National’s budget broke a number of economic promises. One that’s not been emphasised enough is their commitment to be fiscally neutral.
Labour got New Zealand to $0 net government debt, we actually had net financial assets for the first time. Now we are headed back into the red again and National is making it worse, not to create jobs to help ordinary Kiwis through the recession, but to fund tax cuts for their rich mates. Labour got in independent economists and have discovered that it is not just in the first year the government is more than $500 million short, by 2024 there is a $9 billion budget shortfall. The new taxes imposed (GST & rental property loophole closure) will not increase their value over the years in the same way as those cut (income and business taxes) would have. As they are also refusing to invest in the Cullen Fund once they are projected back into surplus in 2016, another lie, the baby-boomer superannuation hole just gets ever bigger.
With their GST rise (another broken promise…), tax cut for the rich, ACC levy rises, rent increases, additional Early Childcare Education costs, increased power and petrol prices from the ETS (flowing on to everything that’s transported – like food), this is a very inflationary budget.
And what does an inflationary budget mean: on Thursday Alan Bollard will have to start raising interest rates. And he’s going to have to keep raising them. So those renting will be hit by the closing of landlord’s tax loopholes, and those with mortgages will be hit by the increased interest rates. Everyone earning under $80-90K will be worse off next year after their housing costs are added to their GST, ACC and ETS costs.
Increased interest rates have another side effect too. Money will start to flow into New Zealand in the “carry trade” that ruined Iceland. The Japanese will prefer our high interest rates to their own at 1%, so they’ll put money in our banks. This raises the exchange rate, killing the exporters who we need to grow our economy. Some speculators are already talking about parity with the US dollar next year.
So the Government will make the vast majority of people worse off, and harm our exporters trying to grow us out of the pending superannuation debt problem that National is making worse. What to the future though, maybe the next generation can save us? The bright skilled workers coming out of our tertiary education institutions will have the ideas – except that 8500 (and counting) students won’t be coming out of those institutions as the government has frozen the dollar amount of funding for tertiary education. And cut ACE and the Training Incentive Allowance for those going back for a second chance. High-skill, high wage economy? Not with these jokers.
All this so those earning above $80k can enjoy tax cuts; those on $1 mill get $1000 a week, to be paid for by debt and hitting the most vulnerable. The old will suffer with meals on wheels cuts, home care slashed, having their pension rise attenuate over the next 2 years so they’ll have to pay the extra GST without extra income after that, and having resident withholding tax increased to 21%. The young have ECE cut, so no longer will there be an equal opportunity for all New Zealanders to start out on their good foot.
National aren’t creating a fair New Zealand, an economically or ecologically responsible New Zealand. The pay off? Their rich mates get richer, and we have less than 1% additional growth in 8 years time.