NZ-Aust after-tax income gap 'accelerating'

Last updated 01:10 29/03/2008

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The gap in after-tax income between Australia and New Zealand has accelerated since Labour took power in 1999, National says.

National finance spokesman Bill English yesterday released graphs showing a widening gap in average after-tax wages between the two countries that by last year had reached 34 per cent.

The graphs show the disparity began about 1984. It widened substantially between 1991 and 1999, during National's years in power, but has become wider in the years since.

On the latest figures, which English said were compiled by the Parliamentary Library in New Zealand and in Canberra, average Australian after-tax income in New Zealand dollars was $46,000, compared with $34,000 in this country.

In 1999, the average was $32,704 in Australia and $27,128 in New Zealand.

English released the figures to coincide with what would have been the start of Finance Minister Michael Cullen's "chewing-gum" tax cuts on April 1.

Three years ago, Cullen announced income tax thresholds would lift marginally from this year, putting an extra 68c a week in the pockets of average income earners and up to $10 a week for those earning over $60,000.

Cullen cancelled the adjustment in last year's Budget, claiming the country could not afford the $700 million cost and that the public did not want the minor tax cuts.

Labour now plans much larger tax cuts, although Cullen this week said his cuts would be smaller than National's proposals.

National leader John Key said this week National would "out tax-cut" Labour, setting up a potential bidding war for votes in this year's general election.

Other tax cuts will take effect from Tuesday. Labour's corporate tax cut reduces the amount of tax businesses will pay from 33c to 30c in the dollar.

KiwiSaver's compulsory employer contribution also kicks in, beginning at 1% and rising to 4% of a worker's wages.

The Government will pay a $20 weekly subsidy to employers, but in most cases that will be more than outweighed by the amount businesses must pay into workers' KiwiSaver accounts.

Reserve Bank Governor Alan Bollard yesterday told the Euromoney Australian Financial Markets Innovation Congress in Sydney that tax cuts and higher government spending could limit the extent to which the domestic economy cooled this year.

He also said there was still a risk international financial market turbulence would result in a sharper downturn than the bank was currently projecting.

Bollard said he still believed the current 8.25% cash rate with a "flat" outlook was "appropriate" because of inflationary pressure, but he indicated the bank was watching developments closely for any sign the global economy was slowing by more than most forecasters were projecting.

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No-one from Cullen's office was available to comment yesterday.

- © Fairfax NZ News

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5 comments

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Steve Withers #5 05:26 pm Jan 28 2009

I have read several articles recently that make a credible case for higher wages and better conditions in Australia being due to the "labour market reforms" there not being as extreme as they have been in New Zealand. My daughter is finding that working in NZ means any time, any day, minimum wage, work when we call. No 40-hour week. No holidays other than the annual 3. No holiday pay. This is "good for New Zealand?" I don't see how making the vast majority paupers in good for New Zealand. The wage gap with Australia very much appears to be a PRODUCT of our own version of "labour market reforms".

James Kearney #4 05:26 pm Jan 28 2009

Why has Colin ignored the fact that the wage gap between NZ and Australia grew from 18.9% to 28.4% under National, and by just 0.4% under Labour?

After tax wages are not the issue because tax cuts mean reduced services. The real issue is wages but National has an appalling record on that so they pretened it's all about tax.

Why is Colin so uncritical of National's spin, and why has he ignored the EPMU's release on this? http://www.scoop.co.nz/stories/PO0803/S00271.htm

Very poor form Colin. The public deserves better.

Thomas Smith #3 05:26 pm Jan 28 2009

A hard working person busts his/her guts everyday, some doing 2 jobs just to try and get ahead. Slash! goes the tax man and a substantial amount of his/her hard earned cash gets sliced of every week. Folks are sick and tired of it. This is one of the reasons why we have an accelerating "brain drain". It makes me want to flee across the Tasman also when family and friends over there gloat about their pay packets and the relaxed tax system. I don't mind paying taxes Helen!...but for #*!k sake...give hard working folks a decent tax break after years of a burdening tax scheme.

John Pickering #2 05:26 pm Jan 28 2009

Interesting analysis Colin. It would help if there were a "cost of living" factor incorporated into differences of income between NZ and Aus. Perhaps, also, the average nurses, average teachers, average sparky's wages would be interesting as a comparison.

Also, it is not "Labour's corporate tax cut"... more accuaretly is that it is United Future's initiative. If you recall at the last election Labour was the only part to oppose reducing the corporate tax rate. However, Peter Dunne has dragged Michael Cullen kicking and screaming into reducing taxes. (One wonders if Helen Clark was anticipating the need to cut taxes when she offered Peter Dunne the Inland Revenue portfolio - so he has done the "persuading" of Michael Cullen rather than herself).

Mike #1 05:26 pm Jan 28 2009

I was very surprised to see English implying tax is the reason we are so far behind Australia. A back of an envelope calculation implies that even if we had a total tax cut median NZ incomes wouldn't reach those of Australia. The real reason were are behind Aussie is that they kept their work rights (which protect wages and allowances) and National took ours off us in the 90's. Ironically Bill was a minister in the government that created the wage-gap. His attempts to may political hay out of that gap now would be hilarious if it weren't for the fact his party's policies caused so much pain to so many Kiwis and they're trying to do it all over again.

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