Cullen denies tax-rise agenda

By VERNON SMALL

Finance Minister Michael Cullen has given a "cast iron" guarantee Labour will not increase GST, income tax or company tax in the next three years.

But he will not give the same pledge on petrol tax, nor rule out a rise in the duty on alcohol or tobacco.

However, he said there was no reason to think they would rise beyond the normal inflation-linked adjustment.

National has accused Labour of secret plans to lift tax rates after senior whip Rick Barker let slip a proposal to ring-fence a portion of income tax as a dedicated health tax.

Releasing Labour's economic policy, Dr Cullen said the pledge card promise was absolutely clear on GST, income and company tax.

"There is no bigger lie in the campaign than that the Government has a secret agenda. The health tax will not increase taxes. That is absolutely solid and sound."

No Government had ever committed itself to not raising petrol tax, but he saw no need for any increase in the next three years. There were also no plans to raise the excise on tobacco and liquor above the usual index-linked increases.

He confirmed his intention to renegotiate the policy targets agreement with the new governor of the Reserve Bank to ensure that monetary policy was flexible enough to maintain price stability while supporting growth.

"Labour believes that such flexibility is essential if the bank is to be able to judge whether there has been a shift in New Zealand's sustainable non-inflationary growth rate," he said.

"Labour also believes that increasing the rate of productivity growth is the best method of improving confidence that the sustainable non-inflationary growth rate has increased."

He would not be drawn on the possible wording of the new agreement.

The 0-3 per cent inflation range would not be changed.

Dr Cullen has criticised the bank for aiming for 1.5 per cent inflation, the mid-point of the target range, instead of using the full 0-3 per cent band.

Yesterday he went further, accusing former governor Don Brash, who is now running as a National Party candidate, of "monetary policy incompetence".

His failure to tighten early enough in 1993 had seen a much greater tightening later.

That had pushed up the value of the dollar causing "the crucifixion of the tradeable sector".

The bank's board will appoint a governor in mid-August.

Dr Cullen said there were about 40 applicants.

He said the economy had performed well and would grow at 3 per cent over the next four years. The Government wanted to lift that to 4 per cent.

He planned talks with business, unions and Government agencies to find ways to lift productivity.

Labour would encourage employment-based but portable superannuation schemes, reduce compliance costs and simplify the tax system, examine the introduction of a health tax to replace an equivalent amount of income tax, promote "brand New Zealand" abroad and attract more productive foreign direct investment.

It would continue to run budget surpluses and keep debt below 30 per cent of gross domestic product.

It would also review the Takeovers Code and insider trading laws, start a post-2005 tariff review and ensure accounting standards kept abreast of international changes in the wake of the US scandals.

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