1. JOHN KEY (Leader of the Opposition) Link to this
to the Prime Minister
Does she have confidence in the Minister of Finance?
Does she agree with the majority of New Zealanders who, according to the latest TV3 poll, want Michael Cullen to deliver a personal tax cut in this week’s Budget, and if there are no personal tax cuts, want him sacked; if not, why not?
Hon Dr MICHAEL CULLEN Link to this
No; I agree with the National Party spokesperson on finance that this is not the time for substantial personal tax cuts.
Is the Prime Minister concerned that 44 percent of Labour’s own voters want Dr Cullen sacked if he does not stump up with personal tax cuts in this week’s Budget, while only 41 percent of voters want him to stay; and, if Labour’s own supporters want Dr Cullen sacked—let alone the rest of the country—how long will it take her to come to that realisation?
Hon Dr MICHAEL CULLEN Link to this
The member might do well to read the latest Australian opinion poll. Australians, by a large majority, said that the most important part of the Budget for them was tax cuts, and promptly increased the lead of Labor in the opinion polls.
If inflation concerns are the only reason Dr Cullen’s Budget will not include personal tax cuts this year, why does she think Dr Cullen said yesterday that the election year Budget in 2008 will include personal tax cuts, even though he currently has no idea what the environment will be like then?
Hon Dr MICHAEL CULLEN Link to this
By sheer chance I happen to know what Dr Cullen actually said, which was that he hopes in next year’s Budget to outline the Government’s long-term plans in respect of personal taxation.
What is the magic that makes a tax cut under Labour a possibility in election year but totally unaffordable and inflationary the rest of the time?
Hon Dr MICHAEL CULLEN Link to this
I just answered that question, but if the member would care to even look at the latest economic data put out yesterday, he will find that retail sales rose by 3.8 percent in one quarter. If that is not showing excess demand in the economy, then I do not know what is.
Rt Hon Winston Peters Link to this
Can the Prime Minister confirm that the two great tax cuts in the past occurred in the late 1980s, when National was not occupying the role of Minister of Finance or Treasurer, and in 1998, when, again, National was not occupying the role of Treasurer—
Rt Hon Winston Peters Link to this
Well, it is a fact, actually, is it not, boys? The last big cut in this country was $1.1 billion, when I was Treasurer. Can the Prime Minister confirm that, and could she give us any idea why, given that track record, National should be trusted on this matter?
Hon Dr MICHAEL CULLEN Link to this
It is certainly true to say that the largest change to the taxation system, including the biggest cuts in the top tax rate and in the business tax rate, occurred in 1988, and that there were further substantial cuts in taxation in 1997-98. It is also true that both incumbent Governments lost the next election.
Is the Prime Minister saying that Dr Cullen has confirmed in the House this afternoon that tax cuts are not necessarily on Labour’s agenda for election 2008?
Hon Dr MICHAEL CULLEN Link to this
I said yesterday that I hope to outline in next year’s Budget what the long-term plans will be in respect of any changes around personal taxation. What I do notice is that if we had had $2.5 billion worth of tax cuts in the last year, as proposed by the member, then the figures for yesterday’s retail sales would be much higher than they were, inflationary pressures would be higher, and the current account deficit would be even worse. But this member said that we should borrow more, as the answer to economic management in New Zealand
Does the Prime Minister agree with what, in effect, Michael Cullen has been telling the people of New Zealand for the last 8 years, which is that “you can’t have a tax cut when the surplus is small, because you can’t afford it; you can’t have a tax cut when the surplus is big, because—by the way—there’s no correlation between the two; and you can’t have a tax cut when there’s a threat of inflation, and so, in fact”—
Hon Trevor MallardWell, the only time one can have a tax cut, I say to Trevor, is obviously when one is behind in the polls. That is what he said yesterday.
Hon Dr MICHAEL CULLEN Link to this
It is certainly true in any simple understanding of macroeconomic management that if a large surplus is due to demand-led economic growth, feeding that demand is the most stupid thing one could do. That is why Bill English has been saying that we should not do it. So Opposition members disagree with one another—even on their core policy.
Jeanette Fitzsimons Link to this
Is the Prime Minister aware of the statement made by Lester Brown in his book Plan B that the overriding challenge is to restructure taxes to get the market to tell the ecological truth; if so, how can she have confidence in a Minister of Finance who developed a billion dollar - plus tax-cut package for business without any consideration of using it to promote sustainability?
Hon Dr MICHAEL CULLEN Link to this
Officials are indeed working on whether the tax system can be used in that respect, but I prefer to do the work—and I am somewhat sceptical about the possibilities—rather than picking a billion dollars out of the air for supposed tax incentives for sustainability without any detail about what they might be.
Rodney HideDoes the Prime Minister accept that the ACT party has always said that it is a good time for a tax cut?
Hon Dr MICHAEL CULLEN Link to this
Yes, even when it was the Minister of Finance it used to argue that, as well.