Prebble Richard: Questions for Oral Answer — Questions to Ministers 
Prebble Richard: Questions for Oral Answer — Questions to Ministers 
[Volume:606;Page:3772] 
4.  
Hon RICHARD PREBBLE (Leader—ACT NZ) 
 to the  
Minister of Finance 
: Further to his answer to question No 7 yesterday when he claimed that New Zealanders’ average incomes rose faster than almost any other country in the OECD over the last couple of years exactly how many OECD countries experienced increases in gross average wages higher than New Zealand between 2001 and 2002? 
Hon Dr MICHAEL CULLEN (Minister of Finance) 
: 
 The member seems to be confusing average incomes with average wages. Total gross earnings are a better measure of incomes because they capture changes in wage rates numbers in employment and hours worked. Gross earnings in New Zealand increased by 7.7 percent last year and 6.6 percent the previous year. This was about 5 percent above the rate of inflation in each year. 
Hon Richard Prebble 
: Is the Minister not aware that the latest OECD report this week shows that in the last year gross average wages increased faster in 19 OECD nations than in New Zealand yet the rise in the tax bill of the average worker was greater in New Zealand than in all but one OECD nation; and would he like to reconsider his answer to Parliament yesterday when he said that the rise in tax being paid by the average New Zealand worker is caused by the increase in gross wages? 
Hon Dr MICHAEL CULLEN 
: No. Again the member confuses wages with incomes. Let me try to explain to him how the family support system works. It is a targeted wage rebate which is clawed back on the joint income of husband and wife. Therefore if the family income rises there is a claw-back of family support payments. Unless there is indexation increases in income automatically lead to overall reductions in the level of family support payment on average. That is why the average tax burden for a person with two children rose in New Zealand. The member also noted that the tax burden for a single person in New Zealand is at the lower end of the OECD scale. 
Jill Pettis 
: Why was New Zealand’s gross income performance so strong over the 2001-02 period? 
Hon Dr MICHAEL CULLEN 
: Because income is a function of both wages and the number of jobs. New Zealand has the ninth-lowest unemployment rate in the OECD. Last year we posted the third-highest growth rate in the OECD and we are amongst the top five in terms of job growth. 
Dr Don Brash 
: Given the large number of OECD countries where average incomes rose more quickly than they did in New Zealand in the last year or two—when our economy was buoyant because of strong export prices and a low exchange rate—would the Minister expect to see any improvement in our relative position over the next year when the latest Treasury projection for growth suggests that after adjusting for the higher exchange rate total growth is likely to be only about 2 percent? 
Hon Dr MICHAEL CULLEN 
: The member repeats exactly the same error as Mr Prebble; he confuses average incomes with average wages. Mr Prebble correctly quoted the OECD tables relating to wages. I would have thought a former Governor of the Reserve Bank would know the difference between wages and incomes. 
Dail Jones 
: Given that table 1 of the OECD report to be tabled in April entitled “Household tax burden in 2002 as a percentage of gross earnings equivalent to the average production worker”—so that we are clear about the basis we are using—shows that an Australian one-earner family with two children pays tax of only 14.7 percent whereas a New Zealand family of exactly the same ratio being a one-earner family with two children pays 18.2 percent; what will the Minister do with the substantial tax collection he has received which has resulted in a substantial surplus to improve the situation of a one-earner family with two children in New Zealand? 
Hon Dr MICHAEL CULLEN 
: As we have indicated should it prove over the next year that the surpluses we are experiencing at the moment are structurally strong and not merely cyclical the intention is to address that matter in the 2004 Budget. We do not intend to repeat the experience of the United States and the United Kingdom which confuse cyclical surpluses with structural ones and have blown them in advance. 
Hon Richard Prebble 
: Can the Minister explain why a 4 percent increase in the average gross wage in this country results in the second-highest increase in the tax bill of average workers of any country in the OECD but a 7 percent increase in the average wage in Ireland results in a 6.2 percent decline in the tax paid by that average worker; and should the Minister not have a look at the Irish tax system? 
Hon Dr MICHAEL CULLEN 
: No. As I tried to explain to the member New Zealand has a targeted family support rebate system. Many other countries around the world have universal systems of family rebates on the tax system or of direct family payments. Mr Prebble is one of the Ministers who designed the targeted family support rebate system.