Written By: - Date published: 3:00 pm, May 22nd, 2008 - 67 comments
Categories: budget 2008, election 2008 -
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The tax cuts are smaller up front than Labour had been hoping to deliver but the economic position at present means there is simply not the money in the coffers to give huge cuts right now. Labour is bringing forward the cuts and the boost to Working for Families to October 1, instead of April 1 which would be the usual date, and targeting money at lower income families first. The cuts in following years will be larger than most expected and will spread the benefits into upper middle income levels ($50K plus), with the tax bill for someone on $50,000 reducing 15% by 2011.
Labour’s broadband plan is much more sophisticated than National’s and will actually work in delivering better internet without putting Telecom back into a monopoly position. It doesn’t aim to build in record time a network massive bandwidth that most people have no use for. Instead, it takes a more prudent and cost-effective approach to gradually increase broadband speeds. Sure, National’s investment figure is bigger but there is a vacuum behind it, as if the plan was made up on day and Key plucked the$1.5 billion figure from the air. It was good to see that Labour’s plan specifically includes money for a new trans-Tasman cable, for which the government will be anchor tenant. It’s all very well having lightening fact connections in New Zealand but not much good if the data can’t get overseas. The Labour plan also targets those who have most use for faster broadband, businesses.
The tax cuts and the global economic slowdown mean the fiscal position of the Government will be much tighter in the coming years than it has been in the last few budgets. The operating deficit will be down to a couple of percent of GDP. Government debt will remain stable at around 18% of GDP over the next three years. Labour is not increasing debt to pay for tax cuts but rather than decrease debt further it is giving tax cuts. By phasing the cuts in over three years, the inflationary impact from them is reduced. Inflation is expected to fall under 3% in the medium term. That’s the Reserve target, so interest rates can be expected within the nest few months.
This means there is little free room, only about $1.7 billion, for spending or tax cuts promises heading into the election without going into an operating deficit (that is, borrowing to fund day to day spending, rather than borrowing for investment). Which sets us up for an interesting election: where will the money come from for both major parties to offer vote-grabbing policies, and what will be left for policy concessions to minor parties in governing deals?
As we predicted, this budget leaves National in a bind. If they offer larger tax cuts than Labour, it will have to increase borrowing or cut spending. It also eliminates the over-taxation argument. There was this weird perception that Cullen was sitting on a huge pile of gold at the end of each year, when, in fact, the operating surpluses were being used to fund capital investment and pay-down debt. Now, Labour has delivered tax cuts and kept debt levels steady. It has already meant less new social spending than Labour would probably have liked.
It now comes down to a simple choice for voters: reasonable tax cuts, not more government debt, and moderate increases in government spending or large tax cuts (mostly for the rich, no doubt), more government debt, and less spending on public services.
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Hey Steve, good stuff. I see Key is already paving the way for tax cuts for the rich by talking about them as creating an incentive for people to become wealthier. Other than that Spin bingo was pretty much dead right.
Good budget I thought. I would have liked to see the tax cuts limited to bracket-creep only but it’s good to see some serious and sensible investment. I’m not as sure as you about the contestable fund for broadband (it smells a little bit like “let the market decide”) and I would have liked to see benefits increased.
Just read the summary – Good on Cullen for actually acting like the minister of finance for a responsible government, rather than digging the nation into a hole for the sake of playing father christmas for the next 12 months.
Yes Bill English, I’m looking at you.
randal is yer avridge kiwi joker and it sounded pretty good to me
“The tax cuts are smaller up front than Labour had been hoping to deliver but the economic position at present means there is simply not the money in the coffers to give huge cuts right now.”
Following your logic, SP, why didn’t Labour offer tax cuts given the massive surpluses of the last few years? Why now and not then?
And the Nobel Prize of Cynicism and Disregard for the NZ Public goes to …… Michael Cullen.
Following your logic, SP, why didn’t Labour offer tax cuts given the massive surpluses of the last few years? Why now and not then?
erikter, did you read the bit where massive surpluses were spent on paying debt? I guess not.
Because reducing debt, and saving for the future in previous budgets – it’s about balance, eh?
$12 bucks a week!!!
I hope Aunty Helen is enjoying her last few days on the job.
Opps I mean months.
I’m happy with the budget. I don’t believe in the media myth of “circuit-breaker” – nothing Cullen could have said today would have sent Labour zooming up the polls – not even “I resign”!
But it does force National to copy or cut, and so a real debate can start.
The budget delivers in many of the right areas, and if Labour do lose the election, National can either keep what Labour have delivered, or get dumped out after one fractious term and at least one change of leader. (Hey, I’m almost looking forward to seeing them do it – it’ll be quite a show).
I’m assuming that you Brett Dale are going to be better off by $12 a week which means you’re earning less than 30k p/a.If that’s the case you’ve got me wondering, WTF do you support the Tories?.
Nobody believes Labour will deliver them.
Nine years of no tax cuts, and only now Cullen begrudgingly offers this paltry, measly, sum.
Labour doesn’t trust New Zealanders with their own money. Their tax cut plans have no credibility.
This budget feels very much like the one that David Caygill delivered in 1990: remember the $89 million surplus which turned into a multi-billion dollar deficit?
National will be left to bring some responsible fiscal management back to New Zealand.
Good on you all, at the Standard, for risking your own credibility as well, though. After months and months of saying tax cuts were bad, you’re doing an excellent about-face of heralding them now. Yes, yes, we get the message, Steve. Labour good, National bad.
For a guy who doesn’t support the Labour Party, Steve, you’re putting an outstanding effort into confusing us.
OO. The tax cuts are going to be passed into law this evening. National will vote against it.
We’ve never said tax cuts are bad, we’ve said there are responsible tax cuts, sustainable ones that don’t cut spending or necessitate borrowing, that help out those in need, and bad tax cuts, ones that need to be funded through spending cuts or borrowing and go mainy to the rich.
Chris:
Because I believe in choice and personal responsibility.
I believe that if ya have extra cash at the end of your pay cheque, you should invest it, and not spend it on booze, cigarettes or at the TAB, unlike those on the left.
Steve Pierson:
Perhaps Tax cuts should not only be for those who are in need, but for those who actually work.
I’ve said tax-cuts are bad and I stand by that. See my first comment.
“I believe that if ya have extra cash at the end of your pay cheque, you should invest it, and not spend it on booze, cigarettes or at the TAB”
Nanny State!
So Brett, you think that because I’ve always supported the Labour movement I piss my money away on drink, fags and gambling.
I guess you must be a Tory but on 30k p/a I doubt you’d be of the “born to rule” variety.
“I believe that if ya have extra cash at the end of your pay cheque, you should invest it, and not spend it on booze, cigarettes or at the TAB, unlike those on the left.”
Now you’re not entirely stupid Brett, why do you get these urges to lash out like a filthy bigot every now and then?
SP would make Houdini and any contortionist proud.
After endless ranting about odious tax cuts, he’s now found they come in two flavours: “good” and “bad”. Of course, the ones promised by Cullen are “good”.
They are just absurd statements from a Labour apologist.
Occasional Observer – people don’t fall for NP spin as easily as you presumably do.
National will be left to bring some responsible fiscal management back to New Zealand.
Debt-funded tax cuts eh? Whoopeee! You speak with some certainty about a party with no policy – I find your blind faith almost touching, though vaguely lemmingesque, OO.
Matthew Pilott:
How is my comment bigoted?
Dont you agree that a high percentage of people on very low wages or benefits, drink, gamble and smoke and go to KFC?
Did I mention someone’s race/gender/religion/culture????
Please tell me.
Don’t be daft Brett.
You tell me how it is you came to the conclusion that “the left” wants poor people to spend money on diggers, turps and gambling. And KFC, so it seems.
Would you agree people who are on a low wage,are more likely to vote Labour than National?
Would you also agree, that people on a low wage tend to drink and smoke and play the pokies more???
Do you also agree that a lot of poorer people have a poor diet, eg: KFC and McDonald’s.
Anyway, whats the difference between a bigot and a filthy bigot?
Brett
If you look closely you can see it around the eyes.
Peter Brown – garden variety bigot.
Pauline Hanson – filthy bigot.
Brett, that has nothing to do with whether the left wants people to spend their money on vices. I’m part of ‘the left’ by any general definition, and I don’t want people to spend all their money on crap that’s bad for them – so where did you get the idea that that is what ‘the left’ wants?
I guess the difference is that I was feeling grumpy in general (read: ill and sore), on top of being annoyed at your comment.
I didnt say the left wants people to spend money on their vices.
I said:
I believe that if ya have extra cash at the end of your pay cheque, you should invest it, and not spend it on booze, cigarettes or at the TAB, unlike those on the left.
I personally believe if you have extras cash, YOU should invest it, but a lot of poorer people spend their extra cash on the above mention things, and people who are poorer tend to vote Labour.
I am not suggesting that LABOUR wants people to spend their money on this, quite the opposite in fact.
What with the exodus to Australia (surely only going to continue unabated now) and the retirement (rich pricks)of baby boomers what happens when the number of people reliant on the state and on various arrays of govt benefits and handouts and middle class assistance paid for by other people out number the amount of people working for a living and funding these measures? Is there a tipping point? Do they just raise taxes accordingly in another couple of years? Is that what the global warming thing and its associated taxes is really about?
For example – This WFF thing makes me sick. Why should I as a single person fund other people’s lives just to have families? At the very least couples who want to have children but can’t should be compensated by the state as they miss out, if we’re going down that road.
I just think the govt and the reliance of them that they create needs to be reined in big time. For a start why 120 + mps for a country of 4 million? Why twenty something indvidual health boards and countless councils, departments, commisisions? You’d think NZ was an empire not a small country.
The indians only need about a few chiefs, not about 10,000 of them.
Steve: Those kids qualifying their parents for WFF will be the ones paying your Super in 40 years, so I wouldn’t begrudge them too much just now.
As for the number of MP’s, every Political Science lecturer I’ve talked to seems to think that proportionately we’re under-represented, especially when you consider countries such as the United States and Australia. We don’t have both State and Federal Governments, but feel free to move there and moan about politician numbers if you wish.
“I didnt say the left wants people to spend money on their vices.
I said:
I believe that if ya have extra cash at the end of your pay cheque, you should invest it, and not spend it on booze, cigarettes or at the TAB, unlike those on the left.
I personally believe if you have extras cash, YOU should invest it, but a lot of poorer people spend their extra cash on the above mention things, and people who are poorer tend to vote Labour.
I am not suggesting that LABOUR wants people to spend their money on this, quite the opposite in fact.”
I guess that would be your excuse to give the poor nothing then, eh Brett?
“The tax cuts are going to be passed into law this evening. National will vote against it…..”
Really? I’d have thought they have pout themselves in a space where they’d have to vote for it….there’s enough hypocrisy floating around as it is without that little farce…
Not a bad budget I thought, it’s never going to be entirely to my way of thinking, but not much to quibble on the direction of the spend – I’m broadly happy with where it goes (my priorities are a little different, but that’s a tory/left thing), but I’m always keen to see that the execution/implementation is the best that it can be…
…but sometimes I do feel that the weight (or true potential) of a dollar is not really felt in the right places….opportunity cost and all that….
We’ll see what key comes up with……whenever that is….I’m growing impatient, if for no other reason to have something decent to debate with you guys !
Key has announced National’s economic policy. He did it tonight on Campbell Live, and again on Close-Up. He was pressed by both the interviewers to reveal details, and finally, he did. And National’s policy is …
*drum roll*
They’re going to close the embassy in Sweden.
I am not making this up. You couldn’t.
But I wanted to be the Ambassador to Sweden! The fu*kr’s just lost my vote…
Might as well as close the Swedish embassy, we dont do much business with them.
If any labour supporter thinks that is national’s main policy then you better grow up.
Wait until the announcement comes, Aunty Helen’s 12 bucks is going to be nothing.
POLICY PARROT:
I would give the poor a better education, one where you learn about business and budgeting and the real world, not PC teachings.
I would give the poor, those on low incomes like myself, a bigger tax cut, and tell them, its your money you choose to do what you like it with it, its your choice.
I would cut GST and make lower the petrol tax.
“For a start why 120 + mps for a country of 4 million? Why twenty something indvidual health boards and countless councils, departments, commisisions? You’d think NZ was an empire not a small country.”
The US state of New Hampshire has a state legislature where the lower house has 400 members. New Hampshire has about 1.2 million people, so if New Zealand had the same level of representation, we’d have over 1300 MPs.
New Zealand, with a mere 120 MPs, is hardly overrepresented.