Hon Dr Michael Cullen
Minister of Finance
18 August 2005
Media Statement
Family tax relief package
“A re-elected Labour government will use the stronger than anticipated cash balance in the Pre-Election Economic and
Fiscal Update to provide targetted tax relief to middle income families from 1 April,” Finance Minister Michael Cullen
says.
“After the Working for Families announcement in the 2004 budget, I indicated that our first priority was to reduce child
poverty but that, when we could afford to, we would move to provide tax relief to households further up the income
scale.
“Labour believes a fair tax system is one which acknowledges individual family circumstances and the contribution
parents make to our society.
“The tax relief we are announcing today would be available through Inland Revenue. Recipients would have the option of
having weekly or fortnightly payments or getting a lump sum at the end of the financial year,” Dr Cullen said.
The four year cost is estimated at $1.338 billion and has been made possible by a cumulative $1.583 billion improvement
over four years in the forecast cash position.
“Our modelling shows that, even with the Family Tax Relief package, gross debt under Labour will reduce to around 20 per
cent of GDP within the next three years. These debt levels are consistent with the government’s fiscal objectives and
prudent by international standards.
“The costs will build slowly beginning at $95 million in 2005-06 and rising to $380 million in 2006-07; $425 million in
2007-08 and $438 million in 2008-09. We have deliberately spread the spending over the four year forecast period to
reduce the risk of pushing up inflation and forcing the Reserve Bank to raise interest rates.
“Treasury’s advice, submitted with the Prefu, is to be cautious about increasing the fiscal stimulus in the next two
years and an increase in mortgage rates would penalise the very households we are anxious to help.
“There are no losers under this policy, only winners. This is because it will not require off-setting cuts in spending
elsewhere and will not upset any existing spending commitments,” Dr Cullen said.
ENDS