8. GORDON COPELAND (Independent) Link to this
to the Minister of Finance
Why has he now abandoned his Budget 2005 commitment to a small adjustment to the current tax thresholds, from $38,000 to $40,324 and from $60,000 to $63,672 to offset, at least to some extent, inflation for the 3-year period between 2005 and 2008?
Hon Dr MICHAEL CULLEN (Minister of Finance) Link to this
Madam Speaker—[ Interruption] Those members opposite just cannot wait for their extra $5 a week! Because that would have injected a further $400 million into the economy in 2008-09, and that would not have been responsible in the current macroeconomic environment. It was more responsible to enhance KiwiSaver. That is why I was pleased that at a pre-Budget meeting the member accepted that trade-off—however reluctantly.
Does the Minister realise that a person on the then average wage of $36,000 in 2002 now needs to earn about $44,000 to cover the increases in the cost of living, and that as a result of moving from the 19.5c to the 33c tax bracket, that person is now almost $2,000 per annum worse off, after tax; if so, does he intend to fix that while he still has the opportunity to do so?
Hon Dr MICHAEL CULLEN Link to this
Real after-tax incomes have increased over the last 7½ years. Real household after-tax incomes have increased significantly over the last 7½ years. The member may have noticed that the Reserve Bank recently put up the interest rate. Had I injected another $400 million a year into demand, it is likely that those increases would have been higher, thus reducing people’s real incomes.
Hon Mark GoscheDoes he stand by his statement: “There will be a time for personal tax cuts as fiscal and economic pressures ease.”?
Hon Dr MICHAEL CULLEN Link to this
As I indicated before the Budget, I hope to be in a position to announce the timing and shape of personal tax changes over the long term, in my next Budget. I note that Mr English has said that now is not the time for extensive tax cuts, thus agreeing with me. He has quantified the maximum amount available as $500 million a year, which would give most taxpayers no more than about $1 a week, and $5 a week if spread equally across the entire range of taxpayers. That is what $500 million a year is, I say to Mr English.
R Doug WoolertonDoes the Minister agree that our current high dollar and interest rate led to the intervention by the Reserve Bank on Monday; if so, does he believe that increases in tax thresholds at this time would only add to inflationary pressure?
Hon Dr MICHAEL CULLEN Link to this
As the governor said quite clearly, the major factor in the rise was the proposed Fonterra payout injecting some $2 billion extra into the economy. [ Interruption] Well, that is what the Governor of the Reserve Bank actually said. If the member wants to show the same contempt for the governor as he shows for the legal system, that is fine by me.