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Don Brash -
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Slashing taxes and government spending has been confirmed as a possible prescription to increase productivity and close the wage gap with Australia.
The 2025 taskforce report, headed by former National Party leader Don Brash, says the government's goal of closing the 35% income gap with Australia by 2025 is an ambitious one that would require New Zealand growth to outstrip that of Australia by 1.8% a year.
Even before its release Prime Minister John Key said the radical changes were unlikely to be implemented quickly, if at all.
Recommendations, already reported in several media, include:
- Replacing the top tax rate of 38 cents in the dollar and business rate of 30 cents in the dollar with a top tax rate of between 20% and 25%.
- Limitations on some universal benefits. Those included interest-free student loans and subsidies for early childhood care education.
- The government to reduce operational spending to 29% of gross domestic product by 2012-13.
- Use the NZ Superannuation Fund to pay back borrowing and change the age of entitlement.
- Impose congestion charges in cities to pay for roads.
- No capital gains tax.
Brash says he realises it would be difficult politically to implement his recommendations.
"Our view is that the recommendations would give us a very good chance of achieving the prime minister's vision but we do not underestimate the difficulty of the politics involved."
Key says during the 1980s and 1990s New Zealand underwent radical economic reform while Australia took a more incremental approach. The trans-Tasman neighbour was now in much better shape.
"In that regard I am not convinced that absolutely radical big bang reform is the right way to go," Key says.
"It would certainly have a dramatic effect on New Zealanders and in the short term it would feel very much like we were pulling the rug out from underneath them."
Key says the government will also keep its promises.
"We campaigned on some core commitments, like not raising the age of super or putting the interest back on student loans, and we would be breaking those commitments if we went and did that so we are not going to."
The taskforce was set up as part of a support agreement with the ACT Party which has a key policy plank of a flat tax and takes its name from the year that New Zealand aimed to catch up with Australia.
Brash says cutting back government spending levels to those of five years ago would fund the supposed tax cut programme.
Labour leader Phil Goff questions the motivation behind the taskforce.
"It makes you wonder why you would set up a committee led by Don Brash who has come up with an entirely predictable and discredited agenda," Goff says.
"Why would you do that other than maybe to frighten the hell out of people, put up a straw man and then say 'look we're only going to go part way toward that agenda' and everybody breaths a sigh of relief because the slashing that occurs isn't quite as extreme as the Brash proposal."
