The Government’s insistence on raising GST has clearly fed into today’s rise in the Official Cash Rate, and there’s more pressure to come on most Kiwis, says Labour’s Finance spokesman David Cunliffe.
David Cunliffe said Reserve Bank Governor Dr Alan Bollard was left with little choice but to make Kiwi homeowners and businesses pay higher interest rates.
Dr Bollard noted to the Finance and Expenditure Select Committee today that the tax package had added to short term stimulus, David Cunliffe said.
“Earlier today, however, Finance Minister Bill English also appeared before the Committee and attempted to maintain the myth that his tax cuts will leave most Kiwis better off after the GST increase.
“The Budget documents do not support that. The inflationary surge of nearly 6 percent does not simply disappear. Because wage increases will remain limited, it will take four years before the average-income Kiwi starts to actually get ahead.
"Bill English could not rebut the mathematics that once inflation effects are added to the tax switch, the average Kiwi wage earner is $30 per week worse off,” David Cunliffe said.
“That is also a best-prospects forecast. Some local bodies are already increasing their rates by near double figures. That’s before the October 1 GST increase adds to rate burdens.
David Cunliffe said it is little wonder that at today’s FEC meeting Bill English floated privatising New Zealand Post and Television New Zealand.
“Having put the country into hock to pay for tax cuts favouring the wealthiest at the expense of low-income and average-income Kiwis, Mr English is scrambling around trying to find a way to balance the ledger.
“Such sales, almost inevitably to overseas buyers, will simply add to our current account deficit. The gap between what we earn and spend as a nation will more than double,” David Cunliffe said. “That gap will also help continue to push up interest rates as we borrow overseas to meet the difference.”
David Cunliffe said today’s interest rate rise is the first of some bitter seeds sown by the Budget for most New Zealanders.
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