Tax cuts blamed for 'zero' Budget admission

DANYA LEVY
Last updated 05:00 02/04/2012

Relevant offers

Politics

Green portfolio reshuffle picks right man for pivotal finance role 'Anti-separatist' group is modern day colonisation - New Plymouth mayor Andrew Judd says John Key: Kiwis uninterested in 'broken record' attacks on Maori favouritism Helen Clark's chances at the UN take a hit after a late entry in the race White Man Behind a Desk satirist appeals to other young voters in funny video Argentinian buyers of Onetai Station get two warnings from OIO Mass rat sterilisation could be the answer to New Zealand's pest free future Camera-shy Kapiti councillors call in police to show public speaker the door Kiwis 'drowning in housing debt', Labour says after Statistics NZ figures NZ race relations: new start or new low?

The Government's admission there will be a "zero" Budget this year is evidence New Zealand cannot afford National's tax cuts, the Greens say.

In its Budget Policy Statement in December, the Government said it expected to have an operating allowance of $800 million for the 2012 Budget.

However, Prime Minister John Key said yesterday he expected the Government would hand down a zero or "very close to zero" Budget in May, meaning there would now be no new money spent.

"We need to get New Zealand back into surplus ... so that future generations aren't continuing to pay for debts that we would be racking up today," he told TVNZ's Q&A programme.

Greens co-leader Russel Norman said the 2010 tax cuts had left a "huge hole" in the Budget.

"The Government is having to borrow in order to cover the tax cuts that they gave and so now it is putting pressure right through the Budget."

Under the Government's "tax switch", income tax rates were reduced while GST was increased from 12.5 per cent to 15 per cent.

The Government had claimed the changes would be "broadly fiscally neutral", Dr Norman said.

"But it isn't. The figures at the time said it would cost about $1 billion over four years but it has got much worse than that because the Government thought the increase in GST would cover it but it hasn't, people aren't spending as much on goods and services."

Mr Key said the Government would be spending more in health and education, but all other ministries would be expected to save money.

Labour's finance spokesman David Parker said questions needed to be asked about why the economy was not thriving.

"We have had record commodity prices, our two largest trading partners, Australia and China, have both been doing amongst the best in the world and yet New Zealand is still in the doldrums," Mr Parker said.

Ad Feedback

- The Dominion Post

Special offers
Opinion poll

Should the speed limit be raised to 110kmh on some roads?

Yes

No

Vote Result

Related story: 110kmh limit moves closer

Featured Promotions

Sponsored Content