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www.mccully.co.nz 19 August 2005

www.mccully.co.nz 19 August 2005

19 August 2005 (#218) A Weekly Report from the Keyboard of Murray McCully MP for East Coast Bays

Cut Out the Middle Man

The NZ National Party led by Don Brash must surely go down in history as the most effective political party in New Zealand’s history. Just look at the track record:

- Back in January 2004 at Orewa, Don Brash called for an end to race-based funding and Treaty-based political correctness, for which he was roundly denounced by Helen Clark and co as a racist. Within weeks, that same Helen Clark was announcing an end to race-based funding and Treaty-based political correctness (not that she actually meant it).

- A few weeks ago, Dr Brash announced that it was National Party policy that interest on student loans should be tax deductible. Within days, Helen Clark announced that interest on student loans should be abolished.

- This week, Don Brash announced that next Monday he would release a programme of tax cuts. So this week, having vehemently opposed tax cuts for six years, Helen Clark announced a series of middle-class welfare measures which she attempted to dress up as “tax relief”.

So, do we see a pattern emerging here? At this rate, Dr Brash will be expecting to achieve the full implementation of his party’s manifesto a week or two before polling day. A very hard track record to beat. And time, it would seem, that we cut out the middle man.

Tax Credibility

Remember those comments from Dr Cullen about proposals for tax cuts?

“As always, too much jam now is likely to lead to only crumbs later. “ Budget 2005 Speech, 19 May 2005

“However, it does not give us any scope to indulge in large structural increases in expenditure or in wholesale tax cuts.” Address to CTU Forum, 12 July 2005

“Over the next three budgets the allowance for new spending has been set at $1.9 billion a year, thereafter growing by inflation. That is a target that will require careful prioritisation and some moderation of expectations.” Address to PricewaterhouseCoopers Briefing, 9 June 2005

“We must not fool ourselves into thinking there is more room to move when it is not the case. In an economy operating at full capacity, cutting tax or raising expenditure beyond what is already planned, or even signalling an intention to do so, will flow immediately into higher mortgage rates for homeowners and higher interest rates for businesses.” Address to KPMG Tax Seminar, 3 June 2005

“That is why, for my government, large scale fiscal loosening in the form of major tax cuts or undisciplined expenditure increases does not play any part in our strategy to get the economy back onto a higher growth path.” Address to Wellington Chamber of Commerce/AON Risk Services Business Luncheon, 20 May 2005

Isn’t it just wonderful what a few adverse public opinion polls and a few weeks of post-Budget scorn from caucus colleagues can do for a Minister of Finance?

A Mere Pimple

The middle-class welfare package announced yesterday throws approximately $400 million a year at a target group of around 250,000 voters – middle income voters with kids. Because they are targeted, the sums available to some individuals look significant. But the catch is that any additional dollar of earnings attracts a very high effective marginal tax rate (so don’t bother with overtime or promotion - Dr Cullen will take most of it).

And, of course, as we have already seen, many who have an entitlement simply refuse to apply for welfare (only 14,000 wage earners have applied for Working for Families; the other 180,000 are beneficiaries).

While much has been made of the package, at $400 million a year it is quite small – a small percentage of the total now available for the National Party tax package on Monday.

Labour’s targeted spend is in reality, little more than a pimple on the backside of the much larger package of tax cuts available to the National Party next week.

Drift to Oz Continues

The number of Kiwis heading permanently for Australia continues to rise. Figures from the Government Statistician for the year to June 2005 had commentators lamenting the departure of 630 a week. But the July figures released today show the average weekly departures have risen to 647 (based on a total of 33 670 for the year).

The net figures show a similar trend. After allowing for Australians moving here, and returning Kiwis, a net figure of 19 901 departures is evident –or an average of 382 per week.

Top Canterbury Cop Steps Up

Take a bow Police Superintendent Sandra Manderson, District Commander of Police in Canterbury. The good Superintendent was reported in the media a week before verdicts in relation to five of her officers in the cross-Canterbury speedathon case, reassuring her officers of her complete backing (and of their jobs).

Two of the officers have now been convicted. Which is a bit rough when all they did was try to meet the Prime Minister’s programme. Head office confirmed that no further disciplinary action would be taken. But given the public statements of Superintendent Manderson last week, they probably had no choice. Which is a very good thing indeed. And which demonstrates that she is made of much sterner stuff than the person who occupies the highest elected office in the land.

This report is available weekly on my website at www.mccully.co.nz as well as being emailed each Friday. To subscribe, unsubscribe, or change your email address on the mailing list, please email murray.mccully@xtra.co.nz


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