The Letter Monday 17 May 2004
The Primary
NZ's first primary campaign starts today with a joint candidates meeting in Dunedin. Each candidate will speak and the
audience will ask them questions. Then the nationwide tour – Today, Dunedin: Bentley’s Hotel, St Andrews Street, 6:30pm
Wednesday, Christchurch: Cashmere Club, Hunter Street, 7pm Friday, Wellington: Museum Hotel, Cable Street, 6:30pm
Saturday, Cambridge: Mellow Manor, Corner SH1 and Pickering Road, 4pm Sunday, Tauranga: Bureta Park Motor Inn, Vale
Street, 2:30pm It is anyone's race. You can register to vote at http://www.act.org.nz/join.
The Budget
This will be the father of all giveaway Budgets. The goss is, as Labour has fallen in the polls, the giveaways have
increased.
The Surplus
A $6 billion surplus is around 5% of GDP; the biggest surplus ever. Cullen complains that the cash surplus is much less
and is reduced by depreciation and retained SOE profits. Capital items such as the super fund, student loans and capital
works, reduced the cash available. The government will not borrow for capital works so government debt this year will
fall to 25% of GDP. (Most economists believe that Cullen's super fund money would be better deployed reducing the debt
even further.)
The Giveaways:
Cullen claims his Budget will help working families and aid the transition from welfare to work. The Letter doubts that
it will.
Family Facts
The Treasury says the average household income for a couple with two children is $74,000 before tax. Unless they have
six children, the average family will receive nothing from the Budget and are likely to be paying the 39% tax rate. Most
families (76%) have one or two children. Just 7% of families have four or more children, so Cullen's middle-income
family with four children is just not the norm. Even with the Budget’s boost to family tax credits, the credits will
rebate away to nothing for a two child family earning in the mid-$40,000 household income.
Beneficiaries The Winners
Over $1.5 billion of the $2.5 billion package will go to social welfare beneficiaries. Changes to the child tax credit
will increase the dollar gap between work and welfare but the changes in the rates of family support mean the
relativities between work and welfare remain almost unchanged.
Poverty Trap Remains
The steep effective marginal tax rates on family incomes remain. A family earning $35,000 can increase their earnings by
$20,000 but the loss of tax credits and other assistance means they keep just $5,000. That family can get $5,000 by just
having another child.
It Is Politics
With 350,000 able-bodied adults on a benefit it is just politics for Labour to reward its voting base. It is also
politics to spin the line that working families are the winners.
There Is Another Way
In answer to a written question by Rodney Hide in April, Cullen agreed that reducing both company and personal income
tax to 20% would cost just $5.48 billion, still leaving a surplus. See http://www.act.org.nz/flattax.
Brash’s Economic Policy
Don Brash gave a major economic speech to the National party’s lower North Island regional conference, 9 May. He said, "
We have no need for any thunderbolt of reform…Rather, we simply have to patiently build on and improve what we have.” He
cites the need to improve productivity by encouraging business investment through better education, excellent
infrastructure, low-cost regulatory environment, and a welfare system than does not undermine the incentive to work. He
cites the Holidays Act as an example of anti-business regulation and the RMA, “in particular is a massive roadblock to
development". A very conservative programme. Labour would claim that it too is working to improve productivity with a
similar list of policy priorities but different solutions. What is significant is what has not been said: the need to
reduce the size of government, reduce the level of tax, and there’s no mention of privatisation. ACT’s work is not done.
See http://www.act.org.nz/conservative.
Huntisation Of History
Last week the Speaker, Jonathan Hunt, launched The House, 150 years of the House of Reps in NZ. It contains no fewer
than six photographs of our Speaker and the index has 19 entries for him. In contrast Richard Prebble, who has made a
major contribution to the Standing Orders gets just three entries and no photograph!
War In Digital
It is said the US Army was not defeated in the paddy fields of Vietnam but on the TV screens of America. Middle America
was horrified by the pictures of war.
Cheap digital cameras are doing the same thing for the war in Iraq. Reports, by the Red Cross and Amnesty International,
of mistreatment of prisoners were ignored, but poor quality digital photographs have had a huge impact on world opinion.
The pictures may end the political careers of both PM Blair and President Bush.
The Letter predicts that revealing digital photographs will in the future have a similar impact on our politics.
Everyone has to now consider that anyone with a mobile phone might be photographing them, and then putting it on the net
for the world to see.
This Week's Poll
Helen Clark claimed that a Foreign Affairs official’s notes of a meeting between Dr Brash and some US congressmen
revealed the opposition leader said the nuclear ban would be gone by lunchtime if National was in government – a claim
denied by Dr Brash and the US senators. This week's question: Should Helen Clark have revealed the contents of this
private meeting? We'll send the answer to the PM. Vote at http://www.act.org.nz/poll.
ENDS