

Currently released so far... 12900 / 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
2011/05/01
2011/05/02
2011/05/03
2011/05/04
2011/05/05
2011/05/06
2011/05/07
2011/05/08
2011/05/09
2011/05/10
2011/05/11
2011/05/12
2011/05/13
2011/05/14
2011/05/15
2011/05/16
2011/05/17
2011/05/18
2011/05/19
2011/05/20
2011/05/21
2011/05/22
2011/05/23
2011/05/24
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
Consulate Karachi
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 Niamey
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 Sapporo
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
AE
ASEC
AS
AR
AMGT
AFIN
AORC
AU
AG
AF
APER
ABLD
ADCO
ABUD
AM
AID
AJ
AEMR
AMED
AL
ASUP
AN
AIT
ACOA
ANET
ASIG
AA
AGMT
AINF
AFFAIRS
ADANA
AY
AADP
ARF
ACS
AGR
AMCHAMS
AECL
AUC
APEC
APECO
AFGHANISTAN
ACAO
ASEAN
ADM
AGAO
AND
ADPM
ATRN
ALOW
AROC
APCS
AORG
AO
AODE
ACABQ
AX
AMEX
AZ
ARM
AQ
ATFN
AMBASSADOR
ACBAQ
AFSI
AFSN
AC
ASEX
AER
AVERY
AGRICULTURE
ASCH
AFU
AMG
ATPDEA
ASECKFRDCVISKIRFPHUMSMIGEG
AORL
BR
BO
BA
BM
BL
BH
BK
BEXP
BILAT
BTIO
BF
BU
BD
BY
BE
BG
BB
BBSR
BT
BRUSSELS
BP
BX
BC
BIDEN
BMGT
BWC
BN
BTIU
CA
CS
CO
CD
CR
CPAS
CDG
CI
CDC
CBW
CU
CVIS
CE
CONS
CH
CMGT
CASC
CY
CW
CG
CJAN
CIDA
CODEL
CWC
CIA
CBSA
CEUDA
CFED
CLINTON
CAC
CL
CACS
CIC
CHR
CAPC
CM
CT
CTR
COM
CROS
CN
COPUOS
CV
CF
CARSON
CONDOLEEZZA
CICTE
CYPRUS
COUNTER
COUNTRY
CBE
CKGR
CVR
COUNTERTERRORISM
CITEL
CLEARANCE
COE
CARICOM
CB
CSW
CITT
CACM
CDB
CJUS
CTM
CAN
CLMT
CBC
CNARC
CIS
EFIN
ECON
ETRD
EAID
EC
EU
EUN
EINV
EG
ETTC
EIND
ELAB
EAGR
ECIN
EINT
ENRG
EFIS
ELTN
EAIR
EPET
EZ
ET
ENERG
ECPS
EWWT
EI
ETRN
EINVECONSENVCSJA
EEPET
EUNCH
ER
ES
EN
EMIN
ESENV
ENNP
ENGR
ETRDEINVECINPGOVCS
ENVI
ECINECONCS
ELN
EFTA
ELECTIONS
ENVR
EXTERNAL
ENIV
ESA
EPA
ETRO
ETRDECONWTOCS
EUR
ECUN
EXIM
EK
EUREM
ECONOMY
EUMEM
ERNG
EFINECONCS
EAIDS
ECA
ETRC
EINVEFIN
ETC
EAP
EINN
ECONOMIC
EXBS
ENGY
ECONOMICS
EIAR
EINDETRD
ECONEFIN
EURN
EDU
ETRDEINVTINTCS
ECIP
EFIM
EREL
EINVETC
ECONCS
ETRA
EAIG
EUC
ERD
IQ
IR
IS
IN
IA
IC
IZ
ICRC
ID
IDA
IT
IO
IAEA
ICJ
ICAO
IV
IBRD
IMF
IAHRC
IWC
ILO
ISLAMISTS
IGAD
ILC
ITU
ITF
INRA
INRO
ICTY
INRB
ITALY
IBET
IL
INTELSAT
ISRAELI
IMO
IDP
ICTR
ITRA
IRC
IRAQI
IEFIN
IPR
IIP
INMARSAT
ITPGOV
ITALIAN
INTERNAL
IRS
INTERPOL
IEA
INR
ISRAEL
IZPREL
IRAJ
IF
ITPHUM
IACI
INDO
KPAO
KMDR
KCOR
KNNP
KJUS
KCRM
KDEM
KVPR
KTFN
KPRP
KTIP
KSCA
KSUM
KTEX
KIDE
KIRF
KV
KTIA
KN
KG
KFRD
KWMN
KUNR
KISL
KU
KGHG
KPKO
KOMS
KPAL
KIPR
KMCA
KOMC
KRVC
KSEP
KAWC
KOLY
KWBG
KACT
KFLO
KHIV
KZ
KGIC
KBCT
KDRG
KBTR
KCFE
KE
KHLS
KMPI
KAWK
KPWR
KIRC
KRAD
KFRDCVISCMGTCASCKOCIASECPHUMSMIGEG
KFLU
KPLS
KRIM
KSTH
KDDG
KPRV
KICC
KS
KSAF
KBIO
KREC
KCGC
KCIP
KTDB
KWAC
KPAI
KFRDKIRFCVISCMGTKOCIASECPHUMSMIGEG
KFSC
KSTC
KMFO
KID
KNAR
KMIG
KVRP
KNEI
KGIT
KNSD
KHDP
KSAC
KWMM
KR
KCOM
KAID
KENV
KVIR
KHSA
KO
KCRS
KPOA
KTER
KFIN
KSPR
KTBT
KX
KCMR
KMOC
KCRCM
KBTS
KSEO
KOCI
KNUP
KPAONZ
KNUC
KNNPMNUC
KERG
KSCI
KTLA
KCSY
KTRD
KMRS
KNPP
KJUST
KRCM
KCFC
KCHG
KREL
KFTFN
KLIG
KDEMAF
KGCC
KICA
KHUM
KSEC
KPIN
KESS
KDEV
KPIR
KWWMN
KOM
KWNM
KRFD
KRGY
KIFR
KWMNCS
KPAK
MARR
MOPS
MUCN
MCAP
MNUC
MEPP
MTCRE
MASS
MO
MIL
MX
MAS
MEDIA
MAR
MI
MQADHAFI
MPOS
MTCR
MK
MG
MA
MY
MU
ML
MPS
MW
MD
MARAD
MC
MR
MT
MTRE
MASC
MRCRE
MAPP
MZ
MP
MOPPS
MTS
MLS
MILI
MEPN
MEPI
MEETINGS
MERCOSUR
MCC
MIK
MAPS
MV
MILITARY
MDC
MASSMNUC
NI
NZ
NL
NO
NPT
NATO
NS
NU
NP
NPA
NSFO
NDP
NT
NW
NASA
NSG
NE
NORAD
NAFTA
NG
NATIONAL
NSSP
NV
NSF
NK
NA
NEW
NPG
NR
NGO
NIPP
NZUS
NH
NC
NRR
NAR
NATOPREL
NSC
OIIP
OPRC
OTRA
OEXC
OREP
OSCE
OVIP
OPAD
OBSP
OECD
OFFICIALS
OAS
OPDC
ODIP
OPCW
OES
OFDP
OPIC
OCS
OIC
OHUM
OSCI
OVP
ODC
OIE
OTR
OMIG
OSAC
OFDA
ON
OCII
PREL
PINR
PGOV
PARM
PE
PTER
PHUM
PO
PINS
PREF
PK
PM
POL
PBTS
PNAT
PHSA
PAS
PA
PL
PGIV
PHUMPREL
POGOV
PAK
PEL
PROP
PP
PINL
PBT
PTBS
PG
PINF
PRL
PALESTINIAN
PSEPC
POSTS
PAHO
PHUMPGOV
PGOC
PNR
PREFA
PMIL
POLITICS
POLICY
PROV
PBIO
PREO
PAO
PDOV
PGOF
POV
PCI
PRAM
PSI
POLITICAL
PAIGH
PJUS
PARMS
PROG
PTERE
PRGOV
PORG
PS
PKFK
PSOE
PEPR
PPA
PINT
PMAR
PRELP
PNG
PFOR
PUNE
PGOVLO
PHUMBA
POLINT
PGOVE
PHALANAGE
PARTY
PDEM
PECON
PY
PLN
PHUH
PF
PHUS
PU
PARTIES
PCUL
PGGV
PSA
PGOVSMIGKCRMKWMNPHUMCVISKFRDCA
RU
RS
REGION
REACTION
REPORT
RO
RW
RCMP
RSO
RP
RM
ROOD
RFE
RICE
ROBERT
RSP
RF
RELATIONS
RIGHTS
RIGHTSPOLMIL
RUPREL
SENV
SY
SNAR
SCUL
SP
SF
SW
SOCI
SU
SMIG
SO
SA
SR
SZ
SI
SC
SEVN
SN
STEINBERG
SK
SH
SNARCS
SPCE
SARS
SNARN
SG
SL
SYRIA
SIPRS
SAARC
SNARIZ
SWE
SYR
SEN
SCRS
SAN
ST
SIPDIS
SSA
SPCVIS
SOFA
SENVKGHG
SANC
SHI
SHUM
TU
TSPA
TBIO
TS
TRGY
TINT
TPHY
TN
TW
TH
TZ
TSPL
TP
TBID
TI
TF
TD
TT
TNGD
TL
TC
THPY
TIP
TX
TV
TK
TERRORISM
TO
TRSY
TURKEY
TFIN
TAGS
TR
UK
UNSC
UNGA
UNESCO
UNHRC
UP
UN
USTR
US
UNDC
UY
UNICEF
UNDP
UNMIK
UNAUS
UNCHC
UNCSD
USOAS
UNFCYP
UG
UNIDROIT
UNO
UV
UNHCR
UNEP
USEU
UZ
UNCND
USUN
UNCHR
USNC
USPS
USAID
UE
UNVIE
UAE
UNODC
UNCHS
UNFICYP
UNDESCO
UNC
UNPUOS
Browse by classification
Community resources
courage is contagious
Viewing cable 07WELLINGTON386, NEW ZEALAND'S 2007 BUDGET NOT LIKELY TO PRODUCE
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. #07WELLINGTON386.
Reference ID | Created | Released | Classification | Origin |
---|---|---|---|---|
07WELLINGTON386 | 2007-05-22 06:49 | 2011-04-28 00:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Wellington |
VZCZCXRO2318
PP RUEHNZ
DE RUEHWL #0386/01 1420649
ZNR UUUUU ZZH
P 220649Z MAY 07
FM AMEMBASSY WELLINGTON
TO RUEHC/SECSTATE WASHDC PRIORITY 4275
INFO RUEHBY/AMEMBASSY CANBERRA PRIORITY 4845
RUEHNZ/AMCONSUL AUCKLAND PRIORITY 1319
RULSDMK/DEPT OF TRANSPORTATION WASHDC PRIORITY
RUCPDOC/USDOC WASHDC PRIORITY 0136
RHMFIUU/DEPT OF ENERGY WASHINGTON DC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUEHRC/DEPT OF AGRICULTURE WASHDC PRIORITY
RHHMUNA/CDR USPACOM HONOLULU HI PRIORITY
UNCLAS SECTION 01 OF 03 WELLINGTON 000386
SIPDIS
SENSITIVE
SIPDIS
STATE PASS TO USTR, STATE FOR EAP/ANP, EB, INR, PACOM FOR
J01E/J2/J233/J5/SJFHQ
E.O. 12958: N/A
TAGS: ECON EFIN ETRD PGOV PREL NZ
SUBJECT: NEW ZEALAND'S 2007 BUDGET NOT LIKELY TO PRODUCE
POLITICAL DIVIDENDS
REF: WELLINGTON 351
1) (U) SUMMARY: New Zealand's political punditry has given
Labour's 2007 Budget a tepid response. While many wage
earners may decide the Budget's centerpiece, a national
pension saving scheme - KiwiSaver, could provide them some
benefit, the majority of voters will likely be indifferent or
resent another year of no relief in their personal tax rates.
New Zealand faces major economic challenges, including an
overvalued exchange rate that hinders imports, high interest
rates that inhibit investments, and a ballooning trade
deficit (reftel). The Government argues that tax cuts would
exacerbate these problems, but its new budget is unlikely to
reverse these trends. Nor will it reverse the Government's
sliding poll ratings, as New Zealanders are likely to
question why Labour has once again failed to provide them
with any immediate material benefits despite the Government's
huge operating surplus. End summary.
Budget Basics
-------------
¶2. (U) On May 17th New Zealand's Minister of Finance, Dr.
Michael Cullen released the Labour Government's 2007 Budget,
which he promised will address both short-term economic
imbalances (current account deficit, higher inflation and
high exchange rate) along with medium-term challenges
(improve low household savings rates and stimulate
investment). The Budget's two main initiatives are the
"KiwiSaver" superannuation (pension) top up plan and a set of
cautious reductions in business taxes. KiwiSaver (first
proposed in 2005) is a scheme designed to help improve
household savings and to provide New Zealanders with
additional retirement funds supplementing the current
national superannuation fund.
¶3. (U) With the 2007 Budget, KiwiSaver now becomes a reality
when the next fiscal year starts on July 1. As an incentive
to encourage broad participation in the scheme, the
government will kick start each new member's account with a
NZ$1,000 (USD $730) contribution and provide a tax credit of
up to NZ$20 per week (about NZ$1040 per year per individual).
In an unexpected wrinkle, from 1 April 2008 employers of all
KiwiSaver participants will be required to contribute to the
accounts. The compulsory employer contributions will start at
1% of participating employees' salaries and increase by 1%
each year until 2012, when the compulsory employer
contribution will reach 4%. Employers will receive up to
NZ$20 per week per employee in tax credits for their
contributions. GNZ estimates that the cost in deferred
Government revenue will be approximately NZ$3 billion over
four years, with NZ$1.6 billion going to employees as tax
credits and NZ$1.4 billion in tax credits for employers.
Goldman Sachs further estimates KiwiSaver will generate
increased overall savings of between NZ$5 and NZ$7 billion a
year by 2013. The hope is that with this large pool of
domestic capital, New Zealand's reliance on foreign capital
and the overall cost of capital will be reduced, giving New
Zealand investors a greater ownership stake in the economy.
¶4. (U) The second important aspect of the Budget is a change
to business taxes, the most important feature being the
reduction in the corporate tax rate from 33% to 30%. This
will partly offset the cost of KiwiSaver to employers. It
will in addition set the NZ corporate tax rate at the same
rate as Australia's in an effort to help prevent New
Zealand's businesses from jumping across the Tasman. For the
first time, businesses investing in research and development
(R&D) can now receive a 15% tax credit in the hope of
stimulating much needed domestic productivity growth. The
cost to the Government for this measure is estimated at NZ
$630 million in deferred revenue over four years. Another new
feature will grant individuals a 33% tax rebate for
charitable contributions to "qualified donee organizations."
This measure is expected to cost NZ$65 million in deferred
tax over four years. There are also new tax exemptions for
active income derived from active business activity (e.g.,
manufacturing, industrial activity) for New Zealand
controlled foreign companies to help them globalize at a
lower tax and compliance cost (worth NZ$112.5 million over
WELLINGTON 00000386 002 OF 003
four years) making them more internationally competitive.
¶5. The Government claims these measures will encourage New
Zealanders to save rather than spend, which Labour says would
decrease inflation and interest rates. But many analysts say
the need for NZ Reserve Bank's tighter monetary policy will
persist because of high overall consumer demand - especially
for housing. Economists also predict that overall economic
growth will continue to slow in part by the Kiwi dollar
exchange rate, now at a 23-year high and forecast to remain
high through March 2009. The GNZ reports growth in GDP at
1.7% for the year as of March 2007 and forecasts growth of
2.6% through March 2008. This is well below the 4% target
originally set by the Labour government in 2001.
¶6. (U) On the expenditure side of the Budget, the media has
focused primarily on the GNZ's scheme to improve New
Zealand's transportation infrastructure. The GNZ will make
NZ$145 million available in capital funding for highway
construction and upgrades and NZ$500 million in funds for the
electrification of Auckland's rail network and improvements
to Wellington extant network. The funding includes an
additional regional fuel tax, subject to voter approval,
which in Auckland's case will mean an additional 10 cents per
liter on petrol and diesel. This provision is Labour's
admittedly perfunctory nod to the Green's demand for a carbon
tax on gasoline. For a complete list of both tax and
expenditure specifics enumerated in the 2007 Budget see:
www.treasury.govt.nz
Cullen yields to political reality
----------------------------------
¶7. (U) Dr. Cullen, a reluctant tax cutter at best, decided to
signal that personal tax cuts may occur in next year's (the
2008 "pre-election") Budget, a move seen as purely a
political decision rather than an economic one. Labour
probably hoped it could keep the lid on this proposed 2008
election "sweetener" until after Cullen unveiled the current
Budget - his eighth. But Labour's hemorrhaging support in two
recent consecutive political opinion polls apparently
startled long-serving Cabinet ministers -particularly Prime
Minister Helen Clark, who remembers that National almost won
the 2005 elections by promising universal tax cuts. The fact
that Cullen has finally been forced to concede (however
reluctantly) that a Labour Government will cut personal taxes
(later rather than sooner) will be enough to keep his restive
colleagues on his side, at least for now.
¶8. (U) Even if Dr. Cullen finally accedes to tax cuts next
year, this measure alone may not guarantee the sort of
political insurance the Labour Party needs to return it to
power for a fourth term. Labour has hung its hat on
distributing benefits only to those in society it deems most
in need, especially lower and middle income families with
children. The Government also argues that extensive tax cuts
will push up inflation and interest rates. The Government's
challenge is that the opposition National Party has touched a
nerve with voters by claiming that the electorate should be
able to make its own spending decisions and all taxpayers
deserve lower taxes. Labour knows there is mounting
impatience among the electorate for tax relief after years of
bulging surpluses. (Note: This year's cash surplus amounts to
NZ$1.7 billion.) More than one analyst has observed that
Cullen reneged this year on the very small tax cuts he had
promised in last year's budget. The public restiveness is
reflected in the latest 3 News-TNS poll taken before the
Budget announcement, in which 58 percent of those surveyed
said Cullen should be sacked if he did not deliver tax cuts
and 66 per cent wanted the top tax rate threshold of 39 per
cent (i.e., NZ$60,000 (approx. US$45,000) and above which
reflects the top 12%) lowered. Cullen has countered by saying
the TV3 poll hadn't asked the right question, which would be
to ask people if they wanted a substantial tax cut that
pushed up mortgage rates or led to cuts to health and
education spending.
National Party and Greens critical of Budget
--------------------------------------------
WELLINGTON 00000386 003 OF 003
¶9. (U) Predictably, in a robust response to Cullen,s Budget
address to Parliament, National Party leader John Key labeled
the 2007 Budget a "cruel hoax". He stated that costs incurred
by businesses by paying into employees KiwiSaver schemes will
ultimately outweigh and lower any cuts in corporate tax
rates. Moreover, Key asserted, middle income New Zealanders
will not benefit from the KiwiSaver incentives because their
current high debt levels, rising interest rates, and lack of
disposable income have made them cash strapped and unable to
save. Bosses are also unlikely to offer raises knowing that
they will have to kick in to employee KiwiSaver accounts.
¶10. (U) The Green Party complained that Budget 2007 failed to
deliver the necessary environmental benefits to make New
Zealand more sustainable and ultimately carbon neutral.
Environment Minister David Benson-Pope and Climate Change
Minister David Parker proclaimed that the carbon neutral
pledge in the Budget was a "bold and exciting" environmental
program and noted that more money has been allocated to
address sustainability concerns than ever before. National's
Key, who himself is trying to improve his own party's green
credentials, also argued that the Budget was not green
enough. Key has noted that the oft-used Clark slogan of
'carbon neutrality', which Clark established as one of her
goals for New Zealand in the unspecified future, was missing
from the Budget.
¶11. (SBU) Comment: Although not expressly stated, it appears
that Labour's strategy in the lead-up to next year's election
is that it will have begun solidifying its base of support by
paying out at least NZ$1,000 to each wage earner who opens a
KiwiSaver account in 2007. They may then reduce the personal
tax rates in the 2008 Budget as the second traunche of
government largesse to further strengthen voter support but
these measures alone may be perceived by Kiwi voters as too
little too late. End comment.
Keegan