I am not an economist (although I did study economics at high school in the 70s) and yet I can clearly see glaring examples of economic mismanagement by this National led Government. This became even more obvious over the last two days after reading a copy of the NBR's "Rich List 2012" and then hearing the news report that the incomes of Maori and Pasifika families had dropped considerably over the last four years.
Since first becoming the Government in 2008 National has made it very clear that it is the already wealthy who deserve the most support and ordinary New Zealand workers and families need to make sacrifices to ensure the flow of money goes up, not down to those who need it the most. Dropping the tax rate to upper income earners has been the largest contributor to growing our income inequities and declining government income. Tax revenue plummeted in the two years following the tax cuts by $5.7 billion and the claim that this would be off set by an increase in GST never happened. It is now four years after the tax cuts and the last annual tax income was still $150 million short of the 2007/8 total. The Government's income from tax has dropped by an average of $2 billion a year since 2008.
Last year our richest New Zealanders averaged a whopping 20% increase in their wealth while the average wage only increased by 1.9%, hardly keeping up with increases in inflation or the CPI. While the Prime Minister used to make much of their aim to catch up with the Australian economy he obviously had no intention of relating this to ordinary incomes. The median income in New Zealand is now $28,500 and if you were lucky to earn $30,000 you would pay $4,780 in tax. If you earned the same income in Australia, the first $6,000 is tax free (they don't tax paper boys) and the total tax would be only $3,600 (around 25% less). While poor Australians are supported by lower tax, their wealthy pay considerably more. Someone earning $200,000 in Australia pays almost $70,000 in tax, in New Zealand they would pay around 20% less ($56,920).
The other major difference between Australian and New Zealand tax law is that Australia has a capital gains tax, while New Zealand does not. This has resulted in around 40% of most wealthy New Zealander's incomes being almost tax free and has diverted investment away from the the more productive sectors into property. Most of our wealthy New Zealanders derive a large amount of their income from property investment and this has pushed up the value of average homes beyond what most New Zealanders can afford.
A quick analysis of the NBR rich list revealed interesting information:
- Around 25% of our 100 richest New Zealanders derived the bulk of their incomes from property investment. While the last year or two saw a stagnation in the property market it appears that it is now recovering. Houses here are 30% more expensive than in Australia and our incomes are around 30% less.
- Around 10% of the top 100 are involved in the alcohol industry (wine/brewing) and one would have to wonder how much influence they have had on weakening attempts at managing our problematic alcohol consumption.
- Those involved in supplying luxury cars have seen strong profits, Neville Crighton saw his wealth increase by $10 million from the previous year.
- Kevin Hickman derives his income through the aged care industry and while many see those who work in the industry being treated like slave labour, Hickman saw his wealth increase by $15 million.
- I could only count 10 women who got a mention in the top 100 and only two who were listed in their own right and not part of a family dynasty or a joint business with their husband.
- Those in the top 100, whose income is substantially from property, had a collective wealth of over $7 billion and while more productive industries earned substantially less, especially those that would be more likely to earn much needed export dollars.
- Peter Huljich, worth $100 million, is being investigated by the Fraud Squad for misrepresenting the performance of the Huljich KiwiSaver scheme.
The way that this government have manipulated the economy has resulted in the disposable income of most New Zealanders being considerably reduced. The only people who are capable of spending money on much more than the necessities of life are the increasingly wealthy minority and the collective wealth of the 100 richest New Zealanders, $52 billion, is now rapidly approaching the Government's annual income of around $70 billion. This is also why Owen Glenn, our 11th richest man, can afford to spend considerably more on helping poor families that the government. It has also caused the domestic economy to mainly focus on delivering goods and services to the rich while there is little available to the poor except food parcels and a growing number of second hand clothing shops.
When the Gore food bank has seen a 76% increase in food parcel demand and are not just supporting the unemployed but low and middle income earners, then we should be hearing warning bells. The Salvation Army are nationally providing over 1000 food parcels a week. Continually rising power charges and rental costs are eating into incomes that don't increase. Our "Rich List" comprises of widely recognized individuals and families who live in houses and have lifestyles that were once thought to only exist in Hollywood.
Our "Poor List" is too large to be able name individuals and probably comprises over 30% of our population. While the average European New Zealand family saw their income increase by a paltry $11 a week over the last four years, Maori families have seen their weekly income drop by $40 and Pacifika families lost $65. This may not sound much to someone like Jenny Shipley who earns $1000 a day to oversee those leading the Christchurch recovery but for someone on the median weekly income of $550 a week (before tax) it is huge. $65 represents half the weekly food bill for a struggling family, one meal and a glass of wine for a government consultant or half of what Graeme Hart earns every time he blinks.