Stick to your word


The Taxpayer’s Union is calling on Grant Robertson to keep his word :

The New Zealand Taxpayers’ Union has today launched its ‘Stick to Your Word’ campaign calling on Grant Robertson to keep his promise made six weeks ago not to touch the bright line test.

Union Campaigns Manager, Louis Houlbrooke, said: “Despite promising prior to the election not to change any taxes beyond what was in Labour’s election policy, Robertson is now asking Treasury for advice on an extension of the ‘bright-line’ test.”

“Extending the bright line test is effectively imposing a nasty capital gains tax – at a rate of up to 39% – for property owners who sell within ten years.”

“Taxing houses will not make them more affordable. What it will do is hammer people who need to cash out of property for personal reasons. It would reduce liquidity in the market, and could even incentivise politicians to drive up house prices further in order to reap tax revenue from the capital gain.”

“If the Government decides it’s okay to break its tax promises, it won’t stop at the bright line test. A Green Party-style asset tax or even a Michael Cullen-style capital gains tax could be back on the agenda. That’s why we’ve set up a tool for New Zealanders to tell Grant Robertson to keep his promises.”

The campaign advert can be viewed here .

New Zealanders are encouraged to write a postcard to Mr Robertson via the website


False kindness is cruel


Benefits have been indexed to inflation rather than wages for good reason – to ensure there is a big enough gap between the two to make work more attractive than a benefit.

Lindsay Mitchell points out that the previous government understood the danger of this:

 “…it is desirable to create a margin between being dependent on a benefit and being in employment….
The Labour Party isn’t the party that says living on a benefit is a preferred lifestyle. Its position has always been that the benefit system is a safety net for those who are unavoidably unable to participate in employment. From its history, the Labour Party has always been about people in employment.”
Michael Cullen, 2008

This is supposed to be a government of kindness but linking benefit increases to wage rises is false kindness, cruelly disincentivising work and trapping more people in poverty.

The Taxpayers’ Union points out that beneficiaries are getting something denied to the people who pay the taxes that fund the benefits:

The indexation of benefits to wages means that taxpayers are treated less fairly than ever, says the New Zealand Taxpayers’ Union.
Taxpayers’ Union spokesman Louis Houlbrooke says, “The Government says it’s fair to index benefits to wages because we already do this with superannuation. So about tax brackets? These aren’t indexed to inflation, let alone wages. The result is that each year, taxpayers keep less, while beneficiaries get more.”
“Politicians often say we cover the costs of super and benefits by increasing productivity. But under this Government’s policies, increases in productivity will automatically trigger hikes to benefits and super, meaning we can never dig ourselves out of this spending hole.”


Mike Hosking also raises the issue of productivity:

Most who got a three per cent wage rise did so because they did something productive. They made more, produced more, worked more – that’s the productive side of the economy. That’s how you incentivise people: there is reward for work

Beneficiaries got the same rise, that’s the non-productive side of the economy. Nothing more was produced, but more was put into it. And that is why the money is gone and we are borrowing.

Economies grow because of productivity, not because of non-productive spending. You need one to fund the other, and one must be stronger than the other. That’s how you move forward, run surpluses, and afford to cover difficult days.

A level of redistribution, the likes of which we are currently experiencing, leads nowhere sound fiscally. It makes us increasingly vulnerable to global shocks, and we are too small to be running that risk.

The spread of coronavirus (COVID-19) is bringing a global shock ever closer, threatening jobs and increasing the likelihood of more people on benefits.

It is neither kind nor sensible to be doing anything that will discourage work and add to the burden placed on taxpayers.


Rural round-up


Proposed water tax a ‘burden’ on low-water  regions – Stuart Smith:

The proposed new water tax that was announced as part of a swathe of other new taxes potentially facing Kiwis will disproportionally impact on low-rainfall regions like Marlborough.

There are eight new taxes in Michael Cullen’s proposal: the Capital Gains Tax (CGT), tax on vacant residential land, agriculture tax, water tax, fertiliser tax, environmental footprint tax, natural capital tax and a waste tax.

Much has been said about the CGT but the suggested water tax, too, would impact all Kiwis negatively and in particular our farmers, horticulturalists and wine growers in low-rainfall areas. . . 

Partnerships between men and women are critical for farming success – Bonnie Flaws:

With many farms run by married couples, the role of women in farming is a critical one, a female dairy farmer says.

Jessie Chan-Dorman, a former dairy woman of the year, said male farmers could see everyday how women contribute to the business, and they respect that.

“I would say the percentage of women in farming is at least 50 per cent. Nearly every farming business has a partnership that has historically not been seen. But they’ve always been there.” . . 

Studies smoke out fire behaviour – Richard Rennie:

The risk of summer fires is a constant farmers and foresters learn to live with. But the Port Hills fire in 2017 and the Nelson fire last month have brought a human threat to wildfires many Kiwis thought was confined to Australia and North America. With wildfires now affecting rural and urban people Richard Rennie spoke to Scion rural fire researcher Dr Tara Strand about how we are getting smarter at understanding rural fires.

A TEAM of Scion researchers is part of a 27-year history of research into New Zealand’s rural fires, a quiet brigade of climate experts and fire analysts whose job is to help make rural firefighters’ jobs more effective and safer. . .

Grape yield under threat – Joanna Grigg:

Marlborough is experiencing a hydrological drought.

Lack of rain in the mountain catchment has left the Wairau River low, Marlborough District Council hydrologist Val Wadsdworth said.

And summer storage capacity on the plains has been found wanting as a result. January rain of 18mm was soon sucked up by 30C plus temperatures in February.  . .

Matamata to host FMG Young Farmer of the Year regional final :

A Waharoa dairy farmer is facing fierce competition in her quest to be named the FMG Young Farmer of the Year.

Sophia Clark will take on seven other contestants in the Waikato/Bay of Plenty regional final in Matamata next month.

It will be the 30-year-old’s fourth attempt at clinching a coveted spot in the national final. . .

Scott St John leaves Fonterra Fund manager’s board as units hit record  low – Paul McBeth:

(BusinessDesk) – Fonterra director and veteran capital markets executive Scott St John has left the board of the shareholder fund’s manager, the same day the units plunged to a new low.

A notice to the Companies Office last night noted St John ceased being a director of FSF Management Co, the manager of the dual-listed Fonterra Shareholders’ Fund, which gives investors exposure to the cooperative’s earnings stream. He is still a director of Fonterra. . .

Property speculators pay CGT


Labour leader David Cunliffe says it’s ‘lunacy’ that property speculators get tax free capital gain.

But they don’t.

Buying and selling properties as a business, which is what speculators do, attracts a capital gains tax.

Hon BILL ENGLISH (Minister of Finance) : The Government already taxes capital gains on property speculation where property investment is for the purpose of trading. The member may not be aware of that. In addition to this, the Government’s 2010 tax changes on property disallowed deductions for building depreciation, and this raises around $700 million per year from property investors, a much larger number than any estimate we have seen for the foreseeable future for a further extension of the capital gains tax. Further extension of the current tax on capital gains is likely to have high compliance costs, and that is a conclusion that three tax inquiries and several Governments have come to over the last 20 years. If it excludes the family home, it will not raise much difference, it will not raise much revenue, and it becomes effectively a tax on successful businesses. In overseas jurisdictions, it has not improved housing affordability.

Hon David Parker: Why does he think the profits on the sale of investment property are of such critical importance to the economy that they should not be taxed but, instead, be cross-subsidised by every other taxpaying business and worker in New Zealand?

Hon BILL ENGLISH: I would point out two things, as I pointed out in the primary answer. First, where any property is bought for the purposes of selling, the gains on that are taxed at current income tax rates. It is called an income tax, but, actually, it is a capital gains tax on trading investment property. The member may have seen recent publicity about the scope of the Inland Revenue Department’s activities in ensuring that everyone who does trade in property pays full income tax rates, not the half-baked rate that he proposes in his proposition of 15c in the dollar. They are, actually, taxed at 33c currently. Secondly, the changes made in the 2010 tax package do collect $700 million per year from property investors, which is a much larger number than any revenue that he has posited as a result of his partial extension of the current capital gains tax.

Labour’s policy is built on the lie that we don’t have a CGT.

We do, at 33 cents in the dollar, more than twice the rate Labour is proposing – unless of course they’re going to tax it twice which is quite possible with them.

Jami-Lee Ross: In considering various tax options for New Zealand, what international evidence has the Minister seen on the effects of capital gains taxes on housing affordability?

Hon BILL ENGLISH: I have seen reports from Australia on the effects of a partial capital gains tax, limits on foreign investment, a so-called mansion tax, and compulsory savings. If these policies are meant to improve housing affordability, then they have not, because housing affordability is worse in Australia than in New Zealand. Just today there is a report being published showing that first-home buyers now make up the smallest proportion of the housing market ever in Australia. So the housing market in Australia now consists of fewer first-home buyers than ever, so we would be a bit careful about following that policy prescription.

Hon David Parker: What proportion of investment property sales pay tax as traders; is it closer to zero percent than 100 percent?

Hon BILL ENGLISH: I do not have that information to hand, but I can assure the member that the Inland Revenue Department is vigorously pursuing every investor who trades in property.

Jami-Lee Ross: What reports has the Minister received on the case for a new capital gains tax in New Zealand?

Hon BILL ENGLISH: I have received the report of a speech to the Wellington Property Investors Association in July 2005. It noted that the Government-appointed tax review in 2001 considered a new capital gains tax and concluded that the disadvantages of such a tax—its complexity and costs—outweighed the theoretical benefits, so it did not recommend such a tax. The speech also noted that the Government of the day agreed with that conclusion that the status quo was entirely adequate. The speech was delivered on behalf of the Minister of Finance Michael Cullen by his associate David Cunliffe. . . .

What’s changed since Cunliffe delivered that speech?

None of the facts, just the politics.

Cavalier attitude to taxpayers’ money


The Press, which is very familiar with insurance issues in Christchurch was less than impressed with Labour’s plan to establish a state-owned insurance company.

. . . The proposal for a new state-owned insurance company – KiwiAssure – would, Cunliffe says, be an effort to address problems over the responsiveness of private companies in settling claims and of the price of insurance. But in a market as competitive as the New Zealand one is, the price of insurance is determined by risk and the cost of covering it on the overseas reinsurance market. That applies whether the entity is private or state-owned. A state-owned enterprise required to lower its prices or be more generous towards customers than competitors could only do so at the expense of taxpayers.

As for the implication that a state-owned enterprise might provide a better customer experience in general than a private company, that only shows how far Auckland is from Christchurch. There are many in Christchurch who have dealt with EQC who could put Cunliffe right on that point. . .

The Herald is equally unenthusiastic about the idea:

. . . Ironically, the frustrations experienced by home-owners in Christchurch have much to do with government insurance in the form of the Earthquake Commission. . .

Nothing in the policy announced by Mr Cunliffe at the weekend dealt with any of the real insurance policy issues arising from Christchurch. The announcement was little more than a replay of a commercial for KiwiBank which, like it or not, could be saddled with the insurance company. “KiwiAssure will work for all New Zealanders,” Mr Cunliffe declared. It would be “a service-focused, state-owned company that has their best interests at heart”. It would “keep profits from this crucial industry in New Zealand”.

Wisely, he did not quite claim it would offer cheaper premiums than existing companies. Christchurch had an insurance company that did that. AMI had come to dominate the local market by undercutting competitors and the earthquake exposed its inability to meet all of its liabilities.

The AMI experience is salutary for national taxpayers, too, when they hear Labour’s assurance that its company would not carry a government guarantee. The present Government quickly came to the relief of AMI’s policy holders, taking over the worst liabilities and selling AMI as a going concern to the multinational IAG. It is hard to imagine a Labour Government acting any differently if a state-owned insurer fell into the same trouble.

Insurance is almost the last business that should be nationalised. Its purpose is to share risk internationally. Labour’s company, like KiwiBank, might appeal to those who dislike profit-seeking private enterprise and prefer to deal with a state agency, but they will be under-written by a global insurance network of private enterprise. The profits of insurance provide security for all its subscribers.

The illusion of a “home-grown alternative”, as Mr Cunliffe calls it, has a powerful commercial appeal.

Members of the Insurance Council do not relish competing with a new state company for that reason. Taxpayers should be wary too. When a political party goes into business for no reason better than ideological satisfaction, it is likely to create a commercial lemon requiring ever more capital to survive. Let us hope this is one we will never see.

The ODT raises concerns:

. . . The suggestion KiwiAssure will be run by Kiwibank is not sensible.

The success of Kiwibank will be put at risk by tacking on an insurance company with a domestic focus.

Voters only have to look at the downfall of AMI, a Christchurch-based insurance company which substantially undervalued its reinsurance obligations and ended up with the Government – and taxpayers – having to step in to bail it out.

Of course, a government bail-out is exactly what will happen to KiwiAssure if it does not spread its reassurance risks widely.

Reinsurance for a totally-owned government-controlled insurance company will be expensive.

There can be no discounted policies on offer; it does not make sense.

Residents of Christchurch, and other cities and towns, should be asked how they feel about the state-run EQC, or the many people waiting for some help from ACC, to get some indication of whether they feel comfortable with a state-owned insurance company looking after their interests.

Overseas-owned insurance companies, although receiving much criticism for the slowness of their reviews and delays in payments, at least have a global reach of funds on which to draw. . .

Labour’s insurer will be completely exposed to events in New Zealand, a country at major risk of incurring heavy losses from natural disasters. . .

The Auditor General’s report on EQC said its response in Christchurch had been mixed.

There is nothing in the report to give any confidence in a new sate owned insurance company.

Labour leader David Cunliffe  tried to get some traction for the idea in Question time yesterday but gave Prime Minister John Key an opportunity to remind everyone of the risks instead:

. . . According to the public register, believe it or not, a total of 96 insurance firms have a full licence from the Reserve Bank’s carry-on insurance business in New Zealand. I have heard of a group proposing to set up a 97th insurer. The only point of difference is that that insurance business would put hundreds of millions of dollars of taxpayers’ money at risk by entering a market in which that group has no expertise and for which it cannot offer any competitive advantage. That cavalier attitude to taxpayers’ money comes from who else but the Labour Party. . . 

Hon David Cunliffe: Is it not true that the Prime Minister called Kiwibank a “failing institution” after almost a million Kiwis signed up as customers; therefore, why could not KiwiAssure also provide a locally owned, competitive, and high-quality option in the insurance market?

Rt Hon JOHN KEY: It is great that it has taken to supplementary question No. 4, but we will get to the heart of it. These are the reasons. For a start off, let us just take Kiwibank. Yes, it is a good little business. I might point out, though, that it has taken $860 million of taxpayers’ money and it has never paid a dividend in over 10 years. Secondly, the insurance market is hardly a free ride, because insurance companies happen to be in the process of paying $20 billion out in Christchurch. So if we had KiwiAssure, which the member wants to talk about, then New Zealand taxpayers would be paying a fortune into Christchurch. Thirdly, it is a competitive market at the moment. So if one assumes that they are just going to lay off their risk, they will be laying it off with the same reinsurers. Fourthly—     

. . .  Rt Hon JOHN KEY: To my fourth point as to why an insurance company would be a bad idea—name another major bank that operates in New Zealand that has an insurance company. It would not make sense to lend money [Interruption]—no, lend money—and actually have the insurance on the same property they are renting. They do not do that. . .

Finance Minister Bill English got a further opportunity to reinforce the risks in the proposal:

David Parker—Labour) to the Minister of Finance: Does he agree with IAG’s submission to the Commerce Commission that “there is real potential for major banks to begin underwriting their own general insurance products, and to compete directly with the incumbent insurance companies at the underwriting level as they already do at a retail level of the insurance market”?

Hon BILL ENGLISH (Minister of Finance): I have no responsibility for the opinion of IAG New Zealand but I can give the member the benefit of the experience of watching and working closely with the Reserve Bank to reduce the risks of our banking system to the New Zealand taxpayer. There have been 3 or 4 years where capital requirements have been increased, the core funding ratio has been increased, and we have put in place an open bank resolution system. The idea of a bank taking on more insurance risk is about the dumbest proposal that could possibly be made in the light on the events following the global financial crisis. The member should think very carefully before putting forward a policy that heads in exactly the opposite direction to where every other country in the world is heading.

Hon David Parker: Am I correct, then, to infer that he does not support the creation of a Kiwibank-style insurer to serve New Zealand consumers, which would reduce the dominance of overseas-owned insurers, keep profits in New Zealand, and bring added competition, added flexibility, and choice to New Zealanders?

Hon BILL ENGLISH: That is exactly the misleading pitch around this proposition. If there is one thing every taxpayer in the developed world now understands but the Labour Party does not, it is that the risk would be on taxpayers—taxpayers in Ireland, Spain, the US, and the UK. A billiondollar impost on New Zealand taxpayers arises exactly from financial institutions taking too much risk and loading it on to the Government. That is why his proposition is stupid. . .

Hon BILL ENGLISH:  . . . Secondly, what is surprising here is that when we have had the biggest manifestation of risk, it going wrong, and its impact on taxpayers in 100 years, the Labour Party still does not get it.

Hon David Parker: Why should anyone accept what the Minister of Finance says about KiwiAssure when 10 years ago he was pouring scorn on Kiwibank, saying it was “a small bank that has got no long-term viability.”?

Hon BILL ENGLISH: It is a small bank and it has never paid a dividend. It is great that it meets the needs of New Zealanders but it is certainly not an argument for creating a parallel insurance company. It is absolutely clear from our experience with the Earthquake Commission, AMI Insurance, and South Canterbury Finance that when the taxpayer has to underwrite this kind of risk, it can go wrong and taxpayers can be up for billions of dollars. Having low-income people working in the rain, paying their PAYE, and underwriting financial risk is as dumb an idea as you can have in the 2020s.

Rt Hon Winston Peters: Why would any sane New Zealander believe that last diatribe given that just 10 years ago, when the Cullen fund was announced, he said the very same thing about that, then went down just last week to its 10-year celebration and humbly had to admit what a fool he was?

Hon BILL ENGLISH: Well, as the member will know, because he was there, I did not say that. I did praise Dr Cullen for finding a way of stopping the Labour caucus spending billions of dollars in surpluses. If Dr Cullen had been there, he would have said that that was why he set up the Superannuation Fund—to protect New Zealand from the Labour caucus.

The one thing that is saving us from Labour’s cavalier attitude to taxpayers’ money is the proviso on the policy that a business case stacks up.

It is very unlikely a business case will so this isn’t so much policy or a promise as an attempt to get votes in the Christchurch by-election the outcome of which will be settled well before the business case is found to be faulty.

The business case for #gigatownoamaru stacks up well.

PREFU will show choice is clear


If you’ve been on the Herald or Stuff websites you might have noticed National’s ads showing the choice is clear.

On the left is a bloke in a red hat with a stop sign, on the right is a bloke in a blue hat with a go sign.

Arrows point left to stop and right to go forward.

The clarity of the choice will be confirmed when Finance Minister Bill English delivers the PREFU – Pre-election fiscal update – this afternoon.

When Labour Finance Minister Michael Cullen delivered the 2008 PREFU it forecast 10 years of deficits. Under their stewardship, New Zealand was already in recession and Labour didn’t have a workable plan to change that.

In spite of the financial and natural disasters which have beset us since then, National is forecasting a return to surplus earlier than that with policies which rebalance the economy away from  taxing and spending towards savings, investment and export-led growth.

That is a significant achievement and a reminder that the choice is clear – going backwards under Labour or forwards with National.


We have Ruth Richardson to thank for the opening of the books. Until National, at her urging, changed the law which requires governments to open  the books before the election, opposition parties had no idea about the state of the national accounts until after the election.


Govt still commited to surplus by 2014/15


The government remains committed to a return to surpluses by 2014/15 in spite of the impact Canterbury’s earthquakes have had on the deficit.

The Crown’s accounts for the year to 30 June 2011 show net expenses of $9.1  billion for the Canterbury earthquake last year made up almost half of the  Government’s $18.4 billion operating deficit before gains and losses.

“This is an unusually large deficit, but it includes the significant costs of  the Canterbury Earthquake Recovery Fund and the updated assessment of Earthquake  Commission costs,” Mr English says.

“Setting aside the earthquakes, we’ve made good progress compared to  estimates five months ago in the Budget. A combination of higher than forecast  revenue and lower than forecast spending has reduced the underlying deficit by  about $2.8 billion.

“However, this was more than overshadowed by the higher earthquake  costs.”

The deficit is concerning. But given the country was in recession before the rest of the world; that growth from about 2004 was the result of debt-fuelled spending; and that this government has faced an unprecedented series of natural and financial disasters, it could have been a lot worse.

Despite the Canterbury earthquakes, Treasury notes economic growth was better  than expected in the first half of 2011, driven by a recovery in domestic demand  and higher export prices.

“This flowed through to tax revenue, which rose for the first time in three  years due to higher income, private consumption and business profits,” Mr  English says. “And despite the earthquakes, management of public sector finances  continues to improve.

That is a significant achievement given the continuing difficulties in Canterbury which accounts for about 10% of the economy and we need more of this government’s economic medicine.

“In the current uncertain global environment, it’s important the Government  remains focused on its plan to return to surplus faster and building a  competitive economy so we can sell more to the world. This is certainly not a  time to be promising to borrow more, spend more and tax more.”

In spite of all the set backs it’s faced, National has stuck to its plan to reduce government spending and deliver on its promise of polices which promote savings, investment and export-led growth.

Normally a deficit this size so close to an election would be good news for the opposition. But when Labour squandered the good years and its Finance Minister Michael Cullen boasted about spending the lot after his last Budget few outside its core supporters, believe they should be trusted back in government.

Did the Greens make them do it?


Trans Tasman explains Labour’s decision to introduce a capital gains tax:

. . . a CGT would almost certainly be one of the Green Party’s coalition requirements. John Key was quick to damn the new policy, saying a CGT would “crush everyday NZers.” But the real criticism lies in the actual mechanics of the tax, which as papers prepared for the Tax Working Group showed could raise if applied across-the-board at 30% to all property, shares, and farms around $3.8bn a year, but only after about 15 years.

Any suggestion the introduction of a 15% CGT, applied only to investment property, would immediately yield $4.5bn a year, roughly the revenue gap to be filled will be laughed off the hustings. While left-wing commentators have hailed the prospect of a CGT as “bold,” and a “circuit-breaker,” others are asking why politicians as astute as Helen Clark and Michael Cullen always kicked the idea of a CGT deep into touch.

Keeping Stock pointed out it’s not just former Labour MPs who didn’t support a CGT.

Did the Greens make them do it? Not directly.

But perhaps Labour is attempting to front-foot the issue rather than risk being seen to give the Greens such a major concession during coalition negotiations should they be in a position to form a government after the election.

No longer if but when and who


The leadership of a political party which has been scorned by voters after nine years in government is a poisoned chalice.

The public usually gives a new Prime Minister and administration a period of grace before it starts looking for alternatives, especially when the obvious one isn’t markedly different from the one they turfed out at the previous election.

Helen Clark announced her resignation on election night which meant any publicity Phil Goff might have got as Labour’s new leader was overshadowed by the establishment of the new National-led government.

Michael Cullen resigned soon after which gave Goff the opportunity to appoint a new finance spokesman but there weren’t enough other changes in the front bench to convince voters they could offer a fresh approach.

Since then the few faltering steps forward have been countered by mistakes and misjudgements by Goff or his MPs. But until now there hasn’t been any serious suggestions of a coup against him.

Why would anyone want to lead the party to almost certain defeat when he or she could wait until after the election and make a fresh start? The only reason would be the thought that a new leader might be able to reduce the damage which is likely to be inflicted at the polls if the current one stays.

The odds were always on Goff  going after the election they are now increasing on the chances  he might go sooner. It is no longer a matter of if he will go but when and who will replace him. Scoop suggests the answer to when? could be next week and who? will be David Parker. The link to the NBR in the last post yesterday makes a similar prediction.

Kiwiblog reckons the coup could happen even sooner.

Stealing from the future


My parents generation came through the Depression with the very firm belief that saving for a rainy day was better than borrowing to enjoy the sun today.

My generation got a reminder of the good sense of that when the ag-sag of the 1980s hit.

We didn’t like it at the time but the tough prescription of Roger Douglas’s Budgets were a very necessary correction of the policies of successive governments from the early 1970s. They spent more than they earned, taking the country into debt which was in effect stealing from future generations.

Reducing the burden of the state and freeing the economy to allow better growth were worthy aims which were subverted by Labour from 1999. Michael Cullen reduced public debt and achieved Budget surpluses but he also increased government spending, gave welfare to people in want rather than need and increased taxes.

The worst damage was done by the extravagant promises which Helen Clark used to win the 2008 election. The productive sector was in recession but it was disguised by high government spending and consumer spending and escalating property prices fuelled by borrowing.

We were already in recession when the global financial crisis hit. Recovery has been patchy at best and the economic impact of the Christchurch earthquake has been the last straw.

The government has recognised the seriousness of the situation and is making it clear there will be no pre-election lolly scramble. There won’t be any increased spending at all – if there is more in one area it will have to come from less in another.

The left either can’t or won’t see the sense in this which gives voters a very real choice in the election.

Labour and its potential allies  want to steal more from the future. National knows the lesson the Depression taught my parents still hold true.

Tax-free income threshold too costly for little benefit


Who said a tax-free threshold on income “. . .  would have only a minimal benefit for a very small number of low income earners.”?

None other than then-Finance Minister Michael Cullen before delivering his 2008 Budget:

His initial preference had been for a tax-free income threshold.

“This would have seen, for example, the first $9500 of income not attract income tax,” Dr Cullen said.

On the surface this had appeared to be an appealing idea.

“However, it became clear that it would have only a minimal benefit for a very small number of low income earners.”

Up to 90 per cent of those earning below $18,000 were on temporary low income – students and youths – or supported by benefits or superannuation.

Dr Cullen said it would deliver less assistance to low income workers than the $3.7 billion cost in the third year warranted, and he “would be unable to provide meaningful relief for those further up the income scale”.

If the costs outweighed the benefits of a tax-free threshold of $9,500 in 2008 how can the benefits of the lower threshold proposed by Labour leader Phil Goff justify the costs now?

Dr Cullen also rejected calls for removing GST on food and petrol saying it would make the tax system inefficient and any gains would be quickly wiped out.

Goff was a senior member of the same Cabinet in which Cullen served.

Even if his duties as Trade Minister took him overseas when Budgets were being set, Goff must have known about options and justifications for choices.

If removing GST on all food and petrol wasn’t a good idea in the last Labour government, tinkering at the edges of that policy by taking GST off fresh fruit and vegetables wouldn’t achieve enough to jsutify the costs in the next one.

List still seen as second best


In spite of more than 14 years with MMP there’s still a perception that an electorate seat is better than a list one.

Electorate MPs do sometimes opt to seek a list place only, but usually only towards the end of their careers as Michael Cullen did and Lockwood Smith plans to.

It’s much more common for list MPs to try for an electorate seat – some more than once.

The Labour Party has today chosen list MP Phil Twyford as its next candidate in the Te Atatu electorate, replacing ousted MP Chris Carter.

Mr Twyford has saved himself from the embarrassment of missing out on his fourth hope for an electorate seat. He lost out on the Waitakere seat to Carmel Sepuloni. He was also earlier discouraged by the party hierarchy from putting his name forward in two seats – Mt Albert, now held by David Shearer, and Auckland Central, in which Jacinda Ardern will stand.

The question now is, will Chris Carter stay for the full term or will he go early and prompt another by-election?

A dog of an idea


In a list of Labour’s spending excesses, Duncan Garner writes:

Michael Cullen spent twice what he had to buying back KiwiRail from Toll.

The purchase suited Labour for political reasons. They campaigned on KiwiSaver, KiwiRail and Kiwibank. But it was not good value for money – taxpayers’ money. Cullen would never have spent his own dosh on such a buy-up.

I note KiwiRail is now valued at half what Cullen paid for it . .

In her Listener column Joanne Black writes:

My elder daughter and I are much excited at the moment by what name we would give a cat . . . Naming a dog? That would be so much easier. If I had a dog I’d call it Kiwirail.

Apropos of this, like Whaleoil, I’m not impressed with Otago University’s decision to grant Cullen an honorary degree.

They spent the lot


It pains me to say this but Michael Cullen got something right.

After last year’s budget he said, “we spent the lot.”

The news of an operating deficit of $10.5 billion in the crown accounts in the year to June, shows they did.

What he didn’t say is that we’d all be paying for it.

Only one of the guilty in the dock


Former MP Phillip Field was in the dock.

But the Dominion Post editorial makes it clear he wasn’t the only guilty party.

However, if Field has got his just deserts, others have got off lightly. Those others are the senior members of the Labour Party who ran interference for him for almost 18 months and who are now ducking for cover.

Readers might remember that former prime minister Helen Clark was slow to act when questions were first asked about Field’s conduct, perhaps because the 2005 election was in the offing, and that when she did, she established an inquiry with narrow terms of reference and without the power to compel witnesses to give evidence.

Hence Field was able to claim he had been vindicated by an inquiry that found no evidence he had misused his position as minister for personal benefit.

Deputy prime minister Michael Cullen appeared to agree. Field’s “fundamental fault was to work too hard for the many, many hundreds of people who come to his electorate office on immigration matters”, he said.

What he overlooked, deliberately or otherwise, was the numerous questions the inquiry raised about Field’s conduct as an MP as opposed to his conduct as a minister.

Field was convicted  of 11 counts of bribery and corruption and 15 of attempting to pervert the course of justice.

No-one is suggesting his former colleagues were complicit in the crimes. But they too behaved shamefully by attempting to thwart the inquiry into his actions.

They compounded their shame by continuing to defend him when, in spite of being hamstrung by narrow terms of reference, the Ingram inquiry raised very serious questions over Field’s conduct.

New Zealand has a very good repuation for a lack of corrpution. That depends not just on people not acting corruptly, it also depends on other people’s determination not to tolerate such acts.

Labour’s support of Field was corrupt and their inability to say sorry sicne makes it worse. They weren’t guilty of a crime but they were guilty of trying to prevent him being held to account.

Hat Tip: Kiwiblog 

P.S. David Farrar devotes his NBR column to this issue too.



Imagine what New Zealand might have been like if the last nine budgets hadn’t been covered in red.

Imagine how much stronger the country’s balance sheet would have been had middle and upper income families not been turned into beneficiaries, had the emphasis been on improving services rather than changing systems, had we not been saddled with an over priced train set, had the goal of returning New Zealand to the top half of the OECD not been ignored. . .

Imagine how much stronger households and businesses would have been had we not had nine years of over taxing and over spending.

Imagine how much better off New Zealand would have been had Michael Cullen not spent the lot last year.

It wouldn’t have stopped the global economic recession but policies which minimised the dead weight of the state and maximised growth would have left us in a stronger position to deal with it and recover from it.

Ghost of Budget’s past


Oh, no – not again, TVNZ reports that:

Finance Minsiter Michael Cullen will deliver the 2009 Budget on May 28.

Hat Tip: Big News

Not a watch but time bombs


A letter to the editor of the ODT:

Well, sadly, it is goodby to Helen Clark and Michael Cullen. I am sure all citizens of New Zealand wish them well in their future endeavours.

For the past decade, under their stewardship, we have gone to sleep at night knowing that the best little country in the world was ticking like a fine Swiss watch. We had an independent foreign policy respected around the world. Minority peoples were given equal rights. Out monetary policies enabled us to repay enormous debts overseas, and yet ran in the black for the first time ever. We lead the world in environmental issues.

Already, some of these things are being whittle away. Let us be ever vigilant of our inexperienced National Government and never accept second best for our children. John W. Stephen Fairfield.

That wasn’t the ticking of a fine Swiss watch, it was the unfunded and underfunded time bombs left for the new government and current and future taxpayers.

Labour’s newest MP brings diversity to caucus


Labour’s newest MP isn’t brand new, Damien O’Connor was the MP for West Coast Tasman until the last election when National’s Chris Auchinvole won the seat.

O’Connor was formally declared elected to parliament as a list MP  yesterday to replace Michael Cullen.

He adds to the diversity among his party’s ranks – he’s a middle-aged, Pakeha, rural man and – I think – the only one in Labour’s caucus who has been a farmer.

Staitsm and Sanctimony


Brilliant column from Rob Hosking in the NBR: Statism and Sanctimony – the Clark-Cullen Years.

I recommend reading it in full so will jsut give a couple of teasers:

One small example of the shift in attitude since the change of government was in an exchange .  . .  at a select committee a couple of weeks ago.

Labour and Green MPs were worrying about tax cuts, and what people would do with those cuts. . .

English simply observed people would do with their money what they thought was right for them, and he wasn’t going to get into nagging them about it.

Isn’t it a relief to know someone trusts us to make our own decisions with our own money?

We have heard a lot from Labour and its apologists about how grateful we should be for the way Cullen got the government debt down.

There are two responses to that.

First, New Zealand’s business sector also got its debt down over that period, and, with a few unwise exceptions, resisted the temptation to gear itself up. Our business sector should be equally congratulated (and the fact it is not shows, again, the underlying statism being exhibited.

The more important point, made by the OECD in its recent report on New Zealand, is that private debt ballooned over that period – and a more balanced approach to tax reductions over the Labour government might have ameliorated that.

 Taking more than was needed and using too much of it to increase the dead weight of the state has left us in a much worse position than we would have been had Labour not been convinced the state knows best and individuals can’t be trusted with our own money.

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