Govt coy on how to catch Australia

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The Government appears to be back-pedalling on its goal of matching Australian incomes by 2025.

A new task force report, released yesterday, recommends major social-spending cuts to help reach the earnings goal.

The task force, headed by former National leader Don Brash, proposes slashing government spending by $9 billion and cutting the top tax rate to 20 per cent.

It says the average family of four already receives $64,000 a year less in New Zealand than in Australia – 35 per cent below the average Australian income – and the economy must grow by 4.5 per cent a year to catch up.

The task force's 35 recommendations include cutting universal entitlement to some benefits, increasing the cost of visits to the doctor and prescriptions, and raising the superannuation age.

KiwiSaver subsidies and the Cullen superannuation fund should be axed, early-childhood education funding cut, and interest-free student loans abolished, the taskforce says.

It also recommends changing labour laws to make it easier to sack workers, extending the probationary period for new workers from 90 days to a year, and making high-income earners subject to contract rather than employment law.

The task force report cost $150,000.

The task force has a total $477,000 budget for the next three years.

However, the Government has already rejected most of the recommendations.

Prime Minister John Key said he was not going to "pull the rug" from under New Zealanders by cutting social services.

"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," Key said.

He also ruled out a 20 per cent tax rate, favouring a more incremental approach rather than "radical big-bang reform".

Finance Minister Bill English said the report was "too radical" to implement and "reads like an ACT party manifesto".

Asked if the Government was back-pedalling on its 2025 target, English said there were a variety of ways it could be achieved.

"I think, over time, it is an aspiration we should have.

"We have gone through a process that was outlined in the agreement between National and ACT when we put the Government together."

However, Brash said there was no alternative if the Government was serious about meeting the target.

"A little tinkering around the edges ain't going to do it."

He rejected suggestions his recommendations were politically untenable.

"The Prime Minister has enormous political capital. He's also an excellent communicator. It's just a matter of selling it to the public."

Brash also this morning rejected claims the report called for a flat tax.

ACT leader Rodney Hide was "very pleased" with the report.

If the Government did not adopt the recommendations, "we don't have a chance" of catching Australia by 2025. Middle-class New Zealanders needed to accept the prospect of short-term pain if they wanted higher incomes and a better quality of life, Hide said.

Labour leader Phil Goff said the task force was a waste of time and public money. Progressive Party leader Jim Anderton described it as "the return of dracula".

The Greens said the proposals would cause environmental and social degradation.

- © Fairfax NZ News