Phil Goff has just delivered his speech
on Labour’s economic vision ahead of the Budget. It’s a good one, filled with core Labour values and ideas that will get New Zealand moving ahead. Here are the highlights.
First, Goff talks about the failures of the Key Government that isn’t working for New Zealand, just for a privileged elite:
“John Key promised an economy that would catch up with Australia’s. But we’re yet to see the substance of any plan to deliver on that rhetoric.
To the contrary, wages have risen faster in Australia over the last year. Our unemployment is higher than Australia’s by a significant margin for the first time in a decade.
In the last couple of weeks we have seen the Australian Government’s initiative to increase employer contributions to superannuation from nine to twelve per cent. This will not only boost Australian workers’ wage packages by three
percent. It will also boost savings that Australians can draw on for investment in growth.
And it will ensure Australia maintains ownership of its own economy.
By contrast here National cut the KiwiSaver employer contribution from four per cent to two per cent. And it stopped contributing to the Superannuation Fund.
In last year’s Budget Bill English asked why we would continue to invest in the Superannuation Fund. The Super Fund has in fact returned strong growth. Since last year’s Budget it has added $3.5 billion in value. The Key Government’s failure to continue to invest in it has cost the government a million dollars a week in lost interest alone.”
The Cullen Fund had actually started growing on the back of recovering markets in March, long before last year’s budget. The decision to stop investing during a year that was guaranteed to produce strong growth coming off a low base thanks to international stimulus coming is little short of criminal.
Goff talks about GST:
In the wake of the Australian tax inquiry one thing the Australian government specifically promised it would not do was increase GST.
John Key made the same explicit promise before the last election. And when he made that promise he spoke to those who feel the bite of recession the hardest.
But he has now indicated he will break that promise. A rise in GST to fifteen per cent – fifty per cent higher than Australia’s rate – will be in New Zealand’s budget.
For hardworking New Zealanders and Kiwi families, it’s a bad time to be pushing up the cost of living by increasing GST. Many retailers are indicating that the rise will be well over 2.5 per cent. They will use this as an opportunity to restore margins. On top of the price increases, there are the increased costs of Government charges, like ACC. Petrol and power prices are set to rise still further.
The biggest problem with National’s tax changes is who benefits and who loses:
For most of the population this will be what John Key terms a â€˜tax switch’. That will be what the words suggest – paying more tax with one hand through GST; and getting some back in return on the other.
The only real winners will be top income earners whose tax rates will come down from 38 cents in the dollar to 33 cents.
A lot of successful and clever people earn big salaries. Working hard and doing well is a good thing.
But what you have to weigh up is whether the person who got a thousand dollar a week pay rise, as a number of CEOs did last year, is the highest priority for a seven hundred dollar a week tax cut this year. Labour will address the unfairness National is creating.
Goff outlines a number of options including: taking GST off vegetables and food, which other countries do without a problem and which has provedn health benefits, reintroducing the top tax rate and raising it to $100K or higher, cutting bottom end tax rates so everyone benefits, cancelling National’s $2 billion a year subsidy to polluters, and, potentially, reversing National’s GST hike altogether:
National got elected by calling for tax cuts we couldn’t afford. But having called for tax cuts in Opposition, their record in
government will tell a different story:
An increase in Goods and Services Tax.
An increase in property tax, feeding into higher rents.
A tax on innovation, through the axing of the R&D tax credit.
They’ve increased ACC tax.
Last week they increased tobacco tax.
Now they’re putting a new tax on student loans.
And Aucklanders are facing higher rates taxes to pay for the Super City.
There has never been an eighteen month period in New Zealand history when a government has imposed so many new taxes on hardworking Kiwi families.
More broken promises from Key.
Goff outlines more of Labour’s solutions. In typical Labour fashion, it is focused on investment in the future and in the potential of Kiwi workers:
In New Zealand, 70,000 young people languish without work, and aren’t in education or training.
We need to boost apprenticeships. When the building industry recovers, for example, we will again face major skills shortages. We need to boost, rather than cap, skills training in tertiary institutions.
Boosting exports and savings and creating a smart economy, in Labour’s view, are the key to creating jobs and the incomes we aspire to.
Our recovery needs to be export driven, not consumption driven. The key to boosting exports is a more supportive monetary policy.
The independence of the Reserve Bank is crucial. But New Zealand is unusual internationally in having a single policy goal for the Reserve Bank of price stability.
The Reserve Bank of Australia, in contrast, is also required to support other objectives: a stable currency; full employment; and the
economic prosperity and welfare of the people of Australia. Labour will require our Reserve Bank here to pursue broader objectives, while retaining our full commitment to price stability, just as Australia is committed to both price stability and broader objectives.
Why shouldn’t New Zealand copy the smart things that other countries do? The next area is building our own savings base, so we don’t have to borrow from overseas of sell our assets:
Labour has a good track record of building New Zealand’s savings. Labour created the Super Fund. Labour created KiwiSaver.
By creating the right incentives to save the response has been spectacular.
Labour will restore contributions to the Cullen Super Fund. And we will rebuild KiwiSaver and offer new incentives for people to
save for their future. We haven’t ruled out phasing in a universal KiwiSaver program – but that needs further work and discussion.
More of our own savings will help us own more of the profits from goods and services produced here. But we can’t do it alone.
Foreign investment will continue to be important and encouraged. In particular we need to attract good greenfield investment that has a net benefit for New Zealand. It can bring factories, jobs, technology and other gains – that’s good investment.
However our overseas investment legislation should not allow loss of control over strategic assets and areas which are natural monopolies within our country.
We need to ensure we maintain New Zealand control over key export areas. We should not allow cumulative purchases of farms that would allow control over Fonterra, for example, to slip out of New Zealand.
We need solutions that harness our own capital, our own talents and brains and skills, and invest in them so that we do better at earning our way in the world.
Research and development is another crucial area:
We need to promote innovation, skills and adding value to our exports. If we want to earn more overseas, we have to keep pushing the value of our exports up the value chain. We haven’t been doing well enough at that.
It is no coincidence that New Zealand’s rate of private sector investment in research and development is the lowest in the developed
world. We invest around one third of the OECD average. The R&D tax credit Labour introduced would have lifted our R&D expenditure to two thirds of the OECD average.National cancelled it. That has weakened our export performance and made New Zealand poorer.
Yesterday National announced some new R&D steps, but they lack credibility. Their measures will see just a third of the R&D investment that would have resulted from Labour’s fifteen per cent R&D tax credit.
The Key government dismantled the $700 million Fast Forward fund, which the private sector had agreed to match, creating a $2 billion investment fund. That would have produced a step-change in added-value research in the primary sector.
A year and half of energy and momentum has already been wasted, when we needed it most. More will be wasted before the latest scheme is up and ready.
Labour will restore incentives for our most innovative companies to move investment into research and development.
It is this last passage that has me really excited. National says New Zealanders are hopeless. Labour says we can match it with the best:
But there is no doubt that New Zealand has the talent to be a smarter economy. We are in the top five in the world for the number of published papers per scientist.
But what we are not as good at is commercialising that science into products that create higher value for New Zealand. We export too many raw logs, and not enough high value products from transforming those logs here in New Zealand. Biofuel and finished wood products are much better value for New Zealand than the export of raw logs.
We need to back the companies and talents we have here.
Take the skilled workers we have at Dunedin’s Hillside and Petone’s Woburn rail workshops, who are already building high quality railway carriages. National won’t even let them tender to build new rolling stock for KiwiRail.
This could create up to 1300 jobs, growth in GDP of up to $250 million and up to $80 million of tax revenue. But National is happy to see the work go offshore without even a fight.
Labour backs Kiwi firms because we believe in them and their skilled workers.
Imagine if we had a government with half the vision for this country that Goff and Labour have displayed today. We might even have the wages, jobs, and growth that we enjoyed under the last Labour government.