NZ Tax System: Tax Cuts Traded For GST Rise – Will It Stimulate Growth
February 17th, 2010
A new tax structure, with tax cuts worth $4bn, an increase of GST to 15%, and compensatory adjustments to benefits, unlocking NZ’s mineral wealth, new priorities in science and innovation, changes to how property is taxed; welfare benefit reform with a focus on helping people back to work; Whanau Ora to be developed as a new way to fund and co-ordinate social service contracts – these are the salient points of John Key’s programme to lift NZ’s economic performance. Those commentators looking for some pizzazz were underwhelmed. Inspirational? No. Aspirational? Hardly. Politically do-able? Yes.
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John Key is no Roger Douglas, nor is he Ruth Richardson re-incarnated. Remember this is 2010, the year after the global financial crisis, and NZ’s economy is still on the knife-edge. Clearly the model for implementing economic policy has been refined to match the MMP environment. Instead of the “big bang” approach, the Key-led coalition is moving to the Aust model of continuous reform. Key doesn’t accept the “surge mentality,” the psychological equivalent of a shift in the tectonic plates, which can change economic behaviour overnight. Switching gears to accelerate into the economic fast lane can’t be done as it was in the 1980s or 1990s, without road-kill (in this case among the support parties). It’s going to be a long, hard road to catch up to Aust’s living standards.
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Duncan Cotterill