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Australian budget and the need for a NZ vision

18/05/2008

Bernard Hickey has an excellent article at Stuff on the Australian budget, inflation and the comparisons between NZ and Australia. The graphs are worth studying, especially this one comparing the growth in government spending and non government spending in NZ. Frightening.

First off, as Hickey notes, Rudd is delivering on his promises to rein in spending and to cut waste:-

It included $7 billion of government savings this year, largely driven by reducing real government spending growth to 1.1%. Labor Finance Minister Lindsay Tanner, a former union official, announced that his “razor gang” planned spending cuts of $33 billion over three years, which was three times more than Labor promised in the election campaign.

If only poor quality spending could be attacked so vigorously here.

Then Hickey notes:-

Rudd and Swann went out of their way to say they hoped this budget would keep the Reserve Bank of Australia happy and help it fight inflation to keep interest rates down. They know that home-owning and small business-owning middle Australians care most about interest rates. Labor knows it can deliver more to voters’ back pockets by fighting inflation and keeping interest rates low than by tinkering with tax breaks and middle class welfare.

Note the difference between there and here. Cullen seems to believe the latter, especially the welfare bit.

The Australian budget actually went out of its way to cut some of that middle class welfare by slashing access to a baby bonus and a family tax benefit to those earning more than $150,000 a year. Yes, believe it. These Australians, and no doubt quite a few expatriate New Zealanders, were receiving a type of Working for Families payment even though they earned twice the median family income.

The same thing is happening here. A family with two kids and an NZ$84,500 family gross income still gets a Working for Families tax credit. This is well over the average household income. It creates enormous marginal tax rates and is the worst kind of middle class welfare that the government should take a knife to if it’s serious about helping middle New Zealand.

Adam believes very strongly that WFF is wrong, it sends all the wrong signals and is a disincentive.

Rudd’s laser-like focus on the people who elected him, middle Australia, and the interest rates they pay should be watched and learned from on this side of the Tasman. He knows that an interest rate cut for a family with a mortgage is so much more meaningful than any sort of middle class welfare or tax cut

Key and English should bear this in mind as they plan for the future.

The overall impression from Labor’s first budget in Australia is that it knows how to help middle Australia and knows that long-term investment in infrastructure is one of the best ways for a government to improve the health and wealth of the nation over the long term. It has looked beyond the initial electoral pain of budget cuts and middle class welfare cuts and taken a long-term decision. It shows energy, bravery and vision.

Can the same be said of our government? There are suggestions of yet more middle class welfare handouts in next week’s budget and no suggestion of the sort of government consumption spending restraint needed to keep the pressure off interest rates. Our Labour government appears tired, afraid of the electorate and lacking in vision.

We need a government that has a vision, one that can be delivered upon and one geared to raising productivity and national and individual wealth.

We will not get it from the present administration.

They are only interested in returning to office and will leave no stone unturned or taxpayer dollar unspent in order to achieve this.

This government is corroding and the stench of scandal is now too commonplace.

It is time for a change.

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