Inequality report ignores tax cuts for rich - Goff

ANDREA VANCE
Last updated 05:00 03/08/2011
goff
CHALLENGING THE FIGURES: Phil Goff pointed out that the Government's report did not cover the new tax-cut package.

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Prime Minister John Key has been attacked for using a new report to show that income inequality is not widening, but failing to say the report does not take account of last year's tax cuts.

Mr Key referred to the Social Development Ministry report Household Incomes in New Zealand in Parliament yesterday. He was answering a question from Labour leader Phil Goff on "the growing gap between rich and poor".

Citing the study, published yesterday as Parliament's question time began, he said it "shows that the degree of income inequality in New Zealand ... has actually fallen in recent years".

But Mr Goff pointed out that the report did not cover the Government's tax-cut package, introduced in October. The tax cuts gave $2.5 billion a year to the top 10 per cent of earners and "practically nothing to the bottom 20 per cent of earners, who got 3 per cent of those cuts".

Mr Key responded: "It is the most accurate information we have." He said two-thirds of the tax cuts were delivered to "the bottom two codes".

The ministry report says income inequality peaked in the early 2000s, then fell from 2004 till 2007 because of Working for Families. It was lower in 2010 than in 2007.

The lower 2010 figure reflects a decline in income for the top earners and a small gain for lower earners, the report says.

It's the first Household Economic Survey to capture the impact on incomes of the global financial crisis and economic slowdown.

Mr Key also said a quarterly employment survey, published yesterday, showed average weekly earnings were up by 1 per cent for the quarter and by 4.2 per cent for the year. The average wage is now $51,123 a year.

INCOME PATTERNS

Trends in indicators of inequality and hardship 1982 till 2010:

There was little real change in household incomes for most income groups from the 2009 Household Economic Survey to the 2010 survey

There was a fall in top-level incomes, by about 2-to-3 per cent, reflected in a decline in investment income after the global financial crisis and the stagnation of some higher salaries

For the 25 years from a low point in 1994 till 2009, there was a steady rise in the average income in real terms.

Incomes for middle-to-higher-income households grew more quickly than the incomes of the bottom third.

From 2004 till 2007, the Working For Families package led to incomes below the average growing more quickly than incomes above the average

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It took till 2000 for the average to return to what it was in 1988. It was only in 2007, after WFF, that low incomes returned to what they were 20 years before.

Child poverty rates were the same in 2010 as in 2009. However, the 2010 child poverty rate is about double the rate that prevailed in the early 1980s.

Poverty rates for Maori and Pacific children are consistently higher. Between 2007 and 2010, one in six Pakeha children lived in poor households, one in four Pacific Island children, and one in three Maori children.

Poverty rates for working-age adults living on their own trebled from 1984 till 2007 and remained high in 2010.

Those aged 45 to 64 have a higher income poverty rate than 18-year-olds to 44-year-olds.

- Stuff

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