"Australia's decision to ease the corporate tax rate down to 30 cents over the next two years must be seen in context," Labour finance spokesperson Michael Cullen said today.

"It should be remembered that Australian companies also pay a compulsory payroll tax on employee superannuation and a general capital gains tax, neither of which applies in New Zealand.

"And if tax was a crucial factor in location, we would have had a rush of Australian corporates relocating here over the last decade to take advantage of our lower taxes. Instead the traffic has been the other way," Dr Cullen said.

"At 33 cents, New Zealand's corporate tax rate is still below the OECD average. However Labour does recognise the need to remain as competitive as possible against Australia which already has the advantages a larger market and a more active and interventionist government can offer.

"A Labour Government will take a positive leadership role in the economy through our industry assistance programme. We also accept that, if the world trend toward lower corporate taxes continues, New Zealand cannot afford to swim against the tide.

"However fiscal circumstances will not permit us to lower the corporate rate in our first term and meet our other priorities.

"Labour is anxious to reverse the growing gap between rich and poor in New Zealand. To this end we are committed to reversing National's pension cuts, restoring income-related state house rentals, reducing the barriers to tertiary education and improving access to public health services.

"Those policies, and our industry assistance policy, will have first call on any new spending in the first three years," Dr Cullen said.

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