National is committing to no new taxes if re-elected – but the jury is still out over whether that means no tinkering to existing taxes.
This means the party is scrapping both a bed tax and a bank tax – something that’s disappointed mayors in tourism hotspots around the country.
Meanwhile, Labour’s banking on its capital gains tax to get us back to surplus by 2029/30.
Labour released its fiscal strategy at the weekend, targeting spending and revenue at around 33% of gross domestic product (GDP) – and net debt at 20% “over time”.
Independent economist Cameron Bagrie told The Front Page that net debt has been moving up consistently now across two successive Governments.
“It’s looking like a systemic trend. Do we need to bend the debt curve down? The answer is yes. It’s the mechanisms that you’re gonna use to achieve it,” Bagrie said.
“Because any government of the day at the moment has got three competing objectives. Number one, you wanna show you’re fiscally responsible; that means charting a path from deficit to surplus.
“Number two, this economy in the form of infrastructure needs a lot more money spent on it, because that helps drive productivity growth. And number three, you’ve got core government services.
“Now, in a perfect world, you could hit all three, or you could hit two out of three, unless you’re prepared to be open and increase taxes. We call it the impossible trinity.”
National has effectively chosen surplus plus infrastructure, with an implied pressure on services.
Meanwhile, Labour is proposing to keep core Crown spending around 33% of GDP while revenue sits near 31%, so it needs to close that gap via tax changes and something Bagrie called “fiscal drag”.
“Now the capital gains tax can get you part of the way there,” he said. Fiscal drag “is that as people go into higher income brackets, we just tend to pay more tax” and that’s would give the Government about an additional $3 billion over the next four years.
“There’s a choice here and what we’re seeing is that one side of the political fence, the incumbent Government, are saying they’re gonna shrink the Government, whereas the other side are saying we expect you [the taxpayer] to put a little bit more money in the till.”
Bagrie said that he thinks many New Zealanders would accept higher taxes if they saw better outcomes, but there is deep scepticism because past spending often felt like “confetti”.
“The Infrastructure Commission has highlighted that New Zealand is among the highest spenders on infrastructure in the OECD. But if you look at the effectiveness of that spend in regard to return on the investment, we’re among the lowest,” he said.
“So we effectively build stuff and then we mismanage it or we throw money around ... We just need to be a lot more effective with the delivery of the expenditure.”
Listen to the full episode to hear more about:
- Capital gains tax
- Wealth tax
- No new taxes
- Promise economics
The Front Page is a daily news podcast from the New Zealand Herald , available to listen to every weekday from 5pm. The podcast is presented by Chelsea Daniels, an Auckland-based journalist with a background in world news and crime/justice reporting who joined NZME in 2016.
You can follow the podcast at iHeartRadio , Apple Podcasts , Spotify or wherever you get your podcasts.
