Tax minister incomes to curb inflation

Thursday, March 8th, 2007

Tax minister incomes to curb inflation

Perhaps the Reserve Bank should be given the power to levy the incomes of cabinet ministers and others if the increases in their portfolio spending exceed the rate of inflation, (!) the Employers & Manufacturers Association (Northern) suggests.

"Since government is the major contributor to inflation, the Reserve Bank should be able to levy the income of government ministers and senior central and local government councilors and officials," said Alasdair Thompson, EMA's chief executive, tongue firmly in cheek.

"If they raise their operating expenditure beyond say three per cent, public officials should be required to pay the price," Mr Thompson continued.

"This would be a more effective way of controlling inflation caused by government than the levy on mortgage interest rates proposed by the Minister of Finance, Dr Cullen. It would bring the massive increases in central and local government operating expenditure to a dead stop.

"In announcing today's interest rates rise Reserve Bank Governor Dr Bollard highlighted his inflationary concern was over expansionary government spending and a resurgence in the housing market.

"The major public sector cost drivers alluded to are government spending expected to blow out this year due to things like the Working for Families programme, government contributions to Kiwisaver, four weeks holiday, and ever increasing numbers of public servants.

"Spending by government agencies is out of control reflected in the gap between the average hourly earnings for employees in the public sector ($28.41) and the private sector ($22.36) widening to $6.05 an hour.

"Overall, the government's call on funds from taxpayers has been growing over twice as fast as growth in the economy, and harming the competitiveness of exporters and other business.

"Business is expected to pay for government's 'expansionary fiscal policies' both through taxation and higher interest rates although prices in the tradable sector are tightly restricted by domestic and international competition.

"In light of these issues, the call by union leader Andrew Little for a 'cost of living' increase to compensate for today's interest rate rise shows his level of understanding of economics hasn't changed much since the 1970's. He ought to know the Reserve Bank closely monitors business' pricing intentions and union wage demands."

ENDS

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