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Tax System Changes—Effect on New Zealanders

Wednesday 15 June 2011 Hansard source (external site)

Goff2. Hon PHIL GOFF (Leader of the Opposition) Link to this
to the Prime Minister

Does he stand by his statement that “the vast majority of New Zealanders are now better off, even after the GST increase”; if so, which New Zealanders are worse off?

EnglishHon BILL ENGLISH (Deputy Prime Minister) Link to this

Yes, the Prime Minister stands by his full quote, made in October last year, which is “Most of you will have noticed a boost in your pay packets since the 1 October tax cuts. The vast majority of New Zealanders are now better off, even after the GST increase.” That was of course referring to the income tax / GST switch that happened on 1 October 2010. To answer the second part of the member’s question, there were some people not fully compensated by the tax changes. Those were people who were sheltering income in trusts, or otherwise earning income that was not fully taxed at the personal tax rates.

GoffHon Phil Goff Link to this

Is the Prime Minister saying that taking into account inflation and the level of tax cuts given to people on the medium or lower income, those people are now better off than they were before—taking account of both GST and inflation?

EnglishHon BILL ENGLISH Link to this

Yes. The after-tax average wage has increased 7.1 percent over the previous year—considerably more than the increase in prices over that time. In fact, the real increase in the after-tax average wage over the last year has been 2.5 percent.

GoffHon Phil Goff Link to this

When he claims that the average wage has increased by 2.5 percent over the last year, what account does he take of the fact that for his income he would have got $1,000 a week extra in tax cuts, and the top 10 percent of wage earners got 40 percent of the tax cuts, thus distorting the real income earned by people across the board, and that lower-paid people, people on a median income or less, are actually worse off?

EnglishHon BILL ENGLISH Link to this

The measure I am using is the one that has been used by this Parliament, in legislation, for 20 years to calculate the basis of New Zealand superannuation. If Labour members think that is wrong, then they should campaign among New Zealand’s pensioners to change the way that New Zealand superannuation is adjusted. The fact is that there has been a real increase of 2.5 percent in the average, ordinary-time, after-tax, weekly wage in the last 12 months.

GoffHon Phil Goff Link to this

Is he telling New Zealanders on the medium wage, or less than the medium wage, that they are wrong in believing that the cost of their food, their power, their rents, and their petrol have soared above any of the wage increases they have got, and that he actually knows better than them?

EnglishHon BILL ENGLISH Link to this

I was just telling Parliament the facts about the averages. Of course, in individual circumstances many New Zealanders over the last 2 or 3 years have not had significant wage increases, or have had no significant wage increases at all. They are victims of the mismanagement of this economy by the previous Labour Government, when people thought they had sustainable jobs, but the jobs were actually based on borrowed money and excessive Government spending. We are working very hard to replace those unsustainable jobs and times of no wage increases, with the benefits of a strong, growing economy, and we are making some progress.

KateneRahui Katene Link to this

Is he aware that over the last month the price of fruit and vegetables has risen another 1.6 percent, and does he agree that to add $6 million to the $300 million - plus that the Government is already borrowing per week, in order to take GST off healthy food, would leave every New Zealander better off; if not, why?

EnglishHon BILL ENGLISH Link to this

Although it is true that food prices do rise in some months, they also fall in others. For instance, over the last 6 or 7 months the price of fruit and vegetables has actually fallen in total. That is good for household budgets. I am not sure New Zealanders are any healthier as a result. The second thing is that every dollar we add to our already fast-rising debt will need to be repaid with interest.

GoffHon Phil Goff Link to this

Did the cut in taxes for a person on the medium wage, which was about $14 a week, adequately cover the cost of filling up their car with petrol, cover the average rental increase of $23 a week in Auckland, and cover the increase in food prices, which went up by 7.4 percent averaged over the year, just to name a few of the costs those families are facing?

EnglishHon BILL ENGLISH Link to this

No family will be on $14 an hour, and the member should look at the family support system—

EnglishHon BILL ENGLISH Link to this

It is $14 a week. The fact is that New Zealand families who are on low incomes benefit from Working for Families, from the accommodation supplement where that is required, and from subsidies on early childhood education. The Government has increased all of those subsidies for those families despite the fact that we have had the biggest recession in a generation.

GoffHon Phil Goff Link to this

Was Statistics New Zealand right in stating that median incomes actually fell in the year to June last year although the December quarter price rise was the highest in 20 years?

EnglishHon BILL ENGLISH Link to this

The member is always going to be able to find a measure of income and a measure of expenditure some time in the last 3 years that do not match up. The fact is that, firstly, on average real after-tax wages have increased and, secondly, the median income measure used by Statistics New Zealand is not the one we use to set New Zealand superannuation. If Labour members want to change that, they should say so. Thirdly, that measure does not take account of all the Government transfers, which have all increased because we have protected the most vulnerable through the worst recession in a generation.

GoffHon Phil Goff Link to this

What does the Prime Minister say to members of the Ōtāngarei branch of the Māori Women’s Welfare League who told Kelvin Davis recently that they are having an unprecedented demand for assistance, particularly food parcels, because unemployment has doubled among Māori to 19.5 percent and because costs have soared above the incomes that Māori people are earning in the north?

EnglishHon BILL ENGLISH Link to this

We are fully aware of the impact of significant unemployment both among young people and among Māori. That is why it is so important we get this economy growing again. New Zealand is not going to create new jobs out of new Government schemes. It is going to create new jobs out of a fast-growing economy. The Prime Minister would be interested to know what Kelvin Davis said to that branch of the Māori Women’s Welfare League. No doubt, it was a large number of expensive, uncosted promises that he does not want broadcast to the rest of the country.

MallardHon Trevor Mallard Link to this

Does he understand today that real average wages go up when high-income earners get massive tax cuts, including over $1,000 a week in his case, and low-income workers lose their jobs?

EnglishHon BILL ENGLISH Link to this

The Prime Minister understands that Labour has always agreed, as we have, to use the ordinary-time average weekly wage as the basis for calculating New Zealand superannuation. If Labour wants to change that, it is welcome to go and campaign. Of course, there are a lot of statistical effects on where the average wage comes out, but over time, Parliament has regarded it as the fairest measure of the overall wage picture for New Zealanders. That is why it is in the law, where it has been for the last 25 years as the way of calculating New Zealand superannuation.

MallardHon Trevor Mallard Link to this

Does the Prime Minister understand that real average wages go up when high-income earners like him get tax cuts of over $1,000 a week, and low-income workers lose their jobs?

EnglishHon BILL ENGLISH Link to this

The member is wrong.

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