

Currently released so far... 12404 / 251,287
Browse latest releases
2010/12/01
2010/12/02
2010/12/03
2010/12/04
2010/12/05
2010/12/06
2010/12/07
2010/12/08
2010/12/09
2010/12/10
2010/12/11
2010/12/12
2010/12/13
2010/12/14
2010/12/15
2010/12/16
2010/12/17
2010/12/18
2010/12/19
2010/12/20
2010/12/21
2010/12/22
2010/12/23
2010/12/24
2010/12/25
2010/12/26
2010/12/27
2010/12/28
2010/12/29
2010/12/30
2011/01/01
2011/01/02
2011/01/04
2011/01/05
2011/01/07
2011/01/09
2011/01/10
2011/01/11
2011/01/12
2011/01/13
2011/01/14
2011/01/15
2011/01/16
2011/01/17
2011/01/18
2011/01/19
2011/01/20
2011/01/21
2011/01/22
2011/01/23
2011/01/24
2011/01/25
2011/01/26
2011/01/27
2011/01/28
2011/01/29
2011/01/30
2011/01/31
2011/02/01
2011/02/02
2011/02/03
2011/02/04
2011/02/05
2011/02/06
2011/02/07
2011/02/08
2011/02/09
2011/02/10
2011/02/11
2011/02/12
2011/02/13
2011/02/14
2011/02/15
2011/02/16
2011/02/17
2011/02/18
2011/02/19
2011/02/20
2011/02/21
2011/02/22
2011/02/23
2011/02/24
2011/02/25
2011/02/26
2011/02/27
2011/02/28
2011/03/01
2011/03/02
2011/03/03
2011/03/04
2011/03/05
2011/03/06
2011/03/07
2011/03/08
2011/03/09
2011/03/10
2011/03/11
2011/03/13
2011/03/14
2011/03/15
2011/03/16
2011/03/17
2011/03/18
2011/03/19
2011/03/20
2011/03/21
2011/03/22
2011/03/23
2011/03/24
2011/03/25
2011/03/26
2011/03/27
2011/03/28
2011/03/29
2011/03/30
2011/03/31
2011/04/01
2011/04/02
2011/04/03
2011/04/04
2011/04/05
2011/04/06
2011/04/07
2011/04/08
2011/04/09
2011/04/10
2011/04/11
2011/04/12
2011/04/13
2011/04/14
2011/04/15
2011/04/16
2011/04/17
2011/04/18
2011/04/19
2011/04/20
2011/04/21
2011/04/22
2011/04/23
2011/04/24
2011/04/25
2011/04/26
2011/04/27
2011/04/28
2011/04/29
2011/04/30
Browse by creation date
Browse by origin
Embassy Athens
Embassy Asuncion
Embassy Astana
Embassy Asmara
Embassy Ashgabat
Embassy Apia
Embassy Ankara
Embassy Amman
Embassy Algiers
Embassy Addis Ababa
Embassy Accra
Embassy Abuja
Embassy Abu Dhabi
Embassy Abidjan
Consulate Auckland
Consulate Amsterdam
Consulate Adana
American Institute Taiwan, Taipei
Embassy Bujumbura
Embassy Buenos Aires
Embassy Budapest
Embassy Bucharest
Embassy Brussels
Embassy Bridgetown
Embassy Bratislava
Embassy Brasilia
Embassy Bogota
Embassy Bishkek
Embassy Bern
Embassy Berlin
Embassy Belmopan
Embassy Belgrade
Embassy Beirut
Embassy Beijing
Embassy Banjul
Embassy Bangkok
Embassy Bandar Seri Begawan
Embassy Bamako
Embassy Baku
Embassy Baghdad
Consulate Barcelona
Embassy Copenhagen
Embassy Conakry
Embassy Colombo
Embassy Chisinau
Embassy Caracas
Embassy Canberra
Embassy Cairo
Consulate Curacao
Consulate Ciudad Juarez
Consulate Chennai
Consulate Casablanca
Consulate Cape Town
Consulate Calgary
Embassy Dushanbe
Embassy Dublin
Embassy Doha
Embassy Djibouti
Embassy Dili
Embassy Dhaka
Embassy Dar Es Salaam
Embassy Damascus
Embassy Dakar
Consulate Dubai
Embassy Helsinki
Embassy Harare
Embassy Hanoi
Consulate Ho Chi Minh City
Consulate Hermosillo
Consulate Hamilton
Consulate Hamburg
Consulate Halifax
Embassy Kyiv
Embassy Kuwait
Embassy Kuala Lumpur
Embassy Kinshasa
Embassy Kingston
Embassy Kigali
Embassy Khartoum
Embassy Kathmandu
Embassy Kampala
Embassy Kabul
Consulate Kolkata
Embassy Luxembourg
Embassy Luanda
Embassy London
Embassy Ljubljana
Embassy Lisbon
Embassy Lima
Embassy Lilongwe
Embassy La Paz
Consulate Lahore
Consulate Lagos
Mission USOSCE
Mission USNATO
Mission UNESCO
Embassy Muscat
Embassy Moscow
Embassy Montevideo
Embassy Monrovia
Embassy Minsk
Embassy Mexico
Embassy Mbabane
Embassy Maputo
Embassy Manila
Embassy Manama
Embassy Managua
Embassy Malabo
Embassy Madrid
Consulate Munich
Consulate Mumbai
Consulate Montreal
Consulate Monterrey
Consulate Milan
Consulate Melbourne
Embassy Nicosia
Embassy New Delhi
Embassy Ndjamena
Embassy Nassau
Embassy Nairobi
Consulate Naples
Consulate Naha
Embassy Pristina
Embassy Pretoria
Embassy Prague
Embassy Port Of Spain
Embassy Port Louis
Embassy Port Au Prince
Embassy Phnom Penh
Embassy Paris
Embassy Paramaribo
Embassy Panama
Consulate Peshawar
REO Basrah
Embassy Rome
Embassy Riyadh
Embassy Riga
Embassy Reykjavik
Embassy Rangoon
Embassy Rabat
Consulate Rio De Janeiro
Consulate Recife
Secretary of State
Embassy Suva
Embassy Stockholm
Embassy Sofia
Embassy Skopje
Embassy Singapore
Embassy Seoul
Embassy Sarajevo
Embassy Santo Domingo
Embassy Santiago
Embassy Sanaa
Embassy San Salvador
Embassy San Jose
Consulate Strasbourg
Consulate St Petersburg
Consulate Shenyang
Consulate Shanghai
Consulate Sao Paulo
Embassy Tunis
Embassy Tripoli
Embassy Tokyo
Embassy The Hague
Embassy Tel Aviv
Embassy Tehran
Embassy Tegucigalpa
Embassy Tbilisi
Embassy Tashkent
Embassy Tallinn
Consulate Toronto
Consulate Tijuana
USUN New York
USEU Brussels
US Office Almaty
US Mission Geneva
US Interests Section Havana
US Delegation, Secretary
UNVIE
Embassy Ulaanbaatar
Embassy Vilnius
Embassy Vienna
Embassy Vatican
Embassy Valletta
Consulate Vladivostok
Consulate Vancouver
Browse by tag
ASEC
AE
AF
AM
AR
AJ
AU
AORC
AG
AEMR
AMGT
APER
AGMT
AL
AFIN
AO
AMED
ADCO
AS
ABUD
ABLD
ASUP
ASECKFRDCVISKIRFPHUMSMIGEG
APECO
AID
AND
AMBASSADOR
AN
ARM
AY
AODE
AMG
ASCH
AMCHAMS
ARF
APCS
APEC
ASEAN
AGAO
ANET
ADPM
ACOA
ACABQ
AORL
AFFAIRS
ATRN
ACS
AFSI
AFSN
ADANA
ASIG
AA
AX
AUC
AC
AECL
AADP
AGRICULTURE
AMEX
ACAO
ACBAQ
AQ
AORG
ADM
AINF
AIT
ASEX
AGR
AROC
ATFN
AFGHANISTAN
AFU
AER
ALOW
AZ
AVERY
BA
BY
BU
BR
BE
BL
BO
BK
BM
BILAT
BH
BEXP
BF
BTIO
BC
BBSR
BMGT
BTIU
BG
BWC
BB
BD
BX
BP
BRUSSELS
BN
BIDEN
BT
CW
CH
CF
CD
CV
CVIS
CM
CE
CA
CJAN
CLINTON
CIA
CU
CASC
CI
CO
CACM
CDB
CN
CMGT
CS
CG
CBW
CIS
CR
CONDOLEEZZA
CPAS
CAN
CWC
CY
COUNTER
CDG
CL
CT
CIC
CIDA
CSW
CHR
CB
CODEL
COUNTERTERRORISM
CTR
COM
CICTE
CFED
CJUS
CKGR
CBSA
CEUDA
CARSON
CONS
CITEL
CLMT
CROS
CITT
CAC
CVR
CDC
CAPC
COPUOS
CBC
CBE
CARICOM
COE
COUNTRY
CLEARANCE
CACS
CTM
CNARC
ECON
EFIN
ETRD
EUN
EFIS
EG
ETTC
EZ
EPET
EAID
EAGR
ENRG
ECUN
EU
ELAB
ECPS
EAIR
EINV
ELTN
EWWT
EIND
EMIN
EI
ECIN
ENVR
ELECTIONS
EINVEFIN
EN
ES
ER
EC
EUC
EINT
EINVETC
ENGR
ET
EK
ENIV
ETRDEINVECINPGOVCS
ECONOMY
EAP
EFTA
EUR
EUMEM
EXIM
ERD
ENERG
EUREM
ESA
ERNG
EXTERNAL
EPA
EINVECONSENVCSJA
ECONOMICS
ELN
EINN
EFINECONCS
ENNP
EEPET
ETRDEINVTINTCS
ENVI
ETRO
ESENV
ECINECONCS
ECONOMIC
EAIDS
EDU
ETRA
ETRN
EFIM
EIAR
ETRC
EAIG
EXBS
EURN
ECIP
EREL
ECA
ENGY
ECONCS
ECONEFIN
ETC
ETRDECONWTOCS
EUNCH
EINDETRD
IR
IZ
IS
IAEA
INRB
IRAJ
IQ
IN
IT
IMO
INTERPOL
ICAO
IO
IC
ITALY
ITALIAN
IRAQI
ICTY
ID
IPR
IWC
ILC
INTELSAT
IL
IBRD
IMF
IA
IRC
ICRC
ILO
ITU
ITRA
IV
IDA
IAHRC
ICJ
ISRAELI
IRS
INMARSAT
ISRAEL
ISLAMISTS
INDO
IZPREL
ITPHUM
ITPGOV
ITF
IBET
IEFIN
INR
IACI
INTERNAL
IDP
IGAD
IEA
ICTR
IIP
INRA
INRO
IF
KJUS
KSCA
KNNP
KU
KCOR
KCRM
KDEM
KTFN
KHLS
KPAL
KWBG
KACT
KGHG
KPAO
KTIA
KIRF
KWMN
KS
KG
KZ
KN
KMDR
KISL
KSPR
KHIV
KPRP
KAWK
KR
KUNR
KDRG
KCIP
KGCC
KTIP
KSUM
KPKO
KVIR
KAWC
KPIN
KGIC
KRAD
KIPR
KOLY
KCFE
KMCA
KE
KV
KICC
KNPP
KBCT
KSEP
KFRD
KFLU
KVPR
KOCI
KBIO
KSTH
KMPI
KCRS
KOMC
KTBT
KPLS
KIRC
KREL
KFRDKIRFCVISCMGTKOCIASECPHUMSMIGEG
KFLO
KBTS
KSTC
KTDB
KFSC
KX
KFTFN
KNEI
KIDE
KREC
KMRS
KICA
KPAONZ
KCGC
KSAF
KRGY
KCMR
KRVC
KVRP
KSEO
KCOM
KAID
KTEX
KNUC
KNAR
KNUP
KNNPMNUC
KLIG
KFRDCVISCMGTCASCKOCIASECPHUMSMIGEG
KCRCM
KHDP
KGIT
KNSD
KOMS
KWMM
KPAI
KHSA
KTLA
KO
KMFO
KRCM
KCSY
KSAC
KTRD
KPWR
KID
KWNM
KRIM
KPOA
KCHG
KOM
KSCI
KFIN
KMOC
KESS
KWAC
KMIG
KSEC
KIFR
KDEMAF
KPRV
KBTR
KERG
KTER
KDDG
KPAK
KRFD
KHUM
KDEV
KCFC
KWWMN
KWMNCS
KJUST
MARR
MOPS
MU
MTCRE
MNUC
MY
MASS
MCAP
MOPPS
MAR
MPOS
MO
ML
MR
MASC
MX
MD
MP
MA
MTRE
MIL
MCC
MZ
MK
MDC
MRCRE
MAPS
MV
MI
MEPN
MAPP
MEETINGS
MAS
MTS
MLS
MILI
MTCR
MG
MC
MARAD
MIK
MILITARY
MEDIA
MEPI
MUCN
MEPP
MT
MERCOSUR
MW
MASSMNUC
MQADHAFI
NZ
NATO
NG
NI
NO
NATIONAL
NU
NPT
NIPP
NL
NPG
NS
NA
NGO
NP
NSG
NDP
NAFTA
NR
NC
NH
NE
NSF
NPA
NK
NSSP
NRR
NATOPREL
NSC
NT
NW
NORAD
NEW
NV
NSFO
NAR
NASA
NZUS
OTRA
OVIP
OPRC
OPDC
OSCE
OAS
ODIP
OIIP
OFDP
OVP
OREP
OFFICIALS
OSAC
OEXC
OPCW
OIE
OIC
OFDA
OSCI
OPIC
OBSP
OECD
ON
OCII
OHUM
OES
OCS
OMIG
OPAD
OTR
PGOV
PREL
PHUM
PINR
PTER
PSOE
PINS
PARM
PK
PBTS
PEPR
PM
POLITICAL
PARTIES
PREF
PBIO
PROP
PA
PSI
PINT
PO
PKFK
PL
PAK
PE
POLITICS
PINL
POL
PHSA
PU
PF
POV
PFOR
PHALANAGE
PARTY
PARMS
PRGOV
PNAT
POLINT
PRAM
PMAR
PG
PAO
PROG
PRELP
PPA
PCUL
PSEPC
PSA
PREO
PAHO
PGIV
PREFA
PALESTINIAN
PAIGH
POSTS
PTBS
PGOVLO
PORG
PGOVE
PLN
PINF
PAS
PUNE
POLICY
PDEM
PDOV
PCI
PGOVSMIGKCRMKWMNPHUMCVISKFRDCA
PBT
PHUMPGOV
PMIL
PNG
PP
PS
PHUH
PECON
POGOV
PY
PHUMPREL
PHUS
PRL
PGOC
PNR
PGGV
PROV
PTERE
PGOF
PHUMBA
PEL
RS
RU
RW
REGION
RP
RICE
ROBERT
RSP
RUPREL
RM
RO
RCMP
RSO
RELATIONS
REACTION
REPORT
RIGHTS
ROOD
RF
RFE
RIGHTSPOLMIL
SP
SA
SY
SF
SYR
SENV
SCUL
SOCI
SNAR
SO
SU
SG
STEINBERG
SHUM
SW
SMIG
SR
SZ
SIPRS
SI
SAARC
SPCE
SARS
SN
SYRIA
SANC
SL
SCRS
SC
SENVKGHG
SAN
SNARCS
SHI
SWE
SNARIZ
SIPDIS
SEN
SNARN
SPCVIS
SEVN
SSA
SH
SOFA
SK
ST
TPHY
TU
TRGY
TI
TX
TS
TW
TC
TFIN
TD
TSPA
TH
TT
TIP
TBIO
TSPL
TZ
TERRORISM
TRSY
TN
THPY
TINT
TF
TL
TV
TK
TO
TP
TURKEY
TNGD
TBID
TAGS
TR
UP
US
UNSC
UK
UZ
UE
UNESCO
UV
UNGA
UN
UNMIK
UNO
UY
UAE
UNEP
UG
UNHCR
UNHRC
USUN
UNAUS
USTR
USNC
USOAS
UNCHR
UNCSD
UNDP
USEU
USPS
UNDC
UNDESCO
UNCHC
UNFICYP
UNC
UNODC
UNPUOS
UNCND
UNICEF
UNCHS
UNVIE
USAID
UNIDROIT
Browse by classification
Community resources
courage is contagious
Viewing cable 08WELLINGTON337, NEW ZEALAND'S GRIM PRE-ELECTION ECONOMIC
If you are new to these pages, please read an introduction on the structure of a cable as well as how to discuss them with others. See also the FAQs
Understanding cables
Every cable message consists of three parts:
- The top box shows each cables unique reference number, when and by whom it originally was sent, and what its initial classification was.
- The middle box contains the header information that is associated with the cable. It includes information about the receiver(s) as well as a general subject.
- The bottom box presents the body of the cable. The opening can contain a more specific subject, references to other cables (browse by origin to find them) or additional comment. This is followed by the main contents of the cable: a summary, a collection of specific topics and a comment section.
Discussing cables
If you find meaningful or important information in a cable, please link directly to its unique reference number. Linking to a specific paragraph in the body of a cable is also possible by copying the appropriate link (to be found at theparagraph symbol). Please mark messages for social networking services like Twitter with the hash tags #cablegate and a hash containing the reference ID e.g. #08WELLINGTON337.
Reference ID | Created | Released | Classification | Origin |
---|---|---|---|---|
08WELLINGTON337 | 2008-10-14 21:09 | 2011-04-28 00:12 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Wellington |
VZCZCXRO5674
RR RUEHAG RUEHCHI RUEHDF RUEHFK RUEHHM RUEHIK RUEHKSO RUEHLZ RUEHNAG
RUEHPB RUEHRN RUEHROV
DE RUEHWL #0337/01 2882151
ZNR UUUUU ZZH
R 142151Z OCT 08
FM AMEMBASSY WELLINGTON
TO RUEHC/SECSTATE WASHDC 5473
INFO RUEHNZ/AMCONSUL AUCKLAND 1759
RUEHBY/AMEMBASSY CANBERRA 5281
RUEHDN/AMCONSUL SYDNEY 0733
RHHMUNA/CDR USPACOM HONOLULU HI
RUEHZU/ASIAN PACIFIC ECONOMIC COOPERATION
RUEHSS/OECD POSTS COLLECTIVE
RUCPDOC/USDOC WASHDC 0256
RUEATRS/DEPT OF TREASURY WASHDC
RUEHRC/DEPT OF AGRICULTURE WASHDC
RUCNMEM/EU MEMBER STATES COLLECTIVE
UNCLAS SECTION 01 OF 03 WELLINGTON 000337
SENSITIVE
SIPDIS
STATE FOR EAP/ANP AND EEB, STATE PASS TO USTR, PACOM FOR
J01E/J2/J233/J5/SJFHQ
E.O. 12958: N/A
TAGS: ECON ETRD PGOV PREL NZ
SUBJECT: NEW ZEALAND'S GRIM PRE-ELECTION ECONOMIC
FORECAST
Ref A) WELLINGTON 168, B) WELLINGTON 159
WELLINGTON 00000337 001.2 OF 003
¶1. (U) Summary: New Zealand's economy contracted
dramatically since the release of the May 2008 Budget
projections, resulting in budget deficits twice as large
as forecasted due primarily to two quarters of negative
growth and growing current account deficits. GNZ
officials however, maintain that the downturn in the
economy is not directly linked to the global credit
crisis. Finance Minister Michael Cullen's message to
voters following the release of the bad economic news was
that thanks to his fiscal prudence, New Zealand is better
placed to weather the economic downturn than a lot of
other countries. Some analysts feel Cullen may have
exacerbated the economic downturn through tax cuts and
increased government spending to bolster the Labour
Government's re-election prospects. The grim economic
forecast caused National Party leader John Key to
reformulate his tax cut program to NZ$47 per week for the
average wage earner beginning in April 2009 and dropping
the originally planned cuts for upper income earners.
End Summary.
NZ Treasury Warns of Severe Economic Downturn
---------------------------------------------
¶2. (U) The GNZ is required under the Fiscal
Responsibility Act to produce the Pre-Election Fiscal
Update (PREFU) which reflects the Treasury's view of the
government's fiscal position based on information
received up to August 28th prior to the general election.
In the PREFU released October 6, Treasury officials said
the New Zealand economic outlook had deteriorated badly
since the May budget was released, which meant reducing
government revenue forecasts and recalculating increased
government costs (see Ref A). Cash deficits -- the net
amount after all infrastructure funding and payments to
the New Zealand Superannuation Fund are made -- are
predicted to balloon from around NZ$5.9 billion a year in
2008/9 around NZ$7.3 billion a year in 2012/13. The
Government's operating balances are predicted to fall
into deficit for the first time since 1994 reaching
NZ$3.2 billion by 2012/2013. Treasury Secretary John
Whitehead said forecast scenarios had Government debt
increasing from 17.4 percent of GDP to 24.3 percent by
¶2013. Mr. Whitehead said that despite the fact that the
Pre-Election Fiscal and Economic Update was completed
before the international financial crisis had become even
sharper, the Treasury's near-term economic forecasts
would remain largely the same. Tax revenue was predicted
to be NZ$3.1 billion less than anticipated in the budget
due to the reduced government revenues resulting from the
recession, along with an increase in subsidies for
programs like early childhood education (NZ$200 million
per year) and the growing popularity of the KiwiSaver
plan (additional NZ$280 million per year). The slowdown
is expected to continue through the middle of next year
with unemployment predicted to rise to 5.1 percent from
the current 3.9 percent.
Government Figures Show Trend Towards Red
-----------------------------------------
¶3. (U) Key figures from the Government's economic report
(Pre-Election fiscal) include:
-- Gross government debt to rise from 17.4 percent of GDP
to 24.3 per cent by 2013 against the Government's target
of 20 per cent of GDP on average.
-- Growth expected to be only 0.1 percent by March 2009
before lifting to 1.8 percent and then 3.3 percent in the
following two years.
-- The budget deficit forecast to be $64 million next
year rising to $1.7 billion by 2010 and staying in
deficit for 10 years.
WELLINGTON 00000337 002.2 OF 003
-- A cash surplus of NZ$2 billion in the year to June
falling to a projected cash deficit of NZ$5.9 billion in
2008/2009 and further deficits over the next four years
rising to NZ$7.3 billion by 2012. In the May budget cash
deficits were forced to average NZ$3.5 billion.
-- Kiwi dollar expected to decline in value by 22.7
percent by 2013. The Kiwi dollar slipped to a five-year
low of US57.85c this month.
-- 90-day interest rates falling from 8.8 percent to 6.3
percent by 2013.
-- NZ$496 million is all that is left in next year's
budget for new spending.
-- Unemployment tipped to rise above 5 per cent by 2010.
-- Inflation forecast to rise to 4.5 percent by March
2009 before falling back to just under 2.5 percent.
-- Tax revenue for the next three years to be lower on
average by around $900 million.
¶4. (SBU) Finance Minister Michael Cullen's message to
voters following the release of the bad economic news was
that thanks to his "fiscal prudence," New Zealand is
better placed to weather the economic crisis than a lot
of other countries but he ignored the impact of his binge
spending on the limited options left has to address the
economic downturn. Having been pilloried for running
huge surpluses in past years, he feels vindicated that
the money went into strengthening the Government's books
for the inevitable rainy day which has now arrived.
Cullen said that had he known earlier in the year how bad
things would get, he would have taken a "more cautious"
approach to cutting taxes. Some analysts feel Cullen
may, in fact, have exacerbated a poor economic outlook by
delivering tax cuts and increased government spending in
the lead up to the November 8 election (see Ref B).
Probably for that reason, he avoided baiting National too
heavily about their proposed budget rollout, instead
letting the budget figures speak for themselves and
waiting for the National Party's response detailing their
plan for tax cuts and how National intended to pay for
them.
¶5. (U) Despite having to explain why the government's
books looked worse than predicted, Cullen said now was
the not time for "a slash and burn response" to
government spending, or more tax cuts. He said the
Government was maintaining a steady and prudent approach,
and should continue to do so. He signaled that any post-
election government would have to take a closer look at
revenue forecasts and increases in government spending.
The tough times meant there would have to be a review of
"low priority" spending to fund "more productive" new
initiatives.
National's Tax Cut Policy
-------------------------
¶6. (U) Opposition National Party leader John Key had to
reformulate his election promise of delivering greater
tax cuts to businesses and wage earners following the
grim economic forecast. Key said that, if elected, he
will deliver a three-tier personal tax system with the
highest rate no more than 33% on income over NZ$50,000.
Key proposes cuts in personal tax rates beginning 1 April
2009 of NZ$47 per week for the average wage earner. He
dropped the originally planned cuts for wealthier tax
payers. This last move preempts Labour accusations that
National remains the party of the well-to-do. To head
off the criticism that it would have to take the fiscal
axe to cherished programs to pay for this, National has
pledged to make no cuts to frontline public services and
no cuts to superannuation entitlements or eligibility
requirements. National says it can make its plan
WELLINGTON 00000337 003.2 OF 003
affordable by making changes to KiwiSaver. It will
reduce the minimum contribution for employees and
employers from 4 percent to 2 percent, discontinue tax
credits to employers, and cap the Government contribution
at $NZ1,040 a year, or 2 percent.
National's Kiwisaver Move Presents Risk
---------------------------------------
¶7. (U) To help fund National's tax cut program, Key wants
to trim down government and employer contributions to the
enormously popular KiwiSaver program. National's
KiwiSaver changes would remove altogether a tax credit
the Government currently pays to employers to help them
pay a contribution into employees saving accounts -
saving NZD3 billion. Instead of being forced to
contribute 4 per cent of an employee's gross salary into
KiwiSaver in future years, however, employers under
National would have to give only 2 per cent. Labour
immediately jumped on the proposed changes and Cullen
accused National of "savaging KiwiSaver" and providing a
disincentive for saving by reducing the standard
contribution. By and large, political analysts thought
that National tax package was "good politics" because it
did not ignore the middle class and assisted those who
have not received any assistance from Labour. Analysts
also acknowledged that even those low-income earners not
assisted in a significant way by National's proposed tax
program already receive considerable financial assistance
through existing programs which National has pledged to
retain, such as the Working for Families scheme.
However, they acknowledged that changing the KiwiSaver
scheme represents a political risk for National.
Kiwisaver is very popular with New Zealanders - 800,000
members since Labour promoted it in 2007 - and analysts
believe that any changes National proposes could alienate
a huge block of the voting population.
¶8. (SBU) Comment: The next New Zealand government
following the November 8 general election will inherit a
brittle economy mired in red ink due in part to Finance
Minister Cullen's binge spending which produced now
projected cash deficits of $NZ5.9 billion. National
miscalculated the impacts of the economic downturn and
has been forced to reformulate its tax cut program meant
to entice potential voters away from Labour. Regardless
of which party prevails on November 8, the recent
economic data will limit either party's ability to
stimulate the economy and end the current recession.
MCCORMICK