web analytics

Dolla Dolla Bill, Y’all

Written By: - Date published: 5:17 pm, March 11th, 2008 - 14 comments
Categories: economy, election 2008, national, slippery, tax - Tags: , , , ,

Days after saying ‘we’ve always said, we aren’t that worried about, um, whether the Crown needs to borrow a bit of money [for a] programme of tax cuts’ Bill English has accused Michael Cullen of ‘um, ah, borrowing for tax cuts’.

What English’s researchers have discovered is that the amount of Government Bonds on issue is forecasted to increase $2.41 billion from this year to next. He wants you to think this is to pay for tax cuts (he knows it’s not). The truth is significantly more boring.

When Labour came to Government in 1999, gross Government debt was 35% of GDP, it set a target of reducing it to 25%, then 20% of GDP. It is currently 18.5%. The Government wants to keep debt to GDP broadly stable, which is good for the financial system, giving the necessary liquidity to the New Zealand currency and money markets. So, as the economy grows, it gradually increases its nominal debt as well. Here are the projections from the same table (page 57 of link) Bill’s researchers found (figures in millions):

govtdebt.JPG

So, debt levels are going to fall a bit and nominal debt will remain pretty much the same. Could this mean debt is going to be used to pay for tax cuts? No. The cost of a tax cut is not a one-off, you would have to increase borrowing each year to pay for tax cuts with borrowing. Key wanted us to do that when he was finance spokesman but these projections do not show that kind of reckless behaviour.

The Government is keeping debt at roughly the same levels and has ruled out increasing borrowing to fund tax cuts, a responsible and moderate position. Compare that to Nationals’ position on debt. First problem: it depends what day it is and whether you’re speaking to Bill or Mr Slippery here’s a selection of their various policies:

  • Key: ‘we’re sort of comfortable with a notional debt-to-GDP of around about 25 percent, so that’s gross debt’ (always a man with firm positions)
  • English: 25% gross debt ‘has never been one of our policies.’
  • English: ‘we aren’t that worried about whether the Crown needs to borrow a bit of money [for] tax cuts’
  • English: ‘borrowing for tax cuts is wrong’
  • English: ‘National will release a comprehensive fiscal policy later’

Let’s make a dangerous assumption and say Key has National’s policy correct: they want debt at 25% of GDP. In other words, National wants to borrow about $10 billion, which will cost at least $700 million a year in interest, and would be hugely inflationary. An expensive, unnecessary, and unwise policy. Another one they’ll try to slip their way out of, no doubt.

14 comments on “Dolla Dolla Bill, Y’all ”

  1. ghostwhowalks 1

    Remember from the last national government the financial trickery they used wehn they moved the disability sector ( IHC, Crippled Children etc) from the Social Welfare vote to the health vote.
    In one foul swoop they claimed the health budget had risen by approx $1.3 billion.
    I expect the tricks that Shar-key will employ if he had the control of the purse strings will increase markedly.
    Only one problem is that he cant keep his story straight.

  2. burt 2

    Steve Pierson

    So if National had planned to increase borrowing while pushing ahead with tax cuts no matter what they would be bad, but when Labour do it it’s good. Tax revenue is also below forecast at the moment, perhaps workers leaving for Aussie is starting to bite. Looks like the 4 way tax cut test is gonna be toast come budget 2008, either that or we are waiting till after the election so Cullen can cancel the tax cuts once Labour get their elusive 4th term.

    They don’t need a fifth term, most will all be retiring during their elusive 4th term anyway. Expect some big compromises on previously hard held ‘high ground’ this election.

  3. Burt you dullard – read the post. The government’s plan is to reduce nominal debt. I know I’ve taken the piss out of you for this before but I do think you may have a reading/comprehension problem.

  4. burt 4

    Robinsod

    Keep up young fella. I was talking about the “Read my lips – there will be tax cuts” fiasco.

    How the F can Cullen guarantee his four way test against an uncertain economy when he couldn’t deliver tax cuts against a more stable and productive times? It’s election year, that’s how.

    The fact that the economy might not deliver the debt repayments as forecast to allow the gross reduction in debt is apparently irrelevant in an election year. How foolish of me to forget.

    Steve

    Can you please disclose the source (and date of) the projections you have published.

  5. AncientGeek 5

    The two points about tax cuts that matter as far as I’m concerned are:-

    1. That they don’t raise government debt. I’m tired of paying for my parents (via muldoon) debt – there is no way I would wish that on my kids, nieces, nephews, and assorted jonior generations.

    2. That the tax cut focus go on to the tax brackets that have had the least adjustment the longest (ie the lowest ones). The 39% bracket (where I pay most of my tax in) should be last under those conditions.

    3. That they are set in a sustainable program tracked to starting to mark tax brackets to inflation (and reduce fiscal drag). That reduces the political effect giving gifts away. Of course in the case of national – that would leave them with nothing to talk about given their absence of any other designable policy,

  6. AncientGeek 6

    Ok – 3 points – it is this bottle of merlot….

    I probably need to have a session with BB…….. kerikeri here i come..

    I don’t believe it…
    captcha: hang statistics

  7. Rexel 7

    How dumb are they

    National are just retarded economically. All just stupid farmers and failed business men. What succesful person would ever advocate to increase debt when it is not needed.

    This is Key at his idiotic besttrying to stich the country up for his benefit. What a chump

  8. Steve Pierson 8

    Burt, page 57 of the HYEFU Dec 07. Like I say it’s the same data Bill uses to allege debt is going to be used to fund tax cuts.

  9. Burt:

    “Tax revenue is also below forecast at the moment, perhaps workers leaving for Aussie is starting to bite.”

    No, that’s due to the credit crunch.

    “So if National had planned to increase borrowing while pushing ahead with tax cuts no matter what they would be bad, but when Labour do it it’s good.”

    National’s tax cut program is likely to be much more expensive than Labour’s. It’s also likely that they’d be less progressive (it will increase income inequality). So it’s about degrees, not absolutes.

  10. Steve Pierson 10

    burt. labour isn’t borrowing for tax cuts, National says (sometimes) that they would.

  11. SweeetD 11

    Rexel

    re:What succesful person would ever advocate to increase debt when it is not needed.

    If you can get a return on the debt greater than what is costs you to carry the debt, then it seems like a pretty good investment.

  12. If you can get a return on the debt greater than what is costs you to carry the debt, then it seems like a pretty good investment.

    If it were for productive sector expansion maybe but for personal tax cuts???

  13. SweeetD 13

    Robinsod

    I think this is all getting back to Key and what would he borrow for. Unlike Cullen, not everything needs to be paid for in cash, there are somethings that can be paid for by debt, as they would give a higher return over the peroid than the cost of the debt.

    So, maybe Key is saying we can borrow for more long term investments, and fund tax cuts out surplus cash take. I think that is what he (Key) is trying to say. Yes, borrowing for tax cuts makes no sense.

Links to post

Recent Comments

Recent Posts

  • NZ announces a third P-3 deployment in support of UN sanctions
    The Government has deployed a Royal New Zealand Air Force P-3K2 Orion (P-3) maritime patrol aircraft to support the implementation of United Nations Security Council (UNSC) resolutions imposing sanctions against North Korea, announced Minister of Foreign Affairs Winston Peters and Minister of Defence Ron Mark. “New Zealand has long supported ...
    BeehiveBy beehive.govt.nz
    2 days ago
  • Pacific trade and development agreement a reality
    Pacific regional trade and development agreement PACER Plus will enter into force in 60 days now that the required eight countries have ratified it. Trade and Export Growth Minister David Parker welcomed the announcement that the Cook Islands is the eighth nation to ratify this landmark agreement. “The agreement represents ...
    BeehiveBy beehive.govt.nz
    6 days ago
  • Securing a pipeline of teachers
    The Government is changing its approach to teacher recruitment as COVID-19 travel restrictions continue, by boosting a range of initiatives to get more Kiwis into teaching. “When we came into Government, we were faced with a teacher supply crisis,” Education Minister Chris Hipkins said. “Over the past three years, we ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • Border exceptions for a small number of international students with visas
    The Government has established a new category that will allow 250 international PhD and postgraduate students to enter New Zealand and continue their studies, in the latest set of border exceptions. “The health, safety and wellbeing of people in New Zealand remains the Government’s top priority. Tight border restrictions remain ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • First COVID-19 vaccine purchase agreement signed
    The Government has signed an agreement to purchase 1.5 million COVID-19 vaccines – enough for 750,000 people – from Pfizer and BioNTech, subject to the vaccine successfully completing all clinical trials and passing regulatory approvals in New Zealand, say Research, Science and Innovation Minister Megan Woods and Health Minister Chris Hipkins. ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • International statement – End-to-end encryption and public safety
    We, the undersigned, support strong encryption, which plays a crucial role in protecting personal data, privacy, intellectual property, trade secrets and cyber security.  It also serves a vital purpose in repressive states to protect journalists, human rights defenders and other vulnerable people, as stated in the 2017 resolution of the ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • Ministry of Defence Biodefence Assessment released
    The Ministry of Defence has today released a Defence Assessment examining Defence’s role across the spectrum of biological hazards and threats facing New Zealand. Biodefence: Preparing for a New Era of Biological Hazards and Threats looks at how the NZDF supports other agencies’ biodefence activities, and considers the context of ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • New Approaches to Economic Challenges: Confronting Planetary Emergencies: OECD 9 October 2020
    New Approaches to Economic Challenges: Confronting Planetary Emergencies: OECD 9 October 2020 Hon David Parker’s response following Thomas Piketty and Esther Duflo. Good morning, good afternoon, and good evening, wherever in the world you might be. I first acknowledge the excellent thought provoking speeches of Thomas Piketty and Esther ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Kaipara Moana restoration takes next step
    A Memorandum of Understanding has been signed today at Waihāua Marae between the Crown, local iwi and councils to protect, restore and enhance the mauri of Kaipara Moana in Northland. Environment Minister David Parker signed the document on behalf of the Crown along with representatives from Ngā Maunga Whakahī, Ngāti ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • New Zealand and Uruguay unite on reducing livestock production emissions
    Agriculture Minister Damien O’Connor and Uruguayan Minister of Livestock, Agriculture and Fisheries Carlos María Uriarte have welcomed the launch of a three-year project that will underpin sustainable livestock production in Uruguay, Argentina, and Costa Rica.  The project called ‘Innovation for pasture management’ is led by Uruguay’s National Institute of Agricultural ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • 3100 jobs created through marae upgrades
    Hundreds of marae throughout the country will be upgraded through investments from the Provincial Growth Fund’s refocused post COVID-19 funding to create jobs and put money into the pockets of local tradespeople and businesses, Regional Economic Development Minister Shane Jones and Māori Development Minister Nanaia Mahuta have announced. “A total ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Health volunteers recognised in annual awards
    Health Minister Chris Hipkins has announced 9 teams and 14 individuals are the recipients of this year’s Minister of Health Volunteer Awards.  “The health volunteer awards celebrate and recognise the thousands of dedicated health sector volunteers who give many hours of their time to help other New Zealanders,” Mr Hipkins ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Community COVID-19 Fund supports Pacific recovery
    The Minister for Pacific Peoples, Aupito William Sio says a total of 264 groups and individuals have successfully applied for the Pacific Aotearoa Community COVID-19 Recovery Fund, that will support Pacific communities drive their own COVID-19 recovery strategies, initiatives, and actions. “I am keen to see this Fund support Pacific ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Community benefits from Māori apprenticeships
    Up to 50 Māori apprentices in Wellington will receive paid training to build houses for their local communities, thanks to a $2.75 million investment from the Māori Trades and Training Fund, announced Employment Minister Willie Jackson today. “This funding will enable Ngāti Toa Rangatira Incorporated to provide its Ngā Kaimahi ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Training fund supports Māori jobseekers
    Rapidly growing sectors will benefit from a $990,000 Māori Trades and Training Fund investment which will see Wellington jobseekers supported into work, announced Employment Minister Willie Jackson today. “This funding will enable Sapphire Consultants Ltd. to help up to 45 Māori jobseekers into paid training initiatives over two years through ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Ruakura Inland Port development vital infrastructure for Waikato
    The Government is investing $40 million to develop an inland port at Ruakura which will become a freight super-hub and a future business, research and residential development for the Waikato, Urban Development and Transport Minister Phil Twyford, and Māori Development Minister Nanaia Mahuta announced today. The funding has been has ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Appointments made to Defence Expert Review Group
    Defence Minister Ron Mark announced today the establishment of an Expert Review Group to review a number of aspects of the New Zealand Defence Force’s (NZDF) structure, information management and record-keeping processes.  The Expert Review Group’s work arises out of the first recommendation from the Report of the Government’s Inquiry ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • No active community cases of COVID-19
    There are no active community cases of COVID-19 remaining in the country after the last people from the recent outbreak have recovered from the virus, Health Minister Chris Hipkins said today. “This is a big milestone. New Zealanders have once again through their collective actions squashed the virus. The systems ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Clean energy upgrade for more public buildings
    More public buildings will be supported by the Government to upgrade to run on clean energy, the Minister for Climate Change James Shaw announced today. Minister Shaw announced that Lincoln and Auckland universities will receive support through the Clean-Powered Public Service Fund to replace fossil fuel boilers. Southern, Taranaki, and ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Schools back donations scheme for the second year
    More schools have opted in to the donations scheme for 2021, compared to 2020 when the scheme was introduced. “The families of more than 447,000 students will be better off next year, with 94% of eligible schools and kura opting into the scheme,” Education Minister Chris Hipkins said. “This is ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Ruapehu cycle trails gets PGF boost
    The spectacular Mountains to Sea cycle trail in Ruapehu District will receive $4.6 million in funding from the Provincial Growth Fund for two additional trails, Regional Economic Development Minister Shane Jones announced today. “This is an exciting development for the local community, and one that will provide significant economic opportunities ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Update to air border order strengthens crew requirements
    Additional measures coming into effect on Monday will boost our defence against COVID-19 entering New Zealand through the air border, Health Minister Chris Hipkins said today. “As part of our precautionary approach and strategy of constant review, we’re tightening the requirements around international aircrew,” Chris Hipkins said. The COVID-19 Public ...
    BeehiveBy beehive.govt.nz
    3 weeks ago
  • A true picture of Māori business activity
    A better picture of the contribution Māori businesses make to the economy will be possible with changes to the way information is collected about companies and trading enterprises. Māori Development Minister Nanaia Mahuta and Small Business Minister Stuart Nash have announced a new option for Māori enterprises who are part ...
    BeehiveBy beehive.govt.nz
    3 weeks ago
  • PGF funding for Taranaki projects
    The South Taranaki museum, a New Plymouth distillery and a Pasifika building firm will benefit from a Government investment totalling more than $1 million, Regional Economic Development Minister Shane Jones says. The $1.05m in grants and loans from the Provincial Growth Fund (PGF) will help the recipients expand and create ...
    BeehiveBy beehive.govt.nz
    3 weeks ago
  • Fijian Language Week 2020 inspires courage and strength during COVID-19 pandemic
    The Minister for Pacific Peoples, Aupito William Sio says the theme for the 2020 Fijian Language Week reflects the strong belief by Fijians that their language and culture inspires courage and strength that is strongly needed in times of emergencies, or through a significant challenge like the global COVID-19 pandemic ...
    BeehiveBy beehive.govt.nz
    3 weeks ago
  • Trades training builds on iwi aspirations
    An investment of $2.025 million from the Māori Trades and Training Fund will support Māori to learn new skills while making a positive difference for their communities, announced Employment Minister Willie Jackson today. “K3 Development Limited Partnership will receive $2,025,000 for its Takitimu Tuanui apprenticeship programme, which will support the ...
    BeehiveBy beehive.govt.nz
    3 weeks ago
  • Conservation Minister plants two millionth tree in Raglan restoration
    A long-term conservation project led by the Whaingaroa Harbour Care group in the western Waikato reaches a significant milestone this week, with the planting of the two millionth tree by the Minister of Conservation Eugenie Sage. “Planting the two millionth tree crowns 25 years of commitment and partnership involving Whaingaroa ...
    BeehiveBy beehive.govt.nz
    3 weeks ago