May 23, 2008

Has Parker Thwarted Cullen's Plan?

Dr Cullen has been quick to point out that the cupboard is bare and that there is no scope for National to offer even deeper tax cuts.

Perversely we see the possibility for David Parker to pull off an incredible double - first to steamroller a policy on an ETS that is so unpopular that he causes a spectacular loss for Labour (including his own position) and he gives National an extra $1 billion a year to pay back as increased tax cuts. As we reported yesterday, Dr Cullen on Wednesday confirmed that the ETS is going to take in $500 million a year up until 2013. From then until 2030 it will take in a further $21 billion. Now these figures were based on $15 a tonne a figure that is incredibly low. Most analysis from Government talks about $25 a tonne. Most private sector commentators see the price as being far higher $30-$60 depending on the value of the NZ$. Using the mid point estimate of $45 this would mean that the ETS will generate close to $1 billion a year up until 2013 over the current budget estimates and $42 billion in the 2013-2030 period.

Because the tax cuts would match the amount paid to the Government by industry and agriculture to buy permits the tax cut each year would not be inflationary, an added bonus. Thank you Minister Parker.

Hive to 9th floor. Do you really want to rush this legislation through?

By the way why does the budget use $25 a tonne when Cullen's Wednesday confession uses $25 a tonne?