Peters: An Economic Plan For All New Zealanders
An address by Rt Hon Winston Peters to members of Morrinsville Grey Power, Monday 22 August (2.00pm) at the Catholic Centre, Thames Street, Morrinsville,
An Economic Plan For All New Zealanders Part One
Part Release Of New Zealand First’s Earning And Tax Strategy
Some commentators have decided that this election will be decided on tax.
Well they are wrong.
Tax is important, and we will address our plans here today.
But tax is only part of the wider purview which is the New Zealand way of life.
We are the only party in parliament committed to preserving the Kiwi lifestyle – and we have an economic plan which will provide the essential framework to both foster real productive growth and increase real incomes into the future.
The types of incomes we expect and deserve as New Zealanders.
Why is this important?
In June, Statistics New Zealand released the average wage increase for the year. It was 2.7%.
Normally that would be a cause for celebration – except that inflation in the same period was 2.8%.
So real wages actually went backwards – no wonder we can’t close the gap with Australia.
Last Thursday the government opened its books for its Pre-Election Economic and Fiscal Update.
Not only did Labour’s fetish over taxation continue – but surprise, surprise – they had spent the lot before they even announced it.
This was truly a low point in our fiscal management and democratic transparency.
Cullen and Labour really scraped the proverbial bottom of pork barrel politics.
New Zealanders deserve better.
New Zealand families do need relief.
But trapping them further into welfare dependency is not the solution.
What Labour is doing is in effect subsidising a low wage economy.
It’s a ‘keep their wages low, top it up with their own taxes and hope they stay quiet’ approach.
This cycle of dependency must end if our wages are to grow.
You see New Zealand families have a third choice.
They do not have to subscribe to Labour’s overtaxation and bureaucratic infestation or to National’s tax cuts for the rich and to hell with the rest of us.
What we are outlining today is the only viable alternative to these two extremes.
Labour’s dependency madness could conceivably see those earning up to $100,000 a year, with several children, on welfare. That is crazy.
National’s plans will work for their rich mates – just like they did in the 1990s – but ensure everybody else gets burnt in the process.
This would mean that the lessons and the upheaval of the 1980s and 1990s would be lost.
We face several structural failings in our economy presently.
These relate to the incentives that exist within our system to, first, promote growth, and second, infrastructure.
One point is absolutely clear.
One of our political parties is going to try and sell tax cuts today as the panacea to all of our economic and social woes.
They are wrong.
There is a case for targeted tax cuts and New Zealand First will take the responsible path on this matter.
But large, across the board tax cuts will mean less capacity to invest in much needed social spending, in rebuilding our depleted police force, in our health and education sectors and most importantly – in growing our wages.
Let me put it to you this way.
Too many hard working New Zealanders still earn around $10 an hour.
Labour’s package means they will subsidise their income by around $40 week.
National’s will mean they will get $10 - $15 a week in tax cuts.
But under both they will still be earning $10 an hour.
Why not increase this to $12 an hour.
That’s an extra $80 a week, which they have actually earned.
It is not reliant on the government to top up.
It does not place our social services and infrastructure at risk because the kitty is empty to pay for tax cuts.
So our first commitment is that we will raise the minimum wage to $12 an hour.
How do we pay for this?
In the first instance we will match this wage increase with a lowering of the corporate tax rate to 30 cents.
This will ultimately cost $600 in three years time – but this money will be immediately reinvested in wages and company growth.
We will also be targeting unnecessary red tape and bureaucratic requirements to reduce compliance costs.
We must end our seeming obsession with constantly trying to force wages down to the levels of other low wage economies.
We must also increase productivity and this means improving the link between labour and technology.
For this reason we will be introducing tax rebates for Research and Development for those companies serious about improving productivity and growing their business.
Now there is one scourge on our economy which is
presently overriding all others.
That is the cost of petrol.
It is hurting families, businesses and almost every facet of our lives.
We now have the Retailers Association’s Barry Hellberg saying that higher petrol costs will inevitably result in higher grocery costs.
We have families having to choose between putting petrol in the car and buying food.
In fact there are few aspects of our lives that are untouched by higher petrol prices.
We say our families and businesses are crying out for relief – and we will deliver it.
We will be taking GST off petrol.
This will cost just under $600million a year.
It will take 15 cents a litre off the current price of petrol.
But let me tell you what this will mean for New Zealand families.
The average family car takes about 50 litres of fuel.
At the current price of $1.44 a litre, it is costing you $71.50 to fill your car.
Under our plan this will be reduced to $62.56.
That is a saving of $9.00 every time you fill up your petrol tank.
With that – not only will you be able to buy a packet of chewing gum, but you will also be able to buy ice creams for all the family.
The flow-on effects do not end there. They will be reflected in lower grocery prices and the prices of almost every consumer good.
Freight will be cheaper – so prices will be cheaper.
In fact, this saving each week will ensure that every household – whatever its make up – will receive much the same tax cut as National is promising, but for one third of the price to the government’s coffers.
That is smart economics and it’s a tax cut where it counts most.
Now not only is this good for New Zealand families, but it is great for New Zealand business.
This cut will benefit every family and every business.
There are several other advantages to this policy.
It won’t be inflationary because reducing the cost of petrol will actually act to reduce the CPI.
It is also worth noting that currently taxes and duties on petrol account for 47% of the price of petrol – so the GST is largely a tax on a tax.
We say that this is wrong in principle.
Additionally, by removing GST entirely the administration costs will be almost zero – there will be no difficult calculations to make.
Now there are other aspects to our tax policy we need to address.
We believe we need to provide the right incentives for export growth.
We will deal with this in more detail later this week, but we will tax all new export earnings at 20%.
Export growth will be the key driver of our economy into the future as it has been in the past and this must be recognised and rewarded as such.
We will make the uptake of private health insurance tax deductible.
We will be looking at removing that component of GST on rates which is merely a tax on a tax.
We will redress the inequalities within the tax regime of the horse racing industry.
We will also look at using the tax system to improve the viability of the shipping industry.
Now we must make some clarifying statements here.
We have chosen GST on petrol, because it will make the most immediate impact on both families and business without compromising the tax base for much needed expenditure on social spending and infrastructure.
We make this additional commitment though.
Following these changes, if they have the stimulatory effect we believe that they will, and once we have ensured our obligations to the Police, seniors and social spending are met, if the surpluses remain as they are – and we suspect they will – then we will certainly be considering income tax cuts.
But for now we cannot have it both ways.
So we have chosen to prioritise petrol tax cuts, business tax cuts to be balanced with higher wages and better social spending and infrastructure investment (including more police).
With the size of the current surplus and the money set aside for discretionary spending we can afford all of our promises.
Now we must deal with the infrastructure issue.
One reason we chose the GST component of petrol tax is that we will be placing the entire petrol excise on transport infrastructure – where it belongs – on transport infrastructure.
This leaves the entire future income flow from these levies in place to maximise our borrowing potential for infrastructure projects.
These income flows will not be affected by our policy announced today.
In fact we are the only party with a track record on this – we had started the process on redirecting petrol levies to roads in 1998 before National reversed it in 1999.
So let me be clear today – we will not be reversing any of the recently announced “surprise” transport packages by Labour. We will be ensuring they occur far more quickly and with additional projects.
You see our infrastructure is caught in a planning paralysis.
Fix the planning, and with the funding essentially in place, projects will happen faster.
For example, in Tauranga we will be ensuring the harbour link bridge gets built without tolls.
We will tackle Auckland’s roading congestion.
We will settle the vexed Transmission Gully project in Wellington – one way or the other.
In fact, we are proposing to conduct a regional referendum on the issue and let Wellingtonians decide if they want the Gully route or not.
If they do – we will build it.
We will deal with our declining rural roads – this has become a disgrace which doesn’t get the attention Auckland does, but is absolutely vital to our economic future.
When it comes to fixing our transport infrastructure our resolve is unreserved.
In fact we will ensure that transport infrastructure is never the poor cousin when it comes to funding allocations and we will borrow against future road tax earnings if we have to in order to complete the job – now.
The simple fact is that it is cheaper to build a road now – even with borrowed money – than to delay it by ten years.
And we will never allow rail infrastructure to be run into ground. We want to see more freight and passengers on rail.
We will also deal with the energy crisis we have in this country.
When we hear of the exorbitant price hikes that power companies are inflicting on our households and our businesses and we see that these correlate to soaring profits and bloated pay packets for company executives – then it is time for action.
Power prices have risen by as much as 40% and more in some parts of New Zealand over the past few years.
And yet only this week we have Contact Energy telling the nation that its profits are up 61% to $90 million dollars.
Given that the company is, thanks to National, 51 percent owned by Australian company Origin Energy – it seems we are paying through the nose to make Australian investors rich.
We then have the revelation that Transpower now have 141 of their 390 staff earning more than $100,000 and 14 earning more than $250,000.
That is disgusting – what company anywhere could justify around one third of its workforce earning more than $100,000 a year.
On top of this, Transpower made a $65 million profit - $40million of which was passed on to the government.
This is simply overcharging to fill the government coffers and line their nests.
The Bradford reforms have failed and Labour has failed to rectify them.
So we will make the following changes.
We will ensure that power companies that want to increase their charges by more than the CPI will have to justify these to the Electricity Commission.
The Commission will actually have the power to ensure that unless increased charges beyond the CPI are being used for investment in increased generation or upgrading the national grid etc then rampant price rises will not be allowed.
We will not continue as the cash cows for foreign investors and the government while our families and our seniors struggle to pay the bills.
We accept that companies must make profits – but where they operate as effective monopolies they will not be allowed to continue to abuse their position.
We will review the operations of the power companies that are SOEs to ensure that the culture of extravagance is reined in.
Like our transport infrastructure – we must also address the planning paralysis which is crippling future generation capacity and the national grid.
This must be sorted – we just can’t afford for the power to go out again.
Now I must add here that we will also be ensuring that Telecom’s recent announcement on lower prices will be honoured.
Now today we have outlined the first part of our economic plan.
It is a plan aimed at providing tax cuts where they are needed, growing our wages and addressing our infrastructure crisis.
It is a plan aimed at restoring the New Zealand way of life to where we expect it. You know the other parties simply don’t get it.
We will not break the cycle we are in until our wages match those in the top half of the OCED.
Keeping wages low – whether you subsidise them or tax them less – just ensures they stay low.
You need to plan for growth.
Only one party has that plan.
That is why New Zealand First is your choice for real change.
And that is why we are asking for your party vote on September 17.