Dean Misled Public Meeting
Dean Misled Public Meeting
National will borrow to fund tax cuts
“At the Queenstown public election forum on Monday this week, the National Party candidate Jacqui Dean blatantly misled the public audience by baldly denying National has to borrow to fund their tax cuts. Members of the public who attended the meeting confirmed Ms Dean made this statement.
While Jacqui Dean was obviously keen to hide the truth from the public, National has now been forced to admit its proposed tax cuts mean they would have to increase Government debt by billions if elected. How desperate are they for power?
There is now no denying that National has to borrow billions of dollars to fund its tax cuts. In an interview with Scoop editor Alistair Thomson on 24 August, National finance spokesperson John Key said:
"In the numbers we put out last week we would borrow 3 billion, 3.3 billion more . . . " [than Labour]
In a speech to Diplomatic Club in Wellington on Thursday 25 August independent economist Brian Easton said this:
Labour’s tax cuts are not only smaller but they are probably within the acceptable fiscal parameters ……
But if Labour’s cuts just hover out of the imprudence range, National’s are much larger. They admit they are going to have to borrow to finance them. What they say is that they are going to borrow to fund capital investment, whereas Labour– the party of the left, and therefore the fiscal conservatives – are going to fund some of their investment from income, just as you would advise a household or business to do. The fact of the matter is that National’s tax cuts will raise its borrowing faster than GDP growth. Whatever the words and excuses, it’s the effect of the stimulating fiscal stance which I want to explore.
(for full speech see www.eastonbh.ac.nz)
Ms Dean’s obvious lack of a proper grasp of the fundamentals of her party’s economic policy left me and others at the meeting, aghast.
When National’s Robert Muldoon left New Zealand’s economy in tatters in the mid-80s Government debt in New Zealand equalled 70 per cent of GDP. $1 in every $5 tax you paid was spent on interest.
Labour’s Lange government restructured New Zealand’s economy. The current Labour-led government has reduced debt to 23 per cent of GDP and only $1 in $20 of your taxes is now spent on interest. It has taken 20 years to get ourselves out of trouble, let’s not go back.
For the first time since the Muldoon years, we have a major political party promising to increase government debt by billions of dollars and as a percentage of GDP to fund government expenditure. This is clearly fiscally irresponsible. The government interest bill is set to increase by hundreds of millions of dollars.
Under Labour we have the lowest rate of unemployment n the developed world and have had one of the highest rates of economic growth (3.9% per annum over and above inflation for the last five years).
National’s tax cuts mean rising government debt even in good times like this. You don’t need to be a brain surgeon to know that if the economy slows down, not only would government debt would go up even faster, core services would also be cut.
Do you think borrowing like this is wise? I don’t.
If Labour proposed increasing government debt to GDP we’d be flayed alive by big-business lobby groups. Why are those critics silent now?
New Zealand is not highly taxed by international standards. Comparative records are compiled independently by the OECD. Our total taxes as a proportion of GDP are the 13th lowest in the OECD. Our taxes are well below average overall, and especially so when compared with countries which have public health, education, and superannuation.
Under Labour core government expenditure (which is all government expenditure excluding SOE’s) is now 30 per cent of GDP, down from 33 per cent of GDP when National left office in 1999. This proves that the assertion that this government’s expenditure is out of control is just wrong.
National’s promise to maintain health spending at current levels ignores the reality that health spending always has and always will increase ahead of inflation as our population ages and medical technology improves. There is no way National can achieve savings in the order they are talking about without cutting health, education, or superannuation.
The Governor of the Reserve Bank has previously confirmed the obviously correct comments of Brian Easton - tax cuts or spending paid for by government borrowing are inflationary. Higher inflation of course requires the Reserve Bank to raise interest rates. So not only will the government interest bill go up, so will house mortgages.
Labour’s tax cuts are focused on families with children because their need is greater. National’s tax cuts give someone earning $100,000 nine times the tax cuts of someone earning $30,000. Is that fair?
Our tax cuts for families, and our other election pledges, have all been fully costed and can be paid for without increasing government debt to GDP ratio.
I believe this is the most important issue of the election. It’s crazy to increase government debt to fund tax cuts.”