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TAX CUTS ARE ON THE WAY By Lawrence JohnstonTHE New Zealand government will announce personal tax cuts in its Budget. It is a move which the Labour-led government does not take lightly, having withstood persistent prodding from its political opponents. But Finance Minister Michael Cullen feels the government can now afford to introduce some cuts. In a speech to the Auckland Chamber of Commerce last month, he said his Budget on May 22 would contain personal tax cuts, which would build on the NZ$4 billion a year in tax relief for families, businesses and savers that will be in place on April 1. He said the government should take confidence in its ability to weather any global storms, from the strength of its economic platform. Over the last eight years, Labour had focused on building a "solid economic platform for growth and fairness." It hadn't been headline grabbing, but it had been, he believed, the government's most important economic achievement. Central to that platform had been a commitment to lowering debt, strong investment in public services, taking inflationary pressures and economic imbalances seriously, and taking steps to reduce inequality in the economy and in society. In this year of uncertainty, it was reassuring that crown debt had been lowered from 35 per cent of GDP to less than 20. That provided a degree of insulation which gave the government room to employ a fiscal response to a downturn if it happened. In this year of challenges, the services that New Zealanders relied on - especially in hard times - had happily been rebuilt and modernised. At a time when other countries had learned the lessons of loose fiscal and monetary policy and ignoring imbalances, in New Zealand stability had been a central goal of business, government, and the Reserve Bank. In the face of any global slowdown when low-income families were most vulnerable, it was, he said, heartening that over the last eight years, more people in New Zealand had been in work, fewer trapped in poverty, and fewer having their health predetermined by their ethnicity or bank balance. It was, he felt, therefore no surprise that New Zealand's economy passed the four tests he had announced for the delivery of personal tax cuts. The ongoing strength of the economy and its surpluses had opened the door for personal tax cuts. Labour would deliver tax cuts because it was fair. "Money that we do not need to meet our obligations to New Zealanders should not be held indefinitely in crown accounts," he said. The government would produce a programme for the next three years of its term and the longer term direction of change beyond that. It would neither exacerbate inflation when delivering personal tax cuts, nor allow those cuts to lead to greater inequality. Prior to his Budget announcement, Dr Cullen would expand on each of these four points. "They are Labour's tests for tax cuts because they are our platform for a strong, fair economy," he said. |
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