Party leader David Seymour reveals his Budget, “A Time for Truth”, including tax cuts, prison boosts. Video / NZ Herald
“Our vision is to close the gap with Australia by 2025.” So said newly elected Prime Minister John Key in 2009. 2025 seemed so far away. Now it’s just over 18 months away. How are we doing?
Back then, the median wage in Australia was $11,800 a year higher than here. A Kiwi doing the same job could cross the ditch to earn 29 per cent more. Key stood in Wellington’s “Cake Tin”, pointing out that enough Kiwis to fill the stadium were doing that each year.
Today, the difference is double – $23,400. In percentage terms, the gap is 39 per cent.
That’s the reason, for example, it’s hard to get a doctor’s appointment. Australia has one GP for every 575 citizens whereas 820 New Zealanders have to share one. Aussies earn about 40 per cent more dollars, they pay roughly the same tax rates, and they can afford about 40 per cent more family doctors. The same argument applies to every public service.
We need to decide if New Zealand’s future is as a big Fiji, or the first-world nation we think we were. A flashpoint in that process is this week’s Budget.
I’ve watched a few budgets. Here’s a prediction. Labour and National will compete for the best soundbites. They offer alternatives that, in reality, deliver the same outcome, the small variations made to sound dramatic.
Those “alternatives” will differ by fractions of a per cent when divided by the underlying figures. For example, Grant Robertson’s promise to find $4 billion of savings is 0.8 per cent of government spending so 99.2 per cent of spending will continue. The same tax structure, perhaps with minor adjustments for inflation will remain. The same government departments will continue with bigger budgets for the same goals they fail to meet. Layers of handouts, built-up like lasagne, one bribe at a time, will continue.
Grant Robertson announced that next week’s Budget would contain $4b in savings and reprioritisations over the next four years. Photo / Marty Melville
The apparent choice is to keep doing what we’ve always done under new management. There’ll be fresh slogans, and taxpayers will pay for more spending targeted at marginal voters. The real alternative is to stop trimming the sails and head off in a whole new course.
ACT is again the only party proposing a fully-costed alternative budget. It reduces spending by $38 billion over four years, without touching frontline services. In fact, it increases teacher pay by nearly $5000, and GP funding by 13 per cent. It commits to pulling our weight by putting 2 per cent of GDP into defence because we no longer live in a benign strategic environment. It shares over a billion dollars of GST with councils so they can fund infrastructure to get homes built.
How is this possible? There are three areas where spending needs to be reduced. A lot of spending is simply giving taxpayers their own money back, creating a false sense of dependence. The Winter Energy Payment makes sense for retirees in real hardship, but not for those whose additional income means they are paying 30 or 33 cents in the dollar. They would be better off paying less tax. ACT’s budget would target that spending at those with a Community Services Card, reducing tax for those with higher income. In the end, every taxpayer is better off.
There’s too much money transferred to business, where we’d save $6.2 billion. Too many schemes take money off businesses making a profit and give it to those making losses. Now, investing in start-ups is vital, but government rarely knows where the best investments are, and the track record of subsidies shows it. Politicians could be rich if they knew how to invest their own money, but few own more than an extra house. Businesses would be better off with less tax and red tape than queuing for handouts.
A third is wasteful government spending in Wellington. In five years, Labour has raised spending by $49 billion, or 61 per cent. The headcount in the public service (not the frontline) has gone up 14,000. Going back to the 2017 headcount (when services were, if anything, better) would save $4 billion in four years.
All of that allows a simple, competitive tax system where people can keep more of their money. Instead of six tax rates on income, there’d be two. Aligning the company rate with the top personal rate would simplify the system and reduce avoidance. A top rate of 28 per cent would send a message that we celebrate success, a far cry from recent witch hunts.
It can seem like the future is predetermined and nobody can make any difference. ACT’s alternative budget shows that’s not true. Real change is possible. We could be a low-tax, high-growth economy with first-world living standards. I’m proud ACT is putting that option on the table, and this year we’ll argue it’s the only real choice for our country.
