Thursday, May 18, 2006

The Bondi Budget: Not!

Michael Cullen has just handed down the NZ government's budget which does not include tax cuts. If you believe the hype, tax cuts are a major issue in NZ and the lack of them is causing economic stagnation. Despite the fact this is patently untrue, the NZ economy is doing nicely thanks very much (hey, don't take my word for it, here's the IMF's view), National's tactics are incredibly shortsighted for a number of reasons.
  • one, simply cutting taxes will not instantenously increase NZ's productivity
  • two, if the last election is any indicator, the electorate want more from government than tax cuts
  • three, even if the first two are only partially true, Labour can cut taxes in the next budget thereby stealing National's thunder in the lead-up to the next election.
On this last point, I can't imagine that the Nats don't understand this and some members must be comtemplating a change in the leadership as a knight's-move to give them the opportunity to develop a few more points of difference with the government.

Remaining tax competitive with Australia ought to be and is a goal for the government but Labour are not so simple as to believe that people will up sticks and move West simply because they might earn an extra $10 a week. Again, a quote from the May 06 IMF report might assist:
Tax competitiveness with Australia, along with incentives for tax planning created by the gap between the 33 company tax rate and the top personal income tax rate of 39 percent, appeared to be possible issues for reform in an otherwise very sound tax system. (page 9 emphasis added)
Sure, I live here with my family but it's not because I might earn more - Sydney is a great place to live for many reasons, a number of which are outside of any government's power but none of this means that returning to NZ does not remain a real option. As Dorothy is fond of saying; there's no place like home.

5 comments:

Anonymous said...

According to a report in today's age, aussie voters would have preferred cuts in petrol prices and more spending on services in the budget ahead of tax cuts.

More than two-thirds (68 per cent) said the priority should be spending on services and infrastructure; only 29 per cent put reducing taxes and charges before more money for services.

Perhaps the real reason tax cuts are getting so much air time in NZ is that many members of the press gallery are single with no kids, and therefore don't benefit from many of the policies the govt has introduced??

proud2bekiwi said...

Another thing that the Nats just don't get is that Kiwi's really don't want to be just like any other country. National are all too willing to talk about making New Zealand more like Singapore, India, Australia, the US, or any other country, but don't seem to have any vision that is kiwi-focused.

Bill English does get it, and that's why he is more likely to replace Brash as leader, with Key as his deputy and finance spokesperson.

backin15 said...

Anonymous: it is surprising that tax cuts get so much airplay - they're simple, perhaps that's part of it? Interesting comments re the press gallery - it's been a few years since I've been in parliament but they used to be an older, less pretty bunch with broader experience.

proud2bekiwi: do you think English will be able to generate the Caucus support? I don't know? He's certainly improved since being relieved of the mantle. Key's short on parliamentary/government experience but seems to have the media imagine - is that enough?

proud2bkiwi said...

Key seems to have the opposite effect on people to Helen Clark. Initially people don't like Clark, but then they meet her and get to like her. The more time people spend with Key, the less they like him. He makes Steve Maharey look humble by comparison. Key also lacks a broad vision, unlike English who has been working hard to develop a broader appeal (ie. women, Maori, etc). English might just do it...

backin15 said...

Clark is very likeable in person, I worked for her years ago and, despite being pretty serious, she's very personable and friendly. Her strategy to work the secondary media in 1997 - 99 worked well as she built a solid regional base from which to re-enter the capital cities/media.

I think Key would struggle in a general election, he's just too new and inexperienced - it's one thing to do well in a debate on a narrow set of issues, e.g. tax policy, but quite another to be across a broad range of issues that have implications for families etc.

It's gotta happen soon that they make a move surely?