Kiwi Indians, like other Kiwis, will be wondering what happened to the promises National made before the Budget. Remember, “No rise in GST?” “Vast majority better off?” and “Fiscally neutral?”
All these promises have now been broken. Kiwi families and businesses are beginning to wonder if they did the right thing giving National the chance to govern in 2008.
Sadly, Budget 2010 rewards only the wealthy, to the detriment of the middle class by gobbling up their “tax switch” in the highest (5.9%) inflation in decades. The changes are unfair: a third goes to the top 5% of earners and 15% to the top 1%.
A majority of Kiwis will be worse off. Inflation will wipe out the tax cuts, before they even get to the checkout counter. By the Government’s own figures, an average wage earner will be $30 a week worse-off after inflation and a person earning $70,000 will be $45 a week worse-off. This excludes increases in ACC charges, student loan levies, early childhood fees and other charges.
The projected inflation rate of 5.9% next year is important. It is based on Treasury’s projected wage and inflation track and would take average wage earners until 2014 to catch up to where they were before Budget Day. That is two elections away and no doubt there will be several service cuts.
The savage cuts to early childhood education add up to a potential $40 per child per week in affected ECE Centres, and that is just the start.
New funding for Health is way below previous years’ levels and is several hundred million short of keeping up with next year’s inflation. That will mean longer waiting lists and more frail elderly deprived of their home help.
Tertiary education funding limits mean our bright young people face restricted entry.
The Government wants state power companies to make more money; that means higher power bills for Kiwi households this winter. If you are renting, just wait for your landlord to pass on the cost of the tax changes to building depreciation.
Finance Minister Bill English was forced to admit in Parliament that the Government’s online tax calculator leaves out the full inflation factor, even though it is in the Budget documents. Inflation cannot be glibly dismissed as a “one-off spike.” Embedded into all future prices, it would erode the housekeeping money even before groceries are purchased.
The Government has also broken its promise to be “revenue neutral” on the tax package.
It is borrowing an extra $450m gross next year; $1.1 billion over four years, and $9.2 billion by 2023/24.
Reserve Bank Governor Dr Alan Bollard will have to raise interest rates, and we will all pay for that in our mortgages, rents and business loan costs.
The additional “strategic deficit” is a big black hole that the Government will later tell you they need to cover by further savage service cuts, or flogging off what is left of the family silver.
The Prime Minister says he will “never, ever sell” Kiwibank, but the Finance Minister says it could be gone in a second term. Why can’t they ever agree?
All this has occurred without a credible plan for growing jobs and incomes being put in place. There is no plan to close the critical savings gap; instead, the Government has cut KiwiSaver incentives to 2% and has kicked pre-funding superannuation out into the ‘never-never.’
Close to a quarter of all males under 25 are currently unemployed. It is no wonder that more dairies and liquor stores are being robbed and more taxi drivers feel at risk in their own cabs. Where is the promised nirvana under National when all crime would suddenly cease?
On the contrary, due to National’s budget cuts, there are now fewer police cars available to get police to the scene of crimes, and there is an explosion of burglary and property crime across Auckland.
There is no plan to boost innovation, skills and technology. Instead, the crucial R&D tax cuts were axed, while Australia raised its R&D rebate to 140%. The so-called R&D package in this Budget is a pale 39% of the investment Labour made but National cut on taking office.
There is no plan to close the current account deficit that even Treasury predicts will blow out from 3% to a disastrous 7-8% of GDP.
Funding for economic and regional development has also been slashed. Small business policy is a vacuum. There is no rethink on monetary policy. The Government is relying on ‘trickle down” economics to create jobs and growth. It would not even allow Hillside Workshops to bid for the new Auckland locomotive contract – shame!
The result is less than 1% of additional economic growth over the next seven years. Job growth will be less than half the number created under the last Labour Government and Treasury says only 5.7% of that is attributable to Government policy changes.
Overall, the Budget fails both tests of fairness and growing jobs and incomes.
Lower and middle-income earners are left behind while the top end reaps a windfall.
The Government is borrowing to favour its mates once again. Budget 2010 is a tax swindle and a lost opportunity it embodies a series of broken promises. From October 1, the pain will hit the average Kiwi’s wallet.
Kiwi Indians are typically hard working, upstanding and peace loving members of our community. They, like other Kiwis, just want to be able to pay the bills, work towards a better future for their kids and have a little left over at the end of the week.
A few wanted to give National the opportunity to show what it could do to deliver on its promises.
Budget 2010 was its biggest chance, and it failed.
No wonder so many in the community are deciding it is time to think again.
The above Guest Editorial, written by Labour Party MP and Finance Spokesman David Cunliffe (MP for New Lynn, Waitakere), does not reflect the views of Indian Newslink.
