Public finance

What a good idea, the next logical step is a TABOR

George Osborne is looking at legislating for surpluses.

George Osborne is to announce a return to the public finances of the Victorian age, with plans for permanent budget surpluses designed to cut the national debt and to make life uncomfortable for the Labour party.

The chancellor will use his annual Mansion House speech on Wednesday to exploit the political advantage of the Conservative victory in the general election with a “new settlement” that would allow the government to borrow only in exceptional circumstances.

Labour, still shaken by the scale of its defeat last month, will be forced to decide whether it wants to back the proposal that tax revenues should cover spending on both infrastructure and the day-to-day running of government when parliament votes on Osborne’s tougher approach to the public finances later this year.

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Typical socialists, they always want a subsidy

Why do socialists always think subsidies are a solution?

Keeping the Capital Connection running could cost ratepayers less than previously thought.

An internal Ministry of Transport memo released under the Official Information Act casts doubt on the amount of public money needed to keep the commuter service between Palmerston North and Wellington going.

KiwiRail has said it will cease running the train from July this year and has no plan in place for a replacement service.

For the Capital Connection to continue, the two regional councils – Horizons and Greater Wellington – need to convince the New Zealand Transport Agency to shift the Connection to a Wellington Metro service, which would mean it could receive a subsidy from the two councils and NZTA.

The Ministry of Transport report estimates the cost of the subsidy needed at about $250,000 per annum.

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A reader analyses Len’s crazy tolls idea

tolls

Hi guys

I thought I’d ‘run the numbers’ (and a very quick calculation, nothing exciting) regarding the proposed Auckland toll.

Now, for the time being, I won’t point out the lack of actual authority here. I have a far simpler question: is this actually value for money?

Forgetting the multi-cost option, the basic proposal is for a $2 toll per trip (regardless of distance).   Read more »

Taxpayers’ Union slams Joyce for his expanded corporate welfare programme

Since the opposition is asleep at the wheel the job of holding a spendthrift government to account falls upon the shoulders of the Taxpayers’ Union.

They are holding Steven Joyce to account for his expanded corporate welfare programme.

Responding to Economic Development Minister Steven Joyce’s defence of corporate welfare, Jim Rose, the author of Monopoly Money, a Taxpayers Union report on corporate welfare since 2008, says:

“Mr Joyce defends over $3 billion in subsidies to KiwiRail and Solid Energy under his watch by saying that they are state owned. Bailouts are not the role of ministers as shareholders. Since 1986, state-owned enterprises have had a statutory duty to operate as a successful business and to be as profitable and efficient as comparable businesses not owned by the Crown. The whole idea of the State Owned Enterprises Act 1986 was to bring an end to bailouts and permanent deficits.”

“Instead of putting a failed business in the hands of receivers, Mr Joyce defends throwing good money after bad by blaming the previous government for buying KiwiRail. That was three elections ago. Elections are supposed to count for something. $3 billion in taxpayers’ money cannot be handed out in subsidies with ministers bobbing and weaving about responsibility for the amount and wisdom involved. The Treasury Benches come with a full ministerial responsibility for every single dollar of taxpayers’ money spent under your watch.”    Read more »

Labour plans to let local bodies tax you even more

Now this has to be an election winning strategy….for National.

Labour is going to let local councils tax ratepayers even more than they do now under their local body proposals.

Labour plans to reinstate the power for local bodies to raise revenue through extra levies such as a ‘pillow tax’ on visitors and regional petrol taxes.

Labour’s Local Government policy will also require a referendum to be held before any local council amalgamations can go ahead.

Local communities would also have to be consulted before council services were contracted out or privatised.

Local Government spokesman Sua William Sio said Labour was not opposed to amalgamations, but did not believe they were appropriate in all cases.

He said the Auckland supercity model was opposed by many Aucklanders “and designed to take control away from the hands of the many and vest governance in the hands of the few.”

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Sin taxes and stealth taxes affect the poor more

All sorts of people are proposing taxes on sugar, fat and other supposedly bad things.

They are modelling their taxes on tobacco taxes without thinking through that in the case of tobacco it is the smoker who pays With sugar taxes it will be everyone who pays and the burden for these stealth taxes falls disproportionately on the poor.

Chris Snowden explains this very well in this video:

[T]he IEA’s Director of Lifestyle Economics Chris Snowdon examines the extent of the burden of indirect taxes and government sin taxes on the poorest groups in society and how these have changed over time. This film is an excerpt from a recent IEA panel debate event on the ‘Cost of Living’ crisis, in which Chris was outlining the findings of his recent paper ‘Aggressively Regressive’.

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More good news

The good economic news keeps on coming in, destroying the opposition and their trash talking of the New Zealand economy.

The latest piece of good news is from the IMF who have given our economy a big tick.

Macroeconomic policies are moving in the right direction. With excess capacity largely exhausted the RBNZ has begun tightening monetary policy. The government’s plan to return the budget to surplus is on track. With public debt low and interest rates above the zero bound, the authorities have monetary and fiscal policy space to respond to shocks, and the free-floating New Zealand dollar provides an additional cushion against terms of trade and other external shocks. The well targeted macro-prudential policy framework should allow the RBNZ to take additional measures if needed to guard against the financial sector risks that would arise from an unsustainable acceleration in house price inflation.

[…]

Growth is forecast to increase to about 3½ percent this year and moderate to a trend rate of 2½ percent over the medium term. Strong construction activity is expected to remain an important driver for near-term growth (text figure), although the speed of the Canterbury post-earthquake rebuild and its interaction with the wider economy are less certain. The terms of trade are projected to ease somewhat due to an assumed moderation in global dairy prices, but remain high relative to historical levels and continue to boost growth in national income. The current monetary policy stance remains well below neutral, and with leading indicators pointing to an economy that is set to grow above trend in the near-term, pressure on core inflation should follow, particularly from the construction sector.

[…]   Read more »

Labour’s ‘big tool’ policy turns out to be a big dog

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Aside from a half hearted attempt from the Labour Party spokesman for Fairfax, Vernon Small, and Brian Fallow who has taken time off looking around the globe for catastrophic global warming and a carbon trading system that works it’s not been a particularly welcomed policy release. The exporters love it though with a free lunch on the backs of the working poor.

We wait for the endorsement and backing of Labour from the Property Council, first of all Labour are going to drop their tax rate from 28% to 15% by introducing a CGT and now they are going to give them the gift of lower interest rates which is generally the biggest cost by taking money out of the lowest paid who will now be earning more in retirement than when they are working.

 

Labour’s proposals to allow the Reserve Bank to adjust KiwiSaver contributions rather than interest rates to control inflation could hurt savers and see debt repayment delayed until retirement, KiwiSaver experts warn.

The Labour Party this morning announce proposals to change New Zealand’s monetary policy tools by introducing a variable savings rate for KiwiSaver.

The policy would require the Reserve Bank to use changes to the rate of people’s KiwiSaver contributions rather than interest rates to control inflation while taking pressure off the over-valued kiwi dollar.

Labour would also make KiwiSaver compulsory and increase contributions from the current 6 per cent combined employee and employer contribution to 9 per cent over time.

According to sorted.org.nz  if you earn $600pw and you save at Labour’s compulsory rate you will enjoy a retirement income of $496pw and when added to the super payment of $366 you will be earning $262 a week more in retirement than when you were working and struggling to get ahead.   Read more »

The new big tool is likely to be little better than politicians snake oil

The ANZ Bank is having none of David Parker’s posturing and mistruths.

In their latest Market Focus of 28 April 2014 they basically call out Parker as a snake oil salesman.

The monetary policy framework has served the NZ economy well. Tweaks have been made from time to time to ensure that the NZ framework has evolved in line with global best practice, with the use of macro-prudential policy adding more ammunition to the RBNZ’s policy arsenal. However, the mandate has remained price stability, as this is the best contribution monetary policy can make to delivering better outcomes.  Read more »

Good news on tax

The good news keeps on coming, this time it appears research shows that our tax burden is amongst the lowest in the world.

New Zealand is among the minority of developed countries where the tax burden on wages has lightened over the past three years.

The tax burden or wedge is measured by taking the total taxes and social security contributions paid by employees and employers, minus family benefits received, as a proportion the total labour costs for employers.

In its latest Taxing Wages report the OECD says that across its 34 members the tax wedge increased from 35.1 per cent of labour costs in 2010 to 35.9 per cent last year.

In New Zealand it dropped slightly from 17 per cent in 2010 to 16.9 per cent in 2013.

That is for a single person on the average wage and without dependent children and is the second lowest (after Chile) in the OECD.

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