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Labour Runs Out of Ideas on Economy

Monday 8 Jul 2002

Today's release of Labour's economic policy showed that it had run out of ideas, ACT Finance spokesman Rodney Hide said.

"Commodity prices are falling, the dollar is up, interest rates are rising, and Labour has no economic strategy or ideas to boost New Zealand's economic growth.

"The best that Michael Cullen has come up with is going soft on inflation, a new `health' tax, and holding another talkfest with business.

"Business doesn't want another talkfest. They have told Helen Clark and Michael Cullen want they want - lower taxes and less red tape. The Labour Government have resolutely refused the two things business wants.

"Michael Cullen still maintains, in the face of overwhelming evidence to the contrary, that cutting taxes doesn't boost growth. On tax, Cullen is an ostrich with his head and body stuck in concrete.

"Michael Cullen spent a million dollars on the McLeod Review only to reject its key findings of the desirability of moving to a flat tax. Only ACT has picked up the review's suggestion of dropping the top rate of personal and company tax to 28 cents.

"Michael Cullen wants to renegotiate the Policy Targets Agreement with the next reserve Bank Governor to go soft on inflation. He specifically rejects targeting 1.5 percent as the midpoint for the zero to three percent target. But Michael Cullen's own review by Professor Lars Svensson completed last year endorsed the mid-point target and recommended its formal adoption:

In line with current best practice, the Reserve Bank interprets the PTA as a medium-term point target of 1.5 percent. I recommend that the current policy target in the PTA should continue to be interpreted as a medium-term point target for 12-monthly increases in the Consumer Price Index of 1.5 percent. At the beginning of the next term of the Government, the PTA should be marginally modified to include the medium term point target directly. There is no reason to make other changes in the PTA. (p.3).

"Again, Michael Cullen is contradicting his own expert advice on which spent a great deal of money.

"The "health" tax is a "stealth" tax. Under Labour, precious tax dollars are being gobbled up by bureaucracy and politics. Labour's "stealth" tax will remove all fiscal discipline and will just ratchet up as health expenses climb. Labour Prime Minister Tony Blair promised no rise in income tax just like Helen Clark - but this year hiked National Insurance contributions as a "health tax" claiming it wasn't a hike in income tax.

"Helen Clark can't be trusted on taxes - her pledge not to raise taxes is just as fake as one of her paintings.


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