As recently posted here, there is a vast gulf between National’s rhetoric and the reality on tax cuts. Before the election National sold its tax cut programme as the answer to every question. Tax cuts were the centrepiece of National’s economic plan and its response to the economic crisis:
Key: Tax cuts are a top priority for National. They are an essential part of our five-point plan for the economy to make New Zealand a wealthier, more successful country.
National never truly believed this rhetoric or it would never have cancelled tax cuts in the budget. The reality is that tax cuts were just an election bribe.
Tax cuts don’t cause growth (though they may sometimes be coincidentally correlated with it, allowing this specious claim to continue). The April 1st tax cuts (which National did not cancel) certainly did not cause any growth in NZ:
Statistics New Zealand figures showed core retail sales, excluding vehicles and fuel, dipped 0.1 per cent in April despite the tax cuts. The benefit from tax cuts, falling mortgage interest rates in the past year, rising migration, and a pick-up in housing sales in recent weeks have come to less than nought.
People are being more cautious, saving their tax cuts or paying down debt because of rising unemployment, economists said.
Some economists had expected a 1 per cent lift in core sales figures because of tax cuts from the start of April. But the positives had been overwhelmed by the negatives of rising unemployment and lower wage growth, economists said.
The benefits of the April 1 tax cuts went to the wrong people, the better off, who put the money in the bank. Tax cuts in and of themselves don’t cause growth, and National knows this, which is why it cancelled the future cuts when they became unaffordable. The way to get growth is to invest in jobs and wages, education and training, research and development, export incentives and other forms of targeted stimulus – and on these terms the 2009 budget was a whole heap of fail.
So what is National’s plan for the economy? It isn’t the tax cuts – that bribe got cancelled. It isn’t real investment in growth – the budget cupboard was bare. So what is it? Does National have a plan at all?