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Chamber Says OECD Study Is Being Misintepreted

Chamber Says OECD Study Is Being Misintepreted

The Wellington Regional Chamber of Commerce is concerned at some of the misinformation flying around the New Zealand media about the implications of a recent OECD report for future tax cuts.

“The OECD assessment does not mean that tax cuts would lead to higher interest rates”, said Wellington Regional Chamber of Commerce CEO Charles Finny. “Yes, there are plenty of inflationary pressures in the economy at present, but tax cuts – particularly well targeted tax cuts aimed at improving productivity – would not necessarily increase these,” he said.

Finny repeated the comments he made last week at a lunch for Minister of Finance Hon Michael Cullen “we do have concerns about the future of the economy. Your own figures released yesterday are pointing to a turn down in growth. We also see growing inflationary pressures in the economy. Large wage demands without matching growth in productivity exacerbate these concerns. Overall we also have a concern about the projected size of future budget surpluses, and about the continuing level of growth in Government expenditure. We were not expecting these in this year’s budget – but have to say that the pressure is mounting for some reductions in tax rates – company tax rates will be a good place to start.”

Finny commented that the Chamber continues to welcome the fact that the Government is managing the economy responsibly by maintaining budget surpluses. However, the Chamber feels that they do not to be as large as they have been in recent years, or are forecast to be in the latest budget. The Chamber has also, for several years, been expressing concern about the growth in the size of Government. The New Zealand Chambers of Commerce and Industry have been arguing for several years that the growth in Government expenditure should be constrained to no more than 1% a year.

Constraining growth in Government expenditure to 1% should reduce some of the pitfalls of “Big Government”: intrusive regulation, inefficient public agencies, and lobbies for favours at the expense of others. “It should also reduces the proportion of people’s income which will be put aside to pay taxes. This will increase incentives to work, and to invest in productivity” said Charles Finny.


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