. In particular we need to attract good greenfield investment that has a net benefit for New Zealand. It can bring factories, jobs, technology and other gains – that’s good investment. However our overseas investment legislation should not allow loss of control over strategic assets and areas which are natural monopolies within our country.

We need to ensure we maintain New Zealand control over key export areas.We should not allow cumulative purchases of farms that would allow control over Fonterra, for example, to slip out of New Zealand. We need solutions that harness our own capital, our own talents and brains and skills, and invest in them so that we do better at earning our way in the world.

This is an area which will be getting more attention over time, and is one that I know a lot of New Zealanders are very concerned about.

Overall this is a very substantive speech, and gives a strong indication of the territory Labour is staking out when it comes to the economy.

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Filed under: GST, Tax, economy, finance, inequality, jobs, policy
64 Comments

Building to Budget 2010

Posted by David Cunliffe on May 4th, 2010

Based on what we have heard so far from the Government, Budget 2010 will not deliver the jobs and the future New Zealand needs.

Instead of jobs, it will reward the few at the top and put more pressure on many families and small businesses.

 The Government’s intention to raise GST on every New Zealand family will mean extra pressure when many are already finding it tough to make ends meet.

And borrowing to fund the tax cuts for the top end would be madness when Kiwis are being told to tighten their belts for another round of cuts to health, education and other front-line services.

Worse, fiddling with GST won’t tackle the real problems.  It won’t address the fundamentals that matter. 

 New Zealanders know our country is not paying its way.  We are not exporting enough.  Our current account is bleeding red ink.   Exporters are struggling to survive a wildly swinging exchange rate and unstable world markets.

Rather than saving and investing in real businesses that create value and jobs, Kiwis borrowed heavily to bid up each other’s property prices.

And when the Reserve Bank raised interest rates to cool inflation, it sucked in more hot money that just made that problem worse.  That’s why Labour is committed to rebalancing the economy to rebuild savings and exports.

The next Labour government will be different because we will focus on jobs, growing the economy and higher incomes for New Zealanders.

That means investing in our people, their education, and their opportunities to get ahead.

 It means boosting innovation, technology and R&D, and helping grow the new businesses that will be the stars of tomorrow.

 The real issue is how to grow wages and reduce the pressure on small business and family budgets. 

Labour will offer a better alternative, one that will put people first, act with integrity and plan for the longer term.

Labour believes that Budget 2010 should be about good jobs, a growing economy and a fair go for all.  Lets see how Bill English measures up…

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Filed under: GST, Tax, economic, economy, finance, inequality, low pay, productivity, trade
36 Comments

GST increase not good for vast majority of Kiwis

Posted by Stuart Nash on April 23rd, 2010

Finance Minister English has confirmed the worst kept secret of the 2010 budget – GST is going to increase to 15%.  Now I accept the Tax Working Group’s argument that the tax base needs to be broadened, but what I find so offensive about this particular tax increase, is that the money gathered from every single New Zealander is going to be used to pay for the tax cuts given to the 8% of kiwis who are fortunate to earn enough to pay the top marginal tax rate. 

We have been here before - I know – but let me illustrate an example of why this isn’t going to be as simple as the government has outlined:

Businesses price items strategically.  For example, an item is priced at $49.95 to psychologically convince the buyer that it costs less than $50.  Add 2.5% onto this and you get $51.20c.  No retailer is going to sell an item at this price point – the next psychological point is $54.95, which is around 10% higher – not 2.5% – or they will leave the price the same.  Either way there is a loser – the purchaser, who has had to pay 10% more for an item, or the retailer who has had to forgo margin.  If, however, the retailer leaves the item at $49.95, then, as sure as eggs, they will double the increase in price on other items to make up for this margin erosion. 

My point is that the government is kidding itself if it thinks that the increase in GST is going to be smooth, seamless and painless.  Those who will really feel the pinch are the 75% of people earning under the average wage, as costs increase above any level of compensation that the government may provide. 

It would have been harder to argue against a GST increase in order to broaden the tax base IF AND ONLY IF the resulting personal tax cuts had been equitable to all in our society.  Why is someone earning the median wage of around $33k/ann worth less than someone on $100k/ann.?  Why shouldn’t everyone who works hard and pays tax be compensated equally?  Of course the answer is they should.  

The message this government is sending, however, is that not all New Zealand workers are equal.  I wonder how Mr Key and Mr English will be able to look the guys in the eye who come in to clean their offices at midnight or who make sure they are kept safe during the day, when all parties know that Messers Key and English will be now be getting around $300/wk in the hand extra, when the cleaners and security personal will have got next-to-nothing.  Is that fair?  Not in my book.!

Filed under: GST, Tax, Tax Working Group
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