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National's tax cuts won't help living standards

29 June 2005

Hon Jim Anderton MP, Progressive Leader

National's tax cuts won't bring higher living standards

New Zealanders clearly want higher living standards and higher wages but neither will be delivered with National's prescription for higher interest rates, increased government offshore borrowing and a redistribution of wealth from the poor to the rich, Jim Anderton said in response to National's tax announcement today.

"Brash is giving himself approximately $90 a week more, and leaving superannuitants approximately $10 a week each, creating a massive redistribution from the poor to the rich.

"Increased overseas borrowing by government will lead us straight back to the days of Muldoon, which caused huge damage to our economy and massive unemployment. It will also incur interest payments to double that debt burden.

"Higher living standards must come through lifting the performance of our economy, not through unsustainable and indiscriminate tax cuts. New Zealand already has some of the lowest personal income tax rates in the OECD .

"Progressive policy being implemented in government development programmes focuses on increasing the number of high value, high skill, high wage jobs in the country.

"Tax cuts are simplistic and short sighted if they aren't directly aimed at economic growth. You don’t go asking the boss for a tax cut when actually you want a pay rise. It is more sensible to lift wages in a way that is affordable and sustainable long term.

"The Labour Progressive government is investing in lifting the level of high value products and services, which lead to higher paid jobs. Progressive wants to boost this growth by reducing company tax to 30 per cent in order to increase investment, which leads to higher wages and more jobs. That is the only sustainable way to apply a tax cut.

"Indiscriminate income tax cuts in the 1980s and 1990s led to more money for the rich and less for everyone else and did not do anything for economic growth. It was a period of stagnation where Australia streaked ahead of us in terms of economic growth. That is reason enough to reject indiscriminate tax cuts," Jim Anderton said.

There was a significant redistribution of income over the 1980s and 1990s. Between 1982 and 2001 the top decile group increased their average household equivalent disposable income by 35.2 per cent, while the bottom decile group’s income reduced by 8 per cent, with a regular gradient through the deciles .

According to an OECD report in 2004, between 1994 and 1998 growth for New Zealand in cumulative per capita GDP was 9.9 per cent and 16.9 per cent for Australia, showing underperformance during the National led period of government after large income tax cuts.

New Zealand's average rate of economic growth surpassed Australia's between 1999 and 2003. During that period our per capita GDP increased by a cumulative 14 per cent, compared to 11.3 per cent for Australia.


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