Treasury report undermines Cullen on tax cuts

ACT Leader Rodney Hide today welcomed the release of an internal Treasury paper that shows that tax cuts would boost economic growth.

Finance Minister Dr Cullen has repeatedly denied that lower taxes would improve New Zealand's long-term economic growth rates.

The Treasury paper was written following a decision by Parliament's Finance and Expenditure select committee to cost ACT's tax policy. Released under the Official Information Act, the paper deals with questions ACT put to Treasury about the impact of its tax policies on the economy and growth. It confirmed ACT's position that tax cuts would significantly boost New Zealand's growth performance.

Treasury officials estimated that returning $5 billion in tax cuts would add 1.5% to economic growth in the medium-term. The officials qualified their estimate saying the 1.5% estimate is based on historic OECD data, and for that reason a more prudent growth figure should be used.

"The Treasury report concludes that ACT's 1% extra growth assumption is `defensible'. One percent extra growth would add $1.5 billion each and every year to New Zealand's economic output. That's $1.5 billion that we wouldn't otherwise have. It would mean an extra $15 billion after 10 years of 1% higher growth.

"Workers would have more in their pocket, the country would be more prosperous, and after a few years, even the Government would have more than it would otherwise have.

"It is good news to have Treasury concurring with ACT's findings that our tax cut package would significantly boost New Zealand's economic growth performance. ACT has long said every hard working New Zealander deserves a tax-cut and what a great shot in the arm it would be for the economy. Now, Treasury agrees," said Mr Hide.

"This Treasury paper was supposed to be supplied to the Finance and Expenditure select committee two months ago but it's easy to see why Dr Cullen was not keen to release it. The Treasury paper backs up ACT's position and demolishes Dr Cullen's."

Mr Hide said the Treasury information would be useful as ACT works on putting a revised tax package together in election year.

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