"National's sterile arguments about how higher taxes will promote an exodus of talent to Australia are losing credibility as the Australian Government changes its tax policy," Labour finance spokesperson Michael Cullen said today.

"The Howard Government is now twiddling with its corporate tax package to ensure it is revenue neutral. Unless they can achieve fiscal neutrality, they will not get the changes through the Upper House.

"This means the cut on the company tax rate will have to be paid for by higher tax imposts or the removal of tax deductions elsewhere in the system.

"Add to this the cost advantage the lower New Zealand dollar gives our exporters over their Australian counterparts and the competitive advantage begins to swing New Zealand's way," Dr Cullen said.

"Australia will also increase the Medicare levy next year to raise $900 million [over NZ$1100 million] to cover the costs of its East Timor involvement. Australians earning over $50,000 are already paying a top tax rate of 47 cents in the dollar.

"This makes a joke of the argument that high earners in New Zealand will be chased over to Australia by Labour's proposed new tax step of 39 cents above $60,000.

"In fact, even with Labour's proposal, New Zealand will still have the lowest top tax rate in the developed world," Dr Cullen said.

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