4. JOHN KEY (National—Helensville) Link to this
to the Minister of Finance
Will he be following the lead of the Australian Treasurer, Peter Costello, by raising income tax thresholds and/or cutting tax rates in his 2006 Budget; if not, why not?
Hon Dr MICHAEL CULLEN (Minister of Finance) Link to this
I have no intention of raising the top two personal tax rates to 40 percent and 45 percent, plus a 1.5 percent Medicare levy as in Australia.
Is he aware that Australian tax thresholds have been raised and/or taxes lowered in Australia in 2003-04, again in 2004-05, again in 2005-06, again in 2006-07; and why is it that we in New Zealand have to wait 3 years to get the better part of 67c, which he is telling us we probably will not get anyway?
Hon Dr MICHAEL CULLEN Link to this
It has already been announced that the Hon Peter Dunne and I are undertaking a review of business taxation where those matters will be dealt with. The Australian Government, of course, last night projected what it called an underlying cash surplus of about $10 billion. The National Party’s policy would have implied, in fact, substantial extra borrowing in order to pay for it.
Hon Mark GoscheHon Dr MICHAEL CULLEN Link to this
According to a recent report from the OECD, New Zealand has the third-lowest tax rate for the average worker. Australia had a higher tax burden on the average worker than New Zealand had.
Can he explain why tax cuts are affordable in Australia, when they will be running a future surplus of 1 percent of GDP, but apparently they are not affordable in New Zealand when we will be running a surplus of 2.2 percent of GDP, even after he has fully funded the New Zealand Superannuation Fund?
Hon Dr MICHAEL CULLEN Link to this
That really does show the member’s ignorance of how Government accounts are calculated. The Australians report what they call an underlying cash surplus, which is on the core Crown activity in Australia. This Government will not be reporting a cash surplus at all for the next 4 years.
Has he seen Australian Labor leader Kim Beazley’s comments in support of the Australian tax cuts when he said: “You can’t keep failing to give when you’re running surpluses like they’ve been running. You can’t keep failing to give to middle Australia a tax cut.”; if so, why does he think that Labor leader Kim Beazley thinks tax cuts are affordable when their surplus is half what New Zealand’s surplus is—or does he just think that Peter Costello is being totally irresponsible in announcing tax cuts?
Hon Dr MICHAEL CULLEN Link to this
I tell the member again, he does not have the foggiest idea how Government accounts are calculated. The Australians report on a different financial basis—
Madam SPEAKERMembers know that barracking is not permitted; interjections are. It is very difficult to hear the member’s answer.
Gerry BrownleeI raise a point of order, Madam Speaker. You might require the Minister to answer the question rather than starting with the provocative statement that he did. If we could ask a question by saying something about the Minister of Finance’s inability to understand his capacity to deliver tax cuts, that might be fair. But for him to respond that way will, unfortunately, just lead to the sort of response we get.
I say to the member that the Minister was getting to his answer and I did notice that some questions have been prefaced by superfluous comments, as well. So perhaps we could all stick to the rules in future.
Hon Dr MICHAEL CULLEN Link to this
The Australians report their Government finances on a different accounting basis from New Zealand. Their headline rate is what is called the underlying cash surplus. New Zealand’s underlying cash surplus on the Australian basis is already lower than Australia’s and will be negative for the next 4 years. Large tax cuts in New Zealand over that period can only be paid for either by slashing social spending—and every member opposite calls for increases—or by increased borrowing and rising debt levels. Mr Costello’s proudest boast last night was that he had paid off Government debt, and Australia had a net debt of zero. We achieved the same position in March this year. Thank God we did not have a National Government!
Has the Minister bothered to reflect on the fact that if an Australian worker earns $30,000 or $40,000 a year—not a lot—he or she will pay $1,500 a year less in tax, or $30 less a week, than the equivalent New Zealand worker earning exactly the same amount of money; if so, what is he going to do about that for the New Zealand worker?
Hon Dr MICHAEL CULLEN Link to this
That same person in Australia also pays a 1.5 percent Medicare levy. That provision is not payable within New Zealand; here it is met out of general taxation. That same person will also pay a very large payment of stamp duties, if he or she buys a house. That person would also be subject to general capital gains tax and, indeed, to a range of taxes that are not payable within New Zealand. That person would also qualify for a State pension that is income and asset tested, which it is not in New Zealand.
Has the Minister bothered to calculate that if a New Zealand truck driver earns $45,000 a year, his tax will be $9,720, leaving him a take-home pay of $35,280 to live on, and that when he emigrates to Australia he is likely to earn $60,000 for the same job and have a take-home pay of $48,400; or does the Minister not consider that the $250 a week extra that the worker would get in Australia is material?
Hon Dr MICHAEL CULLEN Link to this
I am always amazed that any members opposite still live in this country. If they think Australia is so good, then for God’s sake let us benefit both countries and let them all go to Australia.
Peter BrownWill the Minister confirm that wages went down in this country as a direct result of the Employment Contracts Act?
Hon Dr MICHAEL CULLEN Link to this
I can confirm there were serious cuts in both wages and conditions for many New Zealand workers, particularly in terms of conditions such as time and a half on overtime, which of course Mr Key never does—at least, not in respect of his work. Indeed, the largest gap between wages in New Zealand and Australia occurred during the period when the policies that Dr Brash and Mr Key are most keen on were being implemented.
When the Minister finally gets to read the rest of David Cunliffe’s Budget next week, will the cheering from his back bench be because the whips have told them to fall into line, or because they have worked out that under the Minister’s financial stewardship they have the privilege of paying $6,540 more in tax than if they had earned their $118,000 back-bench salary in Australia, and is that why the Prime Minister has signalled that next week’s Budget will almost certainly be his last, because she agrees with the back bench that they deserve a tax cut?
Hon Dr MICHAEL CULLEN Link to this
I can understand that somebody who is worth $50 million would have had to arrange his affairs to qualify for a Wellington accommodation allowance as a member of Parliament, and would regard an MP’s salary as somewhat miserable. I have to say that most Kiwis would be happy to earn $118,000—and I would be happy if almost anybody on that side actually earned their $118,000.
Hon Dr Nick Smith Link to this
I was amused to hear Winston Peters criticising the Employment Contracts Act, and I seek leave to table the third reading vote on the Employment Contracts Act, which Mr Peters voted for but of course that was when he was on this side of the House.
Rt Hon Winston Peters Link to this
I raise a point of order, Madam Speaker. Dr Smith should pay attention. I have not asked any questions today, other than the one to do with question No. 2 to the Prime Minister. I did not ask any questions in respect of the last line of questions, so why is he accusing me of having done so?