English: Extra taxes possible to aid recovery

Bill English. Photo / Mark Mitchell

Finance Minister Bill English has again refused to rule out introducing some form of capital gains or land tax as Treasury officials seek policy tools to prevent a premature housing boom and an overvalued dollar blocking economic recovery.

"The economy needs to shift away from more spending and borrowing to more exporting," he said yesterday.

"The signs at the moment are that it is not making the shift we want to see. "

"We need to look to see if there is any policy mix that might make the right shift."

The economic forecasting consultancy Infometrics this week warned that house prices could rise by as much as 11 per cent nationwide over the next year and by 24 per cent over the next three years.

Mr English said there was evidence the recovery could consist of a pick-up in housing.

"Now that's more of the problem than we had before and it would be a concern particularly if it goes with a high exchange rate that punishes our exporters."

He said the tax system might be one way of tilting the playing field.

"But we've yet to see whether that would work and that's what the officials are working on."

Speaking at the National Party conference this month, Mr English referred to the committee of tax experts he has established to look at options for restructuring the tax system.

He warned delegates that they must be prepared for possible tax changes that they would be uncomfortable with.

He did not rule out raising GST or imposing a capital gains tax.

But he added that the Government would need a lot of persuading before accepting either proposition.

Yesterday he said the Government could look at simplifying taxes and changing the mix, but "to do anything significant you'd need a pretty strong case for change and we haven't seen that yet".

"There's a lot of other things we may need to do with the Resource Management Act, with the way councils write their plans, public transport, that could all contribute to making sure we don't have a premature housing boom."

"The official advice is pretty straightforward. If you want to stop people spending more, put GST up, but of course that has a big impact on people, particularly on lower incomes, so it's not a straightforward issue.

Speaking after delivering a speech flagging more private sector involvement in Government-funded infrastructure development, Mr English was asked if the Government wanted to see more private sector involvement in the building and maintenance of state-run schools and hospitals.

He said schools had traditionally been managed by the Ministry of Education

But if the private sector had any propositions for better maintenance of school property, the Government would be interested in looking at them.