Burns Brendon: Taxation (Budget Measures) Bill — In Committee 
Text is incorporated into the Bound Volume 
Burns Brendon: Taxation (Budget Measures) Bill — In Committee 
[Sitting date: 20 May 2010. Volume:663;Page:11125. Text is incorporated into the Bound Volume.] 
BRENDON BURNS (Labour—Christchurch Central) 
: 
 This Budget is a payback Budget. It delivers to people who have supported this Government in the past. It is a business-class Budget. It is moving people in business class up to first class while those down in cattle class start paying for their lunch. This Government sometimes attempts to portray Labour as a party that wants to spend money. Well the Government is borrowing to cut the top tax rate for those at the top end. We have seen that in the past. It is the sort of policy that Ronald Reagan introduced in the United States. It was called a strategic deficit and all it did was rob the poor to pay the rich. It is voodoo economics. 
Supposedly the economy will recover to pay for this but let us look at the Budget tables. The balance of payments has not been in surplus in this country since 1973 since we were last as a nation in the black. This Government says it wants to see export-led growth. Well the balance of payments deficit goes from $4.9 billion this year to $8.9 billion next year to $13.1 billion the following year to $15.7 billion the year after that and to $17.2 billion the year after that according to Treasury projections. So where is the export-led growth that will reduce our balance of payments deficit? The balance of payments is the measure of what we as a nation export as opposed to what we import. 
List MP Nicky Wagner said last night that this Budget was a cracker. Well she should explain that comment to the 76 percent of people in my electorate of Christchurch Central who earn less than $40000 a year. They will not be calling this Budget a cracker. She should explain that comment to the Manufacturers and Exporters Association based in my electorate of Christchurch Central who issued a press release about the Budget. It was headed: “Rhetoric does not match the reality.” Chief executive John Walley said: “The changes to property taxation the corporate tax rate and GST go some way … but they fall a long way short” of what the Tax Working Group recommended. He said: “The removal of accelerated depreciation loading for plant and equipment will be detrimental to business investment.” That is why we are seeing that balance of payments gap deteriorate hugely under this Budget. 
We were told that there was a need to cut the top tax rate from 38 percent to 33 percent because that kind of gap encouraged people to move their tax into company structures to avoid the top tax rate. So what does this Budget do? It cuts the company tax rate back to 28 percent so the differential between the top tax rate and the business tax rate is still the same—5 percent. Obviously there is still every incentive for people to move their tax into a company where that is possible. 
We are told that this Budget is supposedly about driving down the issues of tax shelters. The real impact of this Budget relates to GST and what is yet to come. As Treasury forecasts note we will see inflation nudging 6 percent in the year ahead which will simply erode the benefits of the tax cuts being introduced at the middle and lower end of the income scale. 
I noted that a housing commentator on  
Campbell Live 
 last night asked where the stimulus was in this Budget for building new homes. Of course GST will apply to new homes so they will cost an extra 2.5 percent. Already the housing market is less than buoyant; in fact it is dead flat. The projections are that this Budget will see an 8 to 10 percent depreciation of the existing housing market which will fall most heavily on the new housing market. This Budget has done nothing to stimulate the building sector—in fact it is taking it backwards—and we will see much fewer new houses built. 
Nothing in this Budget encourages younger New Zealanders who are first-time home buyers into their first home. In fact it does absolutely the opposite. Before members opposite attempt to suggest that tax cuts will stimulate this I ask them what $1000 or $2000 of tax cuts will do for a young couple trying to buy their first home. It will be absolutely eroded by the GST increase but if there is anything left what will that contribute to their ability to service a mortgage or to put down a first-home deposit? It will contribute absolutely nothing. Meanwhile the Budget supposedly trumpets the increases in health and GST but those are worth nothing with inflation of 6 percent.