3. Hon BILL ENGLISH (Deputy Leader—National) Link to this
to the Minister of Finance
Does he agree with the NZIER’s analysis that, at the same income, wages are generally taxed more highly and levels of tax credits provided are lower in New Zealand than in Australia; if not, why not?
Hon Dr MICHAEL CULLEN (Minister of Finance) Link to this
Even given the parlous ideological state of the New Zealand Institute of Economic Research, it would not take much analysis to show that that has been the case since the mid-1980s, when the National Government’s top tax rate of 66 percent was progressively lowered—first to 48 percent, then to 33 percent—by a Labour-led Government. However, I welcome the fact that the member now accepts that tax credits are part of the taxation system. It makes it even more baffling that he voted against the last tax credit increases for working families.
Does the Minister agree with the decision by the Australian Labor Party to support significant long-term tax cuts, given his statement last week that the tax cuts promised in Australia were not the sorts of tax cuts one would expect from a Labour party?
Hon Dr MICHAEL CULLEN Link to this
Although I have no responsibility for the Australian Labor Party—and indeed seek no responsibility for the Australian Labor Party—the fact is that it is my understanding that Mr Rudd was promising a rather different variety of tax cuts from those promised by Mr Howard. No doubt our great Australian friends will decide between the two menus on offer.
Darren HughesHon Dr MICHAEL CULLEN Link to this
Despite the Work Choices programme, the stronger bargaining position of employees in Australia due to a more centralised industrial relations system has seen labour capturing a high share of the dividends of economic growth. The fact is that under this Government the rate of growth in profits has exceeded the rate of growth in labourers’ incomes.
R Doug WoolertonDoes the Minister believe that the benefits of targeted taxation outweigh the perceived gains of a general cut in taxation, which often benefits only the wealthy to any meaningful degree?
Hon Dr MICHAEL CULLEN Link to this
I agree that there has to be a balance in these matters. We inherited a situation whereby one-third of New Zealand children were being raised in poverty. That situation was therefore the priority for the Labour-led Government. Bill English voted against reducing the number of children living in poverty.
In light of the situation in the Australian election campaign, which means that significant tax reductions are now certain, does the Minister still stand by his statements that Kiwi workers who go to Australia are “functionally innumerate” and that New Zealand was “better off without them”?
Hon Dr MICHAEL CULLEN Link to this
Although a large number of New Zealanders will be voting in the Australian election, I will not be one of them, and I will leave those people in Australia to decide what kind of Government they want.
Does the Minister believe that the certainty of significant income tax reductions in Australia makes any difference at all to his own Government’s strategy for making New Zealand an attractive place to live and work?
Hon Dr MICHAEL CULLEN Link to this
I have already laid out the conditions under which we will consider reductions in personal taxation. They include, first of all, not borrowing for tax cuts. Mr English’s first condition for tax cuts is to borrow for them. Secondly, there will be no reduction in services in order to fund tax cuts. Mr English, when he was a Minister of Finance, cut taxes, then cut New Zealand superannuation—the elderly paid for the tax cuts for those in the working-age groups. Thirdly, the tax cuts must be able to be sustained. Fourthly, they must be fair; that is, the benefits must not all go to those on higher incomes but must be spread more fairly across the entire population. What is it about that that Mr English does not find to be reasonable economic policy?
Hon Peter DunneWill the Minister confirm that any tax cuts introduced in New Zealand will not follow the Australian path of including capital gains taxes, mortgage duties, stamp duties, land taxes, and all of the other things that the average Australian pays at a state level, both in New South Wales and Victoria, and in other parts of the country?
Hon Dr MICHAEL CULLEN Link to this
It needs to be remembered that the Australian Government collects a large amount of revenue from sources that are untaxed in New Zealand. It needs also to be remembered that the Australian Government levies a very severe income and assets test on its public pension scheme, which reduces very substantially the expenditure going to elderly Australians compared with that going to elderly New Zealanders as a proportion of Government expenditure. Those things, of course, have to be made up for out of other forms of revenue.
Can we take it from the Minister’s answer previous to that one that the facts that Australia has had 5 years of lower taxes already and that it plans to have another 5 years of lower taxes do not make any difference to him at all; and why is he alone in New Zealand in not being concerned about the growing income gap between Australia and New Zealand?
Hon Dr MICHAEL CULLEN Link to this
That income gap grew most between 1984 and 1993, during the period of the largest economic change and reform. The income gap since that time has not grown as greatly as that, at all. It would be very nice in this country if we had an enormous amount of minerals that could be exported in such a way as Australia is doing. The Australian Treasury has increased its forecast revenue for the next few years by NZ$70 billion.
Why has the Labour Government continued to tax people on $39,000 a year at 33c in every extra dollar that they earn, when 3 years ago in the 2005 Budget the Government indicated that it thought it should change those tax rates, but did not?
Hon Dr MICHAEL CULLEN Link to this
No, we did not indicate that there would be a change to the marginal tax rate; there was an indication of some threshold change. The member, of course, rejected that as a “chewing gum tax cut”; now he wants to swallow it.