2. Hon ANNETTE KING (Deputy Leader—Labour) Link to this
to the Prime Minister
Does he stand by his statements that after the Government’s tax changes, including the increase to GST, “the vast bulk of New Zealanders will be better off” and “If the Government cannot achieve that, we would not increase GST”?
Rt Hon JOHN KEYHow can he stand by the statement that the vast bulk of New Zealanders will be better off, when economists from the Institute of Economic Research estimate that rising food prices, the GST increase, and other cost increases that he has introduced will leave around half of all householders worse off by the end of the year?
Because the advice I have had from Treasury is that a family will be better off by about $25 a week post the personal income tax - GST switch, and that an individual will be about $15 a week better off.
Is he aware that power companies are increasing their charges on 1 October, with Contact Energy being the latest company to inform customers of a 6 percent increase in power prices, leading to an increase of about $6 a week, on average, for families; if so, how will New Zealanders be better off, as he promised?
I am aware that power prices have risen under the National Government by about 3 percent since we came into office. I am aware that power prices will increase by half what they would have increased under Labour, in relation to the emissions trading scheme. I am aware that power prices went up by 72 percent when that lot were in office, and I think that New Zealanders, broadly speaking, can take comfort that we are doing what we can to control power prices and make sure that this economy operates efficiently.
Is he aware that public transport costs are increasing on 1 October, with the GO Wellington bus company increasing its fares for some passengers by $5 a week—that is the extra amount it will cost them to get to work each day—if so, how will New Zealanders be better off, as he promised, when $11 of their so-called tax cuts have been eaten up in just the two price increases that I have mentioned today?
Well, if the GO Wellington bus company is raising its prices by $5 a week as of 1 October because of the GST increase, then it is ripping people off, because, quite frankly, GST going up by 2.5 percent is unlikely to equate to an extra $5. I can say that inflation under the National Government has run at about 1.8 percent, and I can contrast that with inflation under the previous Labour Government, which was at 5 percent. It is worth remembering that any cost increases that occur because of increased GST will be more than compensated for by personal income tax cuts.
Would the Government consider holding GST at 12.5 percent to help the about 100,000 households in Canterbury who will have to rebuild their homes, in light of the fact that about $7,000 will be added to the cost of the average new house because of the GST increase on 1 October?
No. That is because the first $100,000 of payments for buildings made under an Earthquake Commission claim will be funded at a figure plus GST of 15 percent, and contents will be funded at $20,000 plus GST.
What action will the Government take to avoid a repeat of the so-called Edgecumbe factor, which, following the earthquake there, saw the cost of building materials and supplies increase dramatically, and which, if it happened in Christchurch and is combined with the GST increase, would see the cost of rebuilding people’s homes increase markedly?
That is one of the issues that the Government is focused on. The Minister responsible for rebuilding and recovery in Canterbury, Gerry Brownlee, is having discussions with building companies about that. Building companies that undertake work in the rapid-rebuild phase, which we want to occur, will have to sign conditions to ensure that their work is done at a fair and reasonable rate. I expect all builders who are operating in Christchurch and helping people to recover from the earthquake to do so in a reasonable and fair way. We expect them to make money and a profit, but we certainly do not expect them to rip people off.