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Cullen Relies on Manna from Heaven

Cullen Relies on Manna from Heaven to Justify Scheme

Thursday 23rd Nov 2000 Rodney Hide Media Release -- Economy

ACT Finance spokesman Rodney Hide said today that Finance Minister Michael Cullen needed a lesson in Economics 101, given his statement yesterday defending his super scheme.

“The reality is that Mr Cullen’s scheme on average only covers 10 percent of the cost of super in the future and at best 14 percent. The rest is still funded Pay-As-You-Go. When Michael Cullen said he was going to “partially” pre-fund super New Zealanders naturally thought the “partial” meant a bit better than one dollar in 10.

“Michael Cullen has now tried to boost the contribution his Fund makes up to one dollar in four by adding in the tax to be paid on the Monster Fund’s projected earnings.

“This is economic nonsense. Cullen’s Monster Fund doesn’t create new assets that wouldn’t otherwise have been taxed. It simply shifts their ownership from the private sector to the state sector. The tax revenue that Finance Minister Cullen is claiming as additional return would have been collected anyway. Mr Cullen’s Fund provides no “free lunch” and produces no “manna from heaven”.

“The Treasury makes that plain in its reports. The existence of the Fund doesn’t make the New Zealand economy any larger and therefore doesn’t increase the size of the tax base. There is no extra tax revenue because of the Fund.

“Mr Cullen is wrong. It is he that is being mischievous,” concluded Rodney Hide.

ENDS

For more information visit ACT online at http://www.act.org.nz or contact the ACT Parliamentary Office at act@parliament.govt.nz.

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