I’m trying to keep this short and simple, which is very tricky. What seem to me to be the major economic issues for this election are:
- Getting a handle on our debt
- Growing our economy
- Taxation
- Cost of living
- Savings schemes
Here are some graphs to give you an idea of how our debt has been handled over the last ten years. The things we need to take into account when looking at this are the major, unexpected expenses which have come up since the last election – the Christchurch earthquakes and the Rena grounding. This has, understandably, blown out budgets significantly. What is interesting about the graphs is how it shows a serious decline in debt toward the end of Labours last term in government. Despite National constantly touting Labour as the 'spendthrift' party, they managed to keep our debt in check. Both National and Labour have plans to have our debt paid down by 2015, but both have very different plans. In simplified form, National plan to part sell our SOE’s, grow the economy and cut spending. Labour plan to install a CGT, bring emissions taxing for farmers forward to 2013, grow the economy, gradually increase the retirement age to 67, and bring the upper tax bracket back up to where it was before National reduced it.
In order for us to ‘compete’ with other countries in terms of wages and work opportunities, we need to grow our economy. Growing our economy will also help us pay down our debt faster, and add some slack to those tight governmental purse strings. This is valued by all the political parties I looked at, but all have a different view on how to do this. National plans to reduce business costs, work on progressing trade agreements to encourage our export market, use Asset Sale shares as a way to ‘revamp’ investment, alter the beneficiary system significantly and improve infrastructure (internet/roading etc) within NZ. Labour are looking at bringing in an R&D tax credit to encourage research and development, creating more apprenticeship schemes, putting more red tape around the sale of our land to foreigners, keep government contracting to NZ based firms only and introduce a CGT to encourage more diverse investment.
In the minority parties the Greens are interested in more than measuring a country by GDP, and want to focus on creating a new way to measure success. They want to create more sustainable businesses, support local businesses and stop the sale of land to foreigners. Act want to cut spending and red tape, lower taxes, sell SOE’s and allow more mining. NZ First want to buy back land that is in foreign hands and rebuild the NZ export economy without free trade deals with low wage economies. Maori want to encourage business in small rural communities, and create a Maori Economic Strategy.
Tax is an interesting thing. It is essential to the running of our country, but also hits us where it can hurt – in the pocket. Labour’s proposed CGT has got a lot of people running scared, but it isn’t a new concept. It has been one of the Green’s policies for a long time, and currently exists in most OECD countries. National and Act are against it, but it is a tax policy most minority parties agree on. Where Act and NZ First is about lower taxes for all, Labour wants to bring the upper tax rate back up to where it was before National took it down and bring emissions taxation forward. The Greens want to bring in more eco taxes and Mana want to bring in the ‘Hone Heke’ tax (like the British ‘Robin Hood’ tax) and a more progressive tax system.
There are also some ‘tax free’ zones proposed by a number of parties. For every party for it, there is a different amount:
Labour $5,000 Greens $10,000 Maori $25,000 Mana $27,000
Many parties are also all for taking GST off at least something, if not everything. Mana want to abolish GST entirely, Maori want to remove it from food, and Labour want to remove it from fruit and veges.
Cost of living is of large concern to many of us. Inflation has gone up around 9% because of the rise of food, electricity and petrol prices, not to mention the 2.5% hike to GST. Over this time median incomes have dropped around 6%, and the minimum wage has increased just 1.9%. For families working hard for minimum or low wages, it’s tough times. National has few plans to address this – a slight reshuffle of Working for Families giving low income families around $14 extra a week, and changes to healthcare. Labour, NZ First, Greens and Mana want to bring the minimum wage up to $15, with both Greens and Mana wanting to fix minimum wage at two-thirds of the average wage. Changes to GST are also designed to aid in this. Act do not seem to be concerned about cost of living at all, but given their target demographic for votes, this is no surprise.
Savings has become even more of an issue for this election with Standard & Poors saying this was a key reason behind our credit downgrade. To be honest, it’s quite difficult to find what the minority parties plan to do about this through reading policy online. Although the Greens say they ‘support savings schemes’ they do not outline specifically how they support these. National and Labour clearly outline how they plan to address this issue. National plan to increase minimum Kiwisaver payments, establish auto-enrolment to Kiwisaver in 2014 (if in surplus), adding investment opportunity through partial asset sales, and resuming contributions to the NZ Super fund once back in surplus. Labours plans are similar – making Kiwisaver compulsory, restarting contributions to the NZ Super fund and gradually increasing the age of Super entitlement from 65 – 67 over 22 years.
So that’s the basic gist of financial policy. I’m sure you have already made your mind up, or at least thought about what you think makes most sense. I’ll tell you my thoughts pretty shortly, but first, here are a few informative articles about what other people think: This is from business leaders on National's economic plan. This, on National from an MYOB poll. And this is an interesting blog on both parties and their approach to the economy.
Economics is supposed to be National’s strong suit, and as such, I see no point in debating their numbers. Phil Goff has produced the numbers also, and until someone other than John Key and Bill English can pick this apart, I see no reason to believe it will not work. More importantly, National's fiscal policy might be completely sound, but is it really what's good for New Zealand?
National are proposing selling off 49% shares in some of our SOE's. This means that the government will maintain decision making power over these assets, but 49% of the profits from those assets will go to whoever invests in them. National and Act are behind this idea, but everyone else disagrees with this. And although National has said these shares will be sold to 'Kiwi families', the likelihood of 'Kiwi families being able to afford this investment is minimal, and in reality, these investments will go offshore. This will not 'revamp' the NZ investment economy as proposed by National. It will just provide a short-term cash fund for the government. As David Cunliffe from Labour says: ‘Asset sales: a one off, short term fix that ignores the lessons of history.’ Selling off our SOE’s is an extremely short sighted plan with little benefit. My other concern with National’s proposal of this, is the validity of it being necessary to get us into surplus. Initially, asset sales were designed to pay down our debt. Now National are saying that asset sales will fund changes to education, health and provide more funds for Kiwibank, so are asset sales really necessary to get us into surplus?
Labour (and every party besides National and Act) give us the option not to sell our SOE's. This comes at the price of changes to taxation. If the upper tax bracket is brought back up to 39%, it will still be the 7th lowest top tax bracket in the OECD. Countries with lower top tax brackets tend to have more unequal societies. Given that NZ is currently rated as the 6th most unequal economic society in the OECD, surely upping tax levels in the top bracket can only mean positives for us as a country? Introducing CGT’s to me is just a common sense way of creating a fairer tax system and a more equal society. Please read Labour’s CGT policy if you don’t really understand it – it’s quite simple, and not really that scary.
For those of you who don't know me, you are probably thinking that I'm just another 'bloody Leftist', that I have everything to gain from Labour and nothing to lose. That I am another poor beneficiary who is moaning about the 'haves and the have nots'. Like many 'Leftists', I am not. My husband and I both work. Financially, I would probably be considered middle class. We eat out at nice restaurants, we're about to buy our first home, we travel overseas, we part-own our family bach. Although (like most Kiwis) we would not be affected 'in the pocket' by changes to the upper tax bracket, we would be financially affected by the introduction of a CGT and changes to the retirement age and my workload would be affected by changes to GST My choice not to support National is not about financial envy, it's about how I truly believe NZ can be a better country to live in.
I do not believe selling our assets is a good long term plan. Neither do most politicians. I do believe in creating a fairer tax system. Given both our current financial position and position on the OECD tables, I think this is necessary for creating an all-round better New Zealand. More equal societies have been proven to have lower rates of crime, unemployment, poverty, teen pregnancy, mental illness and homelessness. That means less spending on health and law enforcement, and an increase in tax revenues. The bottom line is important to me, but, like the Greens, I believe the wealth of a country is determined by more than it's GDP.
