English Bill: Questions for Oral Answer — Questions to Ministers 
English Bill: Questions for Oral Answer — Questions to Ministers 
[Volume:639;Page:9031] 
1. Hon BILL ENGLISH (Deputy Leader—National) 
 to the  
Minister of Finance 
: In how many of his eight Budgets has he reduced statutory tax rates? 
Hon Dr MICHAEL CULLEN (Minister of Finance) 
: 
 I have not delivered eight Budgets. 
Hon Bill English 
: Can the Minister confirm that the Australian Government has reduced personal taxes for the fifth Budget in a row further increasing the significant gap between after-tax incomes in Australia and after-tax incomes in New Zealand; why did he not reduce personal taxes in the last five Budgets? 
Hon Dr MICHAEL CULLEN 
: There has been a large range of tax reductions over a number of Budgets. They have been particularly concentrated in the business taxation area in order to encourage business investment. 
Jeanette Fitzsimons 
: In how many of the Minister’s last seven Budgets has he put in place economic incentives to reduce carbon emissions and promote sustainability; if there were some what were they? 
Hon Dr MICHAEL CULLEN 
: There were no specific incentives in those areas. They would be I think amongst the most difficult tax incentives to design and would require a great deal of thought before being worked through properly. Obviously as I think all members understand any tax incentives also create opportunities for tax avoidance and evasion and the Government has been mindful of that. 
Hon Bill English 
: Can the Minister confirm that a policy of consistent and affordable tax reductions has been one of the significant factors behind the fact that the Australian after-tax average wage has grown by 33.6 percent in the last 6 years and the New Zealand after-tax average wage has grown by 18.9 percent in the last 6 years? 
Hon Dr MICHAEL CULLEN 
: Certainly tax changes will have been a factor but also generally speaking wage increases have been higher in Australia than in New Zealand even when the growth rate has been lower. Of course until recently Australia had a much more heavily regulated labour market than New Zealand’s which gave the trade unions more bargaining power. 
Shane Jones 
: What reports has the Minister seen on the effect of the tax wedge on the average New Zealand family? 
Hon Dr MICHAEL CULLEN 
: The latest OECD report on taxing wages shows that for a single-income family with two children on the average full-time wage New Zealand now has the second-lowest tax wedge in the OECD at 2.9 percent compared with the OECD average of 27.5 percent. That is a reduction from 13.6 percent in 2000 down to 2.9 percent and the 1 April 2007 Working for Families extension will reduce that even more. 
Hon Bill English 
: Can the Minister tell the House and the public why he did not follow the path the Australian Government has followed—namely that when inflation was low and surpluses were big it set out on a programme of consistent tax reductions—and why did he not do that when he could have done so? 
Hon Dr MICHAEL CULLEN 
: The Government has a range of priorities in areas such as education health and superannuation. I welcome the confirmation from the member that he believes in cutting education health and superannuation. 
Hon Bill English 
: Does the Minister now wish he had followed that path now that New Zealanders are increasingly impatient that all the benefits of the growing economy have been used by Labour for Labour’s purposes rather than on expanding the capacity of the economy to grow and given the fact that many New Zealanders believe that the Australian Government has made better decisions than this Government? 
Hon Dr MICHAEL CULLEN 
: What a great deal has gone into is firstly a massive increase in spending on infrastructure in both land transport and public transport which was significantly ignored under the National Government; secondly a massive increase in expenditure on education to invest in our human capital and skills for the future; and thirdly massive reductions in key areas of business taxation notably through depreciation changes in fringe benefit tax and related matters which are also investments in future growth and production. But what the member has to explain is why he has been arguing for some weeks that we should have a tighter fiscal policy and suddenly today he is once again arguing after the Australian Budget that we should have a looser fiscal policy. To put his mind at rest I will say the coming Budget will be slightly tighter than the Australian Budget in the first year and slightly looser in the second year. 
Hon Bill English 
: Will the Minister in his Budget or somewhere else explain to New Zealand why he gave up the opportunity that Australia took—namely to use the chance of a growing economy to reduce personal tax rates and enhance the capacity of this economy to grow without the high inflation and high interest rates that New Zealand families and businesses will now have to pay because he made the wrong call? 
Hon Dr MICHAEL CULLEN 
: The member remains obsessed with the notion that cutting tax rates especially on higher incomes is the sole route to growth. This Government has concentrated on infrastructure on human capital on the business taxation area on offshore investments and on continuing to address those kinds of issues as much higher priorities for stronger growth in the New Zealand economy. 
Hon Bill English 
: Why does the Minister insist that there was no alternative to what he did when the Australian Government has demonstrated it can increase the spending on public services increase the investment in infrastructure reduce taxes and still have lower inflation and interest rates than New Zealand has? 
Hon Dr MICHAEL CULLEN 
: I noticed that after the last Australian pre-election Budget interest rates rose twice after the election. I noticed that the immediate commentary on the Australian Budget from  
The Economist 
 was that it has increased the probability of interest rates rising in Australia after the election.