Time For A Fiscal Diet - Not A Tax Deferral

Hon Sir Roger Douglas, ACT New Zealand

Tuesday, March 31 2009

"It is time for New Zealand to face facts and realise that the Government needs to go on a fiscal diet", ACT New Zealand Finance Spokesman Sir Roger Douglas said today.

"The bureaucracy has become engorged on an endless buffet of taxpayer dollars. Unless we address this problem, tax cuts are unaffordable and illusory," Sir Roger said today.

"No household can reduce the amount it earns while increasing the amount it spends - so why does the Government think that it is any different?

"Core Crown expenditure is set to rise under National, and it is lunacy to cut taxes at the same time. Real tax cuts require a corresponding reduction in Government spending.

"Any dollar we borrow for tax cuts must be repaid with interest. According to the 'New Zealand Herald', these tax cuts are worth $1 billion a year. In reality, five years from now this will cost us $1.4 billion once we include interest. The dollar cost of borrowing, assuming an interest rate of seven percent per annum, is shown below:

Year Total cost of borrowing

2008 $1.00
2009 $1.07
2010 $1.14
2011 $1.23
2012 $1.31
2013 $1.40

"What is needed is a leaner approach. ACT supports tax cuts, but what we are getting under National is a tax deferral. The only type of sustainable tax cuts are those coupled with a reduction in expenditure," said Sir Roger.

ENDS

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