Feb 10, 2008

Fran Looks At Cullen's Slight of Hand

Fran O'Sullivan in today's Herald on Sunday looks critically at the call made this week by Finance Minister Cullen for employers to increase wages. Fran gives Cullen a good basic lesson in economics. Then she hits him hard where it hurts:

Labour will not borrow to pay for tax cuts, will not cut services to pay for tax cuts, will not exacerbate inflationary pressures and will not allow tax cuts to lead to greater inequality in society.

The final condition is potentially the most damaging one to New Zealand's ability to claw back its competitive advantage as far as talented people are concerned.

Inequalities are a fact of life, Dr Cullen. That's why we live in a capitalist society rather than a communist one, and offer incentives to improve your lot.

It's a moot point whether Labour's decision to wipe incentives for New Zealanders to improve their lots - through some misguided desire to make an equal society - has simply encouraged more people to move offshore.

In any event, Cullen's comments would be treated more seriously if the Government had applied a salary freeze for Cabinet ministers until other New Zealanders caught up, or a higher tax threshold for those earning more than $200,000.

The fact is that Cullen and Co have paid themselves very nicely over the past eight years and also ensured good pay rises for those on the State payroll. Meantime they have squeezed the retained income available to companies by taking too long to cut the corporate income tax rate.