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Bold economic leadership… from the Opposition

Written By: - Date published: 12:45 pm, May 6th, 2010 - 61 comments
Categories: Economy, gst, labour, overseas investment, phil goff - Tags:

I’m glad to see Labour is stealing a march on the lazy Nats and building an alternative economic vision ahead of the Budget. It looks to be just the vision New Zealand needs, built on the twin planks of economic sovereignty and a fairer distribution of wealth.

Phil Goff will outline the vision in a major speech next week but there are already a few hints.

The first is either reducing GST back to 12.5% or taking the GST off food. Both would have about the same cost. Labour has previously argued for a single low rate of GST but the increase to 15% heightens the case for exempting food to provide relief to ordinary Kiwi families. Other countries manage just fine having no sales tax on food, there’s no reason we can’t do the same here. It’s not hugely complicated or expensive for businesses. In Australia, the government issues rulings on what is covered and what isn’t and businesses are entitled to rely on that advice.

Labour is considering tightening the rules on foreigners buying land, another old favourite of the Left. We can’t keep selling our assets abroad. Sure, we get the short-term gain but we get long term loss. We get a wad of cash now but lose the profit stream from the asset in the future. Land is a particularly important economic asset because they’re not making any more of it.

The idea of improving national savings is along the same lines: we have two choices in this world, we can live beyond our means now and finance it by selling off the family silver or we can save now for a richer tomorrow.

Listen to David Cunliffe’s very good interview on Radio NZ this morning (I especially like the way he dealt with Geoff Robertson’s jibes with good humour)

61 comments on “Bold economic leadership… from the Opposition ”

  1. Lanthanide 1

    Cunliffe could’ve said “I wouldn’t call a march of 20-50 thousand people in Auckland a “dream run” for National”. Oh well, the interview was still good.

  2. Jared 2

    Labour had the chance to drop GST on food in their last term, and they didn’t. I sincerely doubt that this “new policy” would be anything more than a recycled paper cup when Labour wins their next election.

    “As for dropping GST on food, says Clark, “I prefer Working for Families”.”

    • Lanthanide 2.1

      What part of “15% GST is too high on food” don’t you get? Labour thought 12.5% GST on everything was fine. Now that National are putting it up to 15%, they don’t want to promise that they are going to lower it (because honestly it is actually a good policy to have 15% and not 12.5%), but still want to help mitigate the impact on those who spend a higher proportion of their income on food, eg those on low incomes.

      In short: that was then, this is now.

      captcha: manipulation

      • Jared 2.1.1

        And with an increase to Working for Families to compensate for an increase in GST it could be argued that the increase in GST would have little to no impact on the purchasing power of those on lower incomes?

        • Lanthanide

          Except that if food is cheaper, people will be more likely to spend money on it – there are alarming stories about children from low income families going without meals because the parents blow their money on gambling, alcohol and drugs. Giving these same people higher WFF payments so they can do exactly the same cost/benefit calculation and pick the wrong option isn’t as helpful as changing the cost/benefit calculation in favour of food.

          It is also not the same to simply increase WFF if the GST exception on food applies to grocery items only and not to fastfood/restaurants, for example.

          Finally taking GST off food is of benefit to everyone. Increasing WFF payments is only of benefit to people who receive it. This last item is important in the politics of perception – left-leaning national supporters are more likely to vote for GST off food than they are for an increase in WFF payments. One core group of society that GST on food affects is the elderly, who are generally not eligible for WFF.

          • Bright Red

            drugs are GST free 😉

          • Joe Blog

            After working for several years within Work and Income I would agree with you. Perhaps it a voucher system would be better?

            [lprent: You should consider changing your pseudonym. It is very close to another commentator – who is currently banned for a few more days. I’m guessing that is why I had to rescue you out of the spam queue, you probably got moderated out.

            Either that or the anti-spam engine doesn’t like the word ‘voucher’ which is beloved by the blog spammer bots (along with gold, babies, and sex). ]

            • Joe Bloggs

              Joe Blog – get yerself another handle dude…

              …or I’ll see you down at high noon – once they let me out of this hoosegow

              [lprent: I let you out a day or so early. I was cleaning out the discussion controls yesterday. ]

            • Rex Widerstrom

              That certainly cramps the style of anyone who was planning on offering gold vouchers to women they call “baby” in exchange for sex.

            • kaplan

              Wow. The standard have their own version of the Peter Saunders twins!
              Thank god the moderators have a higher IQ than Paula Bennett.

              [lprent: Gee, thanks I guess…. On second thoughts, even being compared to Paula is insulting… 😈 ]

            • felix

              Where can I get a voucher for a sexy gold baby?

        • Akldnut

          Jared And with an increase to Working for Families to compensate for an increase in GST it could be argued that the increase in GST would have little to no impact on the purchasing power of those on lower incomes?

          It also makes a mockery of Nat wanting to make people less reliant on welfare and gives them the opportunity to sprout on how there is too much money being paid to low income earners thru WFF – just abother con job in the making, transfering what little wealth low income earners have into the govt coffers and transferred via tax cuts to the rich.

          • Draco T Bastard

            The thing about NACT is that they don’t want people to be dependent upon welfare – they want them to be dependent upon them. Hence the BS about not being able to afford things without the rich even though the rich are only rich after stealing from the workers.

  3. Alexandra 3

    I agree, good stuff by Goff. Labour needs to keep up the emphasis on what it will do when in government next year and bring home a brave alternative. By the time the election comes even the love sick Keyites will be sick of the inertia of the lazy Nats.

  4. just saying 4

    Wow, an alternative budget ahead of the govt – just what I was asking them to do about a week ago on this very site. I do realise though that great minds etc….. lots of people thinking the same sorts of things at the same time.

    So glad Labour is no longer just reacting.
    Lot’s of great initiatives lately.

    High on my wish list, and if the Nats pinch it all the better because there is such a urgent need……work schemes partic for the under 25s. I know there are lots of problems with these things, but there isn’t time to wait for the private sector we – need to get these kids working now, before depression and alienation really bite into their souls. God knows there are so many useful community projects they could be involved in. Pleeeaase!

    • Lanthanide 4.1

      There’s something called “Community MAX” that Paula keeps droning on about whenever anyone asks about work programmes. I don’t know what it is about, but it’s targeted at under 25s I believe.

  5. Alexandra 5

    “Wow, an alternative budget ahead of the govt just what I was asking them to do about a week ago on this very site. I do realise though that great minds etc .. lots of people thinking the same sorts of things at the same time.”

    Wow, all credit to you then.

  6. 350ppm 6

    Twin planks will not be enough to prop us up. NZ’s economic policies need to be environmentally sustainable. Just ask any of the thousands who marched against mining in conservation areas.

  7. Nick C 7

    Should we discourage New Zealanders from buying land in other countries?

    • Draco T Bastard 7.1


    • Ari 7.2

      Land shouldn’t be owned by people who don’t live and work on it. It ought to be about a sense of personal connection and obligation to tend for things, not commodification.

  8. Herodotus 8

    Lets just tinker some more take a bit from here and allocate it somewhere else, that really will sort things out. Nat are already doing this tinkering with GST and PAYE rates so LAb will just copy the template.
    So we will give to families on in some cases $100k+ reduce GST and hey presto all is great. How short sighted this initially appears to me . What happens if some that receive WFF doesn’t really need it or use it to purchase rental properties. What is the existance income level and at what level can people participate for all the good NZ has to offer, not “forced” to work all and every hour of the day. But hey we will just give out the money.
    As some have already stated WFF does not cover those on benefits, retirees and those without families and many others. The old Lab has been reengerised to the new lab and there is nothing different for me!!
    I am sorry but this GST and WFF trade off is no better than GST increase offset with PAYE tax cuts.
    But at least I will have some alt reading around Budget time

    • Lanthanide 8.1

      Your comment is mostly incoherent, but National have indicated that in budget 2010 they will be tightening up rules around trusts to prevent people from sheltering income to qualify for WFF.

      Hopefully they will apply this same rule to student allowance and other benefits. It also completely puts paid to their “no-one pays the top rate because they hide their money in trusts” excuse for dropping the tax rate from 38% to 33%.

      • Draco T Bastard 8.1.1

        Hopefully they will apply this same rule to student allowance and other benefits.

        We can hope but, as this is the party of capitalists for capitalists and screw everyone else, I’m not holding my breath.

        It also completely puts paid to their “no-one pays the top rate because they hide their money in trusts’ excuse for dropping the tax rate from 38% to 33%.

        Considering that their whole existence for being is to cut tax rates for the rich I’m sure that they’ll manage to ignore such facts quite well. After all, they ignore facts that go against their ideology all the time so ignoring another couple won’t be an inconvenience at all.

  9. Rex Widerstrom 9

    Labour is considering tightening the rules on foreigners buying land, another old favourite of the Left.

    *cough* Yes, very old. Like… Norman Kirk old. If it had remained a Labour plank from ’84 on NZ First wouldn’t have had much traction and wouldn’t have surpassed Labour in the polls in 1995.

    And if Michael Cullen hadn’t turned the OIC into a giant rubber stamp, Labour might never have needed to suffer an unholy alliance with Winston (because it would have drawn back his support, most of which is traditional Labour voters)… and thus might just have won the last election.

    Hopefully this will erode the remaining ground under Winston’s feet and we’ve heard the last of him. And, of course, it’s the right thing to do.

    So excuse me while I go have a small celebratory sherry as I contemplate sovereignty finally returning as a guiding principle of a major political party 🙂

  10. Bored 10

    I would really like to know how Labour (or for that matter a re elected Nact) will respond to the reality of peak oil. Both parties have had the mantra of growth and progress as key to their policies to date. This in an infinite world would be just fine and dandy.

    We are not in an infinite world, we have declining energy available with price climbing. As energy is directly linked to economic output I would suggest we will be in contraction mode till we reach an energy available to output balance. How then will Labour in particular propose to address reality?

    • Lanthanide 10.1

      I doubt any party in NZ, aside from the Greens, is going to publically take Peak Oil seriously until at least one other major western nation has admitted it.

      National however seem to be acting as they privately don’t take it seriously either, with Joyce green-lighting the roading projects. Although as my boyfriend pointed out, transmission gully will be necessary if global warming inundates whatever the other road out of Wellington at the moment is.

      • Draco T Bastard 10.1.1

        If the road gets inundated then so does Wellington, ergo, the road isn’t needed.

        • Lanthanide

          Only if by “Wellington” you mean the entirety of it, such that there is no building above sea level.

          It is quite conceivable that large dykes will be built up around important cities to stop them being flooded, but it is less economically viable to do the same with long stretches of road. And if the choice is “build a road that cuts down commute time and avoids floods” vs “build dykes around this road to stop it from flooding” then the former option is suddenly much more appealing.

          Of course, transmission gully is apparently right across a fault line, so it’s just trading one potential disaster for another.

          • insider

            or you elevate the road. Ever heard of bridges and causeways?

            • Lanthanide

              I think you missed the point.

              In order to keep the road out of Wellington usable in a sea level rising situation, either the new transmission gully road needs to be built, or the existing road needs to be re-engineered, either with dykes or “bridges and causeways” as you suggest.

              You have to spend money either way, so in this context building transmission gully actually isn’t such a bad option.

        • ianmac

          Or as Steven Joyce said today during question time, you could shift Wellington and then you wouldn’t need a major highway. Huh?

          • Jim Nald

            Did he?

            That would be the same kind of argument about shifting his brains into his rear.
            Or moving his large intestines to the frontal lobes of his cerebral cortex.
            Then the country won’t need any major policy thinking.

    • Draco T Bastard 10.2

      That’s a question that I keep asking myself. But their support of building trains in NZ is a step in the right direction – even if it is for the wrong reasons. It will help us with self-sufficiency in the long run and even with ecological sustainability as well. Our factories in the long run aren’t going to be powered by hydrocarbons but geothermal, wind and hydro and we only need them to be large enough to supply our own community.

    • insider 10.3

      So tell us when it is happening. THis year? next year? Five years ago? 130 years ago? There have been lots of ‘expert’ predictions none of them yet correct

      • Lanthanide 10.3.1

        At the moment the rosiest estimates are 35 years out. The most pessimistic are 5 years ago. Many commentators are thinking sometime prior to 2020, and possibly before 2015 with things starting to bite 2012 or so (helping to vindicate all those spouting Mayan 2012 calendar bullshit).

        • Herodotus

          Spending a few $B on roads would be the least of our issues. I think tourism would be a no go, agriculture and horticulture would struggle, as I heard that it takes about 4-5 kj to produce 1kj of food.
          Perhaps whilst energy is cheep we should be investing in as much concrete & steel to produce as many dams to create electricity, then there would be less trauma as we in NZ would have the essentials, as long as the generators and lines coy are state owned. Cheep power our own limited oil supply to oil & grease the machinery, water and sun and a small pop.
          Perhaps we should have an isolationist policy to keep a substainable pop that the land can manage the only other change I could suggest is to educate engineers and the such , place accountants, laywers and other professions of limited use.

          • Draco T Bastard

            We, as a country, actually have enough energy from renewable resources – if we don’t increase our population.

  11. So who at the standard has worked for Faux news?

    A headline with ” Bold Economic Leadership” with a picture of Goff looking off into the sunset??


    • Bright Red 11.1

      Brett responds with a strong economic argument against Labour’s policies that makes us all stop and think.

      • Lanthanide 11.1.1

        Clearly he has no conception of what Faux News actually spout and imply.

  12. Jenny 12

    Great stuff Marty

    “Congratulations to Darien, Labour, the Greens, Progressives, the Maori Party.” MartyG

    With news that the Maori Party has voted against their coalition partner and with the opposition, and that Labour are reconsidering their stance on GST off food, the possibility of serious détente between Maori and Labour could see further weakening of the coalition.

    Rahui Katene welcomes Labour’s GST off food policy.

  13. Herodotus 13

    So we now have a food tax by stealth. No political announcement is as it initial appears. the statement headline is GST of food. I await the detail, tactics like this could reinforce the resentment out there with Labour… that they are back to their old tricks inferring one thing but delivering something inferrior, just when there was a chance that Nat had allowed an opening. What do we get … the potential for an own goal.
    Jenny the GST is potentiall on some food that politicians and civil servants decide as complying to THEIR way of things.
    Make things easier keep GST status quo BUT support the needy adequately by increasing their support or nominal tax rate for the 1st tier. Remember reducing GST back to 12.5% favours those with the most spending. A 430 Ferrari,GST reverting back to 12.5% WILL save the purchaser over $12.5k in tax. Looks like both parties like supporting the wealthy with tax cuts!!!

    • Jenny 13.1

      GST, Roger Douglas’s iniquitous flat tax. No amount of clever histrionics, and vague mutterings of doom, can rehabilitate it. The only resentment being reinforced here, is the resentment being harboured by bitter die hard rogernomes.

      Herodotus, you may harbour hope that, as you say, “No political announcement is at it initial appears.” Inferring of course that you’re hoping Labour will resile from this initial statement.

      Cynical manipulations and back room dealings may possibly achieve this end. But the political cost of a back track over this now, may be substantial.

      Creating as it would a public perception that everything else in Goff’s alternative economic vision, could also be subject to being watered down and traded away under back room horse trading and pressure.

      Who knows, maybe this sort of public perception may make a difference to whether Labour does well in next years election.

  14. Thomas 14

    Removing the GST on food will be a welcome, positive & progressive move if Labour implements it giving the chance.
    Many are asking how the lost revenue from the implementation of this policy will be be collected, there are many ways but I’ll give you a couple now, simply increase the tax accordingly on alcohol & tobacco,
    The problem with GST on food items at the moment is that a beneficiary pays the same for a pound of butter as does a wealthy person.

  15. millsy 15

    GST off food.

    If this is the best that Labour/the left can do, then they are very much in trouble. The benefit of removing GST from food would be minimal, but the costs will be huge, and we would have a lot of unintended concequences (such as the rich buying GST free pate and caviar – or free ipods with that $350 bag of oranges). Far better to pare it back to the original 10%, with a tax free bracket, paid for by soaking those at the top (the more you earn the more tax you should pay), or even aboloish it altogether…

    But for the moment, from me the message is: go away and try a little bit harder.

    • bahandhumbug 15.1

      “the more you earn the more tax you should pay”

      Isn’t this the way it works at the moment ?

    • Red Rosa 15.2

      Dead right millsy. Presumably restaurant meals count as ‘food’ – hard to see why not. An upmarket CBD ‘business lunch’ would feed a family for a week. Both get GST off. This idea should have been buried years ago.

      • Herodotus 15.2.1

        RR Please do not take it that ALL food will be exempt. There is a chance nad refer Jenny 6:16 re Maori idea that it is limited to healthy food. Then letthe horse trading begin as to what is healthy. Rememer Lab/Progressives intro a tax on drink exceeding 14% to reduce alco pops what happens alco pops reduced their %. Re healthy food is Weetbixs ok how about cocopops . If cocopops sugar/salt is over a % then just reduce the % to marginally under simple, yet if maybe of still”unhealthy”. Me thinks a wasp nest is being upset, unless there are some extremely wise people in communicating this policy or leaving the small print to post the electon. It has happened before by all.

      • Lanthanide 15.2.2

        Restaurant meals are food, but that has no bearing on what the final policy will be. Labour have broadly indicated that they might drop GST from food. What their eventual policy is likely to be is “GST off food excluding prepared meals at restaurants and takeaway places”.

        You know that the government has complete sovereign control in NZ, and there isn’t any formal constitution that blocks them from doing whatever they want, right? There’s no reason they can’t make a law that targets food sold only by grocery stores and not food sold at restaurants, the only question is how many loopholes will be left, how easy those loopholes are to identify and exploit and how easy they are to close.

        • millsy

          And what about the free DVD player with the $200 bunch of bananas?

    • Thomas 15.3

      The problem with pulling GST back to the original 10% is that it would make it more attractive & affordable for the wealthy when they make purchases on expensive items such as a new lamborghini or ferrari etc etc.

      • felix 15.3.1

        And why is that a problem?

        I mean I can think of a few problems in a very broad sense, but within the bounds of this topic, what is the problem with making it easier to buy Ferraris at the same time as making it easier to buy food, clothes, and everything else?

  16. Thomas 16

    Also easier for the richest in society to even better their already rosy lifestyles when accessing the high end food clothes & everything else, & thus widening the gap between the rich & poor.

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