John Armstrong: Key's quick march little more than a crawl

John Armstrong

John Key's promised quick march towards economic nirvana still looks like progressing at little more than a crawl.

Those expecting something special in the Government's new economic plan which will prompt the "step change" in the pace of economic growth that National keeps talking about will be disappointed.

On a measure of boldness, John Key's 23-page statement to Parliament scores about four out of ten.

The contents show National is still putting a big premium on being politically safe. So land tax is out. Likewise the risk-free return method for taxing residential investment properties, although landlords will be hit by other plans to increase revenue from that source.

And, of course, a capital gains tax was never a goer.

National's willingness to take risks extends as far as the Government "carefully considering" raising GST to 15 per cent. This lessens the tax on labour and may help promote savings. But anyone who was around the last time GST went up - in 1989 from 10 to 12.5 per cent - will recall it made diddly-squat difference to economic growth.

Of something that could make a real difference - a substantial cut in corporate tax - the statement says virtually nothing. The Government is obviously waiting for Australia's pending decision on a cut to its company rate.

But the document's silence on that score is puzzling - as is the similar paucity of information on what the Government thinks of aligning the top rate of income tax with the company rate and the rate paid by trusts.

It is clear the top personal rate will be cut.

Thus the emphasis on assuring those punters not paying that rate that the "vast bulk" of them will still be better off through efforts to compensate for the hike in GST, through other tax changes along with raising benefits, national superannuation payments and Working for Families entitlements.

In terms of spurring economic growth, the Government is relying on a lot of smaller things making a big difference _ such as increased funding for research and development, promoting investment in capital markets and spending on infrastructure.

Where the Government has gone out on a limb is firming up its intention to allow mining on Crown land. including parts of the conservation estate.

Even here, though, it has come up with a sweetener in the form of a Conservation Fund drawing on royalties from mining to fund special conservation projects.

That is a clever move. As is the case with a further hint in the document of a backing away from league tables showing schools' performance on national standards, even when this Government is seemingly staunch on a policy, the politics still creep in under the door.