National’s Finance Spokeswoman Amy Adams is gearing up for her first major test in the job – her criticism of the Budget.
Every year, the Opposition’s Finance Spokesperson takes the stage to explain why they think the Government’s Budget is no good for Kiwis.
They usually have a snappy one-liner to cap their criticism off – last year, then Opposition Finance Spokesman Grant Robertson called National’s Budget the “dollar Bill Budget.”
On Thursday it will be Adams’ turn to pick apart the numbers.
Although what’s in the Budget is a secret for most until 2 pm on Thursday afternoon, in the lead up to the big day Adams has been focusing her criticism in a few different areas.
On Tuesday, one of those areas was tax.
“Does he accept that increases to petrol tax, the new regional fuel tax, the five-year bright line test tax, and the new 'Amazon tax' adds up to Kiwis paying around $2.27 billion more tax over the next four years?” she asked Robertson in the House.
In a subsequent press release, Adams broke down the figure.
She says the combination of the fuel excise increase ($1.2 billion), the Auckland fuel tax ($600 million), the bright-line extension and scrapping of negative gearing ($300 million) and GST on online goods ($218 million) adds up to an extra $2.27 billion.
“This from a Government who said they would introduce no new taxes in their first term.”
In the House, Robertson was not able to confirm the $2.27 billion figure.
But a Spokesman for the Minister offered a rebuttal, saying the Government actually adopted Judith Collins’ work on the “Amazon Tax,” and Robertson thanks her for her work.
On fuel tax, he says the previous Government increased that by 40% and also introduced a two-year bright-line test.
He adds that the scrapping of negative gearing will “even up the tax playing field.”
Critical of Government debt
Adams has also put Government borrowing in her crosshairs, critical of the Government’s plan to borrow an extra $10 billion at a time when the economy is doing well.
“Can he confirm that the Government's plan to borrow around $10 billion more over the coming years will result in more than $1.1 billion in additional debt-servicing costs over the next four years, or $650 for every household?” Adams asked on Tuesday.
According to figures from the Half Year Economic and Fiscal Update (HYEFU) the Government is planning to increase debt by $10 billion to $69.40 billion by 2020. But that number drops to $66.76 billion by 2022, or 19.3% of GDP.
In the House, Robertson was prepared for Adams’ criticism on the debt servicing costs.
“I can confirm is that core Crown finance costs, according to the Half Year Economic and Fiscal Update will fall from 1.3% of GDP in 2017 to 0.96% of GDP in 2022,” he said.
“I can also confirm that in nominal terms core Crown finance costs are proposed to fall from $3.5 billion to $3.3 billion.”
In other words, he says it will cost less for the Labour-led Government to service its debt costs than it cost National when it was in power.
Speaking to Interest.co.nz after Question Time on Tuesday, Adams said National were borrowing at a much different time.
“When we were borrowing, we were coming through the GFC and the Canterbury Earthquakes – that is when you borrow, that’s why you have to have headroom to borrow.”
She said it was unfair to compare the Government’s borrowing situation now to the position National was in when it was borrowing more.
“When you get fiscal shocks, it’s important to have the space to borrow and we borrowed quite deliberately to protect the most vulnerable and get us through those tough times.”
86 Comments
“When you get fiscal shocks, it’s important to have the space to borrow and we borrowed quite deliberately to protect the most vulnerable and get us through those tough times.”
Adams is being shifty by appealing to the sheeple's instincts that govts are like h'holds who need to budget in line with their income and debt constraints. No doubt Robertson will play his part in this ridiculous theater.
Really???
So you think that it is okay for governments to spend without regard to any budget constraints? Maybe a quick look at how that worked out for Argentina or Zimbabwe in the past would change your viewpoint.
I despise the people that disregard spending constraints just as much as I do the people that hold spending but cut taxes (resulting in a similar deficit). Both concepts are fiscal mismanagement.
One should hold a reserve for the proverbial "rainy day". If one uses all of the reserve while the sun is shining, what does one fall back upon when there is a challenge to resources?
I don't think that is what JC means. Ultimately debt has to be paid back, so debt servicing matters. But a modern economy runs on credit, and if the private sector stops borrowing then a government can step in to pick up the slack. Consumption is what matters, and if governments can fuel this then it will help the economy through the low in the credit cycle without letting too much debt destruction (other peoples savings and asset values) occur.
If an economy can sustain 3% growth, then a reduction in that capacity is likely to happen slowly rather than fast. So if growth suddenly goes negative, it is conceivable for government spending to come in and stimulate consumption and growth again to a point that is sustainable.
Hope I am making sense. Roelof might be a good one to chime in here.
I understand what you are getting at. In simple terms, there is an optimum amount of debt in an economy. If the private debt starts decreasing then the public debt can increase without bad things happening. What happens when the private debt is increasing, and the public debt also increases?
I suspect demographics are against us
https://blogs.gartner.com/andrew_white/2015/07/05/demographics-and-defl…
Yankiwi,
Has anyone proposed that the government "spend without regard to ANY budget restraints? I don't think so.I would not want to see the debt/GDP ratio blow out massively-private debt is much too high for that-but I see nothing magical about the 20% figure.
we have had many decades of under-investment in infrastructure and in pay for those in health and education and the chickens are finally coming home to roost. It will take many more decades to deal with all these issues and he sooner we start the better. So yes,I would like to see a higher level of government borrowing,but i also want to see NZ become much more productive-to move from a low-wage economy to a high-wage economy. i want to see NZ lose its love affair for property investment and invest more in our stockmarket,thus deepening our pool of capital and reducing the level of private debt.
link,
I refer you to the first comment on this article, "Adams is being shifty by appealing to the sheeple's instincts that govts are like h'holds who need to budget in line with their income and debt constraints."
To me, this sounds like the person is putting forward the view that governments don't need to budget within the usual expected constraints.
I very much agree with you in regards to the issues of the kiwi expectation of using the property ladder as a route to riches. I also strongly agree with your comments on the type of economy desired and the relative benefits of share market investment as compared to property. The last decade has had wildly outsized benefits on the share market as compared to the property market, which one would not have believed if one reads the comments on this site!
You mention health care, there are some rather big issues in regards to health care, and salaries are only a visible tip of the massive iceberg of cost issues in health care. Increasing health care costs are a large concern for virtually every government. Big pharma, and other monopoly issues need to be addressed in health care, as well as adjusting the public expectation of "whatever it takes" in regards to health care. I do not want to be the person deciding this, but sometimes it may not be appropriate to spend hundreds of thousands of $ to extend a single life for a few months when the result is that others get doomed to an early death due to lack of early detection funding on things such as the various cancer testing. New Zealand is rather good in some regards, but in terms of early detection testing, the current health care paradigm is penny wise and pound foolish.
Yes I think Labour fell into a trap there. I remember Mike Hosking getting Ardern to agree the economy had been doing well under National, and a budget surplus was somehow sacrosanct. She should have said the economy had done well for some, but a surplus wasn’t their primary concern.
Now they’re in a lose lose situation where the economy will probably contract with a government surplus, but if they run a deficit they’ll be attacked for not doing what they said.
I really don’t think that any of those items listed constitutes a tax increase. They are either sin taxes - which successive governments have changed as a matter of course of changes to ensure people pay existing taxes. The bright line and amazon tax are not new. They just make clear that in these situations people should pay tax. The bright line tax impacts a very small slice of society that owns two homes.
Semantics for two of them- technically both petrol and bright line aren't new taxes, they exist already.
"Amazon tax" was a National idea, and if you squint at it a bit and look through one eye into the sun, it's an extension of the Netflix tax introduced by National :)
As far as I can see, you are misrepresenting the facts. Has Labour promised that somewhere?
What Labour actually promised (note, read below the headline):
"To avoid any doubt, no one will be affected by any tax changes arising from the outcomes of the Working Group until 2021," Mr Robertson said at Parliament on Thursday morning
"There will be no new taxes or levies introduced in our first term of Government beyond those we have already announced."
Their fuel tax was on their policy page: https://www.labour.org.nz/tax
Point being, we should at least ground any discussion in fact rather than propaganda from some grumpy folk out there.
What about when National added a tax on employer KiwiSaver contributions or when they raised GST? These were far more significant. In the case of KiwiSaver National were sneaky and chose a tax most New Zealanders wouldn’t notice. National isn’t against tax increases, they are against labour raising taxes.
As was cutting the annual payment by 50% and scrapping the kickstart. Oh and don’t forget the 2% increase in student loan repayments. And the final insult was where they introduced a 10% repayment discount for one off payments to student loans and the later scrapped it.
Hardly, you need to take your blinkers off.
This government is trying to tax anything they possibly can and they are going to come a gutser over it!
Anyone with their eyes open can see that they are grossly out of their depth in running a business as they have no proven ability anywhere!
Where has the policies for more productivity, quite the damn opposite!
You know what won’t get me to take my blinkers off? That kind of argument. If you are going to run around screaming ‘Taxinda, Taxinda, Taxinda’ it’s not going to convince me. Now if you showed that government tax revenue as a percentage of GDP above historic levels that might convince me of the need for an income tax cut. But I’m still going to support those tax changes.
Don’t forget in 1999 Labour introduced a 39% tax rate l. That is a tax increase.
Fact is ‘The Man’, the present superannuation and health expenditure tracks are unaffordable. If we don’t raise the age of eligibility we will all be paying a lot more tax and you are going to wish you could go back to the days of a small increase in the petrol levy.
That sure was! And that was after the previous Labour government to that one, had introduced GST & raised it. To be fair to Peter Dunne, it was such a blatant steal, that he exited the party. All that proves is if Mr Cullen thinks so, we will have a capital gains tax, a land tax and anything else that can be got away with, and some token reduction to income tax. Then some time down the track, a few years or so, up will go income tax again.
... yup ... a land tax would make a lot of sense .... captures all landowners ... simple to implement ... low costs of collection .... raises pot loads of dosh in good times and bad ... unavoidable ...
Yes ... it's got everything going for it ...
... so , I'm picking Sir Mickey Cullen will go for a CGT instead ... ... your left nut is safe !
I'm coming around on the land tax. It's too easy to retire early, sit on a mortgage free house and just pay tax on TDs. If they levied say 1% on a home value then people like Retired Poppy and me would have to pay our fair share. Best of all it's a stealthy way of eliminating the effective Super cost as we give it in payments and take it back in tax.
I'd like to throw my miniscule internet commentator weight behind the land tax idea, too. Much better signalling than income or company taxes and hopefully difficult to avoid, as well as contributing to making housing more affordable (lower up front costs should balance the ongoing costs for first home buyers) and freeing up land supply.
Me too, Canberra are doing it, keep an eye on how that pans out.
https://www.canberratimes.com.au/politics/act/bill-to-help-increase-act…
I like a 1-2% land tax as well - so long as it is balanced by reduced income and business taxes. Pushes all those economically inactive or empty homes (retired, capital gain seeking investors with vacant properties and holiday-only occupants) out of high valued central city properties - allowing workers to live in them and so reducing road infrastructure stresses. Will also clamp land-banking.
Do not dispute that there are merits but how do you then cope with a government that leaves those taxes in situ, unaltered. And then, sets about ratcheting up income tax. That is exactly what the Clark Cullen government did. after their previous term had introduced and increased GST. No point going on and on about Labour this and National that, both are adept and devious at stealth taxing. But that tax grab by Labour was about as bald as you can get & gives every reason to believe that they would re-enact it at a moments notice.
Pretty sure Clark and Cullen didn’t touch GST, that was a 1980s Labour and 90s National deal.
Also Labour increase taxes at the start of their term but also cut taxes at the end. Prior to that final tax cut Cullen proposed indexing the tax thresholds which would have meant everybody got a small tax cut every year but the media and opposition called it the ‘chewing gum budget’ so he pulled it in a pique.
Anyway, fact is Cullen did cut taxes.
Say what you want about the man, he stashed away a lot of revenue - way more than National wanted him to, they said he was crazy. That revenue came in useful when the GFC hit and the earthquakes.
So one party can do no wrong and the other can do no right. Where does that take anybody with a balanced mind. GST was introduced & increased by Lange’s labour government. That government compensated by reducing fairly, income tax and was heading for a flat tax. Bolger’s National government simply kept the status quo. But Clark’s lot shoved income tax right back to before that without any compensation. It was a naked tax grab and caused defections from Labour by those that had a conscience such as Peter Dunne. The tax cuts you mention Cullen proposed were pathetic going on pitiful that’s why the whole country laughed at them. But I am though, right with Winston when he stated that we should all be grateful for the prudent and capable economic stewardship of both Cullen and English. Believe you need to have some therapy starting with the word objectivity The one eyed slavish adulation of the party of your choice is not that much different to the era of Peronism.
Not as one eyed as you think. I liked nationals little GST swap and I wanted it to go to 17.5 although I’ve changed my opinion now and think it should stay at 15. Main things I want are land tax, raising nz super, compulsory super and building houses. I only defend Labour around here because of the unreasoned attacks.
It is not really hard to escape - and I will do that if they go that way and introduce effective gradual expropriation of property that I have purchased with tax-paid income.
I will simply move overseas ( where most of my assets are anyway ).
Before you say you will not miss me on this forum - fair enough, but NZ would lose all of my income tax (including that from salary and FIF income) . I will make sure I go to a country I can take my NZ pension to..
If someone retired early and lives in a mortgage-free house then in all likelihood they earned a lot before they retired and they paid (most likely much more than) their fair share of taxes along the way. This is just one reason I am totally against the idea of a land tax.
I think you’d need to target any income tax decrease at the lower income brackets which would benefit people on Nz super and you’d probably increase Nz super as well by a bit to cover the scenario you talked about. So basically I would implement it in a way that a person on NZ super with an average priced house was no worse off.
I'm newly in that situation, with a mortgage free home and a pot of gold that can see me out if I’m frugal enough. I’ve paid more than my share of tax, the PAYE on the redundancy payment was particularly painful. However, think about this. Is it reasonable for me to sit on my butt with tax on TD income and GST on greatly reduced spending being my only contribution for the next 29 years? I figure if we spread the pain over every land owner in NZ it will be a lot less per person, as there are a lot out there pontificating over more taxes but not necessarily having to pay them. This is more democratic as it’s easy to charge and will hit everyone. Of course this is all theoretical because it would be electoral defeat to anyone proposing it. Taxes are something others pay, it would seem.
I reckon your kids would also be better off, as they're less likely to have to depend so much on the inheritance you leave them and more likely to be able to make their own way financially. Home-wise.
Which would also reduce the pressure on you to be quite so frugal and free you up to buy the single malt with the 18 on it rather than the 15.
True the introduction of those tax instruments might eventuate in electoral defeat but you can bet your boots the victorious incoming government, whoever that might be, will do absolutely nothing to compensate or reverse it. They will simply keep the revenue and blame the previous government. This is where these, let’s say indirect, types of tax are so unfair and dangerous to tax payers because governments, when sufficient time has passed and blurred the lines, simply set about helping themselves and increase income tax.
Credit where it is due - that was one of your most sensible posts. Nothing to do with a "weak" NZD - more to do with an end to QE overseas.
Petrol prices will be a tricky one in future as well - half the price per barrel than in 2012/13 but almost the same price at the pump today. $2.50 per L anyone?
Is that a standard you applied to the national government because Bill English had been working in government since he was in nappies and Gerry was a woodwork teacher. I don’t know what Nick did but it didn’t prepare him for building houses. John was a currency trader, is that a worthwhile profession? Who else? What did Paula do before hand?
It's not like the Labour ones are any good either.
After studying politics at Auckland University, Phil worked as a journalist and union organiser before becoming the founding Executive Director of Oxfam New Zealand. Phil’s strong belief in justice led to him becoming Oxfam’s Global Advocacy Director, based in Washington DC.
Oh wow so never had a real job then...
How about Jacinda...
Prime Minister Jacinda Ardern was born in the city of Hamilton, New Zealand, and grew up rurally. She attended high school before graduating from the University of Waikato with a Bachelor of Communication Studies in Politics and Public Relations.
Post-university, she worked as an advisor in the office of then-Prime Minister Helen Clark, in London for the Government Cabinet Office and as an Assistant Director in the Department for Business and Enterprise, and on a review of Policing in England and Wales.
Oh wow, so never had a real job then...
Last round we had a bunch of rich banksters running the place. Now we've got a bunch of bureaucratic pencil pushers.
Jacinda is not a politician at all.
She is a socialist and and one that will do major harm to NZ society.
Unfortunately Jacinda everyone earn at different levels just as you are paid a helliva lot more than most.
Don’t see her giving away her income like John Key did.
Don’t see her giving away her income like John Key did.
Didn't see John Key giving away his income either. That's another false rumour.
I'm sure they both donate/donated to causes they like, but Key never gave away his whole salary as the PR rumour mill made out.
Besides that, Key was as much a socialist, likely as are you.
also, she's still paying off a mortgage, where as John Key had 5 properties worth probably well north of $15million dollars, and AFAICS, no mortgages to pay.
One second you want a PM that is fiscally responsible, then you want her to shirk her mortgage payments and give her income away. Make up your mind you daft twit.
I think this is the source and that he ended up giving less than 90% per year at the end. http://i.stuff.co.nz/national/politics/573560/Key-pledges-PMs-salary-to…
The pm gets a housing allowance that is about as large as the median wage a few years ago, she can sell and not have a mortgage! She could also have practiced good business acumen prior to becoming pm and used the rewards from doing so to buy a house outright prior to becoming pm?
and what is your definition of a good part, after watching 9 years of untruths i would suggest it was a lot smaller than either of us think
" National Party leader John Key has vowed to donate "a good part'' of his government pay to charity should he be New Zealand's next Prime Minister.
Key, named in this year's Rich List as worth $50 million, said he was planning to give away a chunk of the $361,000 PM's salary if his party won the upcoming election."
Besides that, Key was as much a socialist, likely as are you.
Much more of a socialist than people realize. Key ultimately gave the thumbs up for the SCF bailout, about $405 for every man, woman and child in NZ. A protégé of Merrill Lynch, which is a key recipient in the game of taxpayer handouts.
Yep and the accommodation supplement that flows into the hands of landlords was circa $2B when he fled...
That's $2B of taxpayers money subsidizing landlords - ewwww socialism!!!
Yet the amount of people who think its a free market and should be left free of Govt intervention - too late!
Remove that $2B rent subsidy from circulation and see what happens...
Oh and he didn't remove working for families (a crazy labour policy) which he called "communism by stealth" before becoming PM https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=3571934
And then there's GST...oh yeah that got increased despite a promise not too..that's $2.46B in increased TAXES for everyone..rich, poor in-between....
So why so many who think he was a master of free markets - actual evidence (yes, FACTS not emotions) unequivocally point otherwise...yet I voted for him twice hoping it would change.
Jacinda must honestly think we are utter fools if she expects us to believe her line that an AMAZON or ALIBABA or EBAY tax will somehow "save " NZ Retailers .
It won't .
15% extra will not make one iota of difference on stuff that costs 100% to 300 % more onshore than online .
She is just looking to extract more money from us .
We were not born yesterday , and we can see a ruse to shake us down for what it is
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