John Key MP National Party Finance Spokesman

03 June 2005

Experts back National on Cullen's spending binge

National Party Finance spokesman John Key says the economic experts appear to be backing National's argument that Michael Cullen has indulged himself on a taxpayer fuelled spending binge.

He is referring to analysis by Westpac in a piece called 'How many hands are in your pocket?' which reads: 'The Government has consistently argued that there is no room for tax cuts. We would argue that there has been, and still is, room for tax cuts on a number of counts. First, the Government always faces choices when it comes to implementing its policies - the choice to lower or increase spending, to lower or raise taxes, and/or to increase or pay down debt.

The current Government has chosen the path of paying down debt but also both increased spending and higher taxes. Core crown spending is set to increase from 29.6% of GDP in 2004 to 32.3% of GDP in 2009. Put another way, annual spend will increase by almost $12bn (26%) over that period. By implication, there is plenty of scope to cut taxes - the Government has simply made an alternative choice.'

"Michael Cullen is also justifiably criticised for his attempts to deceive over the size of the surplus and his bizarre claim that a dollar spent by taxpayers is more inflationary than a dollar spent by consumers.

"Westpac concludes the opposite. It says a dollar spent by consumers is less inflationary than a dollar spent by Labour's wasteful and inefficient 'big Government' model."

The Westpac analysis backs that up saying 'tax cuts allow the expansion of the economy's productive capacity by leaving more for private investment, stimulating employment, influencing the incentive to work, and attracting people to work and stay in NZ. Over time, this all boosts economic growth, and hence the overall tax-take. In contrast, higher government spending sometimes does little more than redistribute wealth from higher to lower income groups.' - Westpac,'How many hands are in your pocket?

Mr Key says "given this kind of strong criticism from the economic experts, it's little wonder that Michael Cullen is on the defensive about his reckless and wasteful spending.

"Only National can be trusted to deliver lower taxes and better incentives for hardworking Kiwis."

ENDS

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