Wednesday, May 10, 2006

Australian budget

Tonight was Budget Night in Australia, and the centerpiece of the Liberals' budget was - you guessed it - tax cuts for the rich. Which means that in the morning, we'll have to put up with our local advocates for the wealthy demanding that we match the Australian's largesse, or risk seeing New Zealanders fleeing across the Tasman to benefit from the supposedly lower rates (or something). Which is more than a little disingenuous. While Australia has cut its top rates, the average New Zealander crossing the Tasman would face exactly the same marginal tax rate they were facing last week: 30%. And while they've shifted their thresholds, the difference this makes (compared to the pre-cut situation) is on the order of $10 a week. Which, totalled up, would barely cover the airfare. ACT supporters and economists might flee the country for such a meagre gain - but I don't think most normal people would be at all tempted.

The real reason people cross the Tasman is for higher wages and (previously) better working conditions - and those are not problems that can be solved with tax cuts.


You might be mising the point.
the theoretical act voter presumably WANTS the low income people to flee NZ to go to australia since that (in a perfect world) pushes up our average income and average amount of asets owned by NZders, while the rich people fleeing pushes it down.

Posted by Genius : 5/10/2006 07:16:00 AM

As a tangent, is the Stock Exchange looking into any share dealings in Telecom from when Telecom got the leaked report? Share prices dropped on the ASX after the NZSX was closed so those with inside knowledge would have traded if they are any good greedy capitalists. Much better result than a tax cut!

Posted by Hans Versluys : 5/10/2006 10:57:00 AM

"the top rate of 47 per cent will be cut to 45 per cent, the second highest rate will fall from 42 per cent to 40 per cent, "

So their top two tax brackets are still both about 10% higher than our top two tax brackets.

Because of different thresholds at which different tax-levels kick in there will be levels of income where NZers would pay more tax, and there will be levels of income where Ozzies pay more tax. Expect some extremely selective stats from pundits like DPF.

As for higher wages: it very much depends what industry you're in. But also our wage levels have moved closer to their in the last two years because as the NZ dollar has crept closer to the Ozzie dollar.

Posted by Icehawk : 5/10/2006 11:04:00 AM


Why would an ACT voter want to push up NZs average incomes?

Surely their aim is to push up their own income and wealth?

Or are you claiming that ACT voters are not the rational economic self-maximizers that their economic theory claims everyone is?

Posted by Icehawk : 5/10/2006 11:12:00 AM

Of course, you're ignoring how the Australian Govt. can afford such tax cuts ... they've just paid off their National Debt. Neat trick that.

Posted by Duncan Bayne : 5/10/2006 05:12:00 PM

Why do you highlight the phrase "tax cuts for the rich", when it is quite clearly "tax cuts for everyone who pays tax"? Almost all taxpayers will be better off. What is wrong with you?

Posted by Sean (Lawyer in SIN) : 5/11/2006 02:07:00 PM

Tax cuts go hand in hand with cuts to social services (if not for this generation worse then the next). The poor are not "better off" under such a regime.

Posted by tussock : 5/11/2006 02:31:00 PM

Sean: quite apart from Tussock's point, there's also the fact that these tax cuts are overwelmingly tilted towards those on higher incomes, with both rate cuts and threshold shifts combining to ensure that those on higher incomes receive disproportionate benefits.

Look, if you're going to cut taxes, it should benefit those who need it most. Australia's cuts (like those promoted by right wing parties everywhere in the world) do exactly the opposite.

Posted by Idiot/Savant : 5/11/2006 02:36:00 PM

Eh??? The tax cuts are greatest for those on low incomes.

Posted by Duncan Bayne : 5/11/2006 02:42:00 PM

Duncan: the chart you've linked to is DPF's comparison of taxes between NZ and Australia - not the relative benefits by income level of Howard's latest tax cuts.

The SMH story linked to above makes it quite clear: those on $10 - $20K get a whole $7 exta a week. Those on $55K get $10 extra a week. Those on $100K get $50 extra a week. So five times the tax cut for only twice the income. As I said, "tax cuts for the rich".

Posted by Idiot/Savant : 5/11/2006 04:22:00 PM

Tussock - that is speculation on your part. We are talking about an announced tax cut, not what you think might happen. You don't want to pay less tax?

And Idiot says that people on lower incomes get less of a tax cut; but surely they pay less tax both before and after the cut than those on higher incomes?

Perhaps you would both rather a situation where everyone *earned* the same? Then we could all pay the same tax! But then all life's problems couldn't be blamed on people who work hard and get ahead...

Posted by Sean (Lawyer in SIN) : 5/13/2006 02:11:00 PM

It's tax cuts for the people who pay the most tax.

The top rate only kick in for those earning over $150,000 per annum.

But what do you want Idiot - only poor people?

Yes, those evil people who pay the most tax should be taken out back and shot.

Well, that's one way to go I suppose.

Posted by Anonymous : 5/13/2006 03:58:00 PM