The Kākā by Bernard Hickey
The Kākā by Bernard Hickey
There's a $2b hole in Luxon's tax cut plan

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There's a $2b hole in Luxon's tax cut plan

Luxon pledges to reverse all of Labour's tax moves and pay for it from Labour's $6b allowance, without cutting services, and while keeping debt low; Robertson says Luxon entering 'Bermuda Triangle'

TLDR & TLDL: National’s new leader has pledged to reverse Labour’s tax moves since 2017, but also sees no health or education cuts and expects debt to stay low. But Christopher Luxon hasn’t explained how National would ‘square this circle’ of cutting taxes, lowering debt and keeping public services at the same time.

Luxon also didn’t mention $2b of the $3.7b of revenue reductions the plan would entail, and whether that would force National to borrow more, less or the same as Labour.

Finance Minister Grant Robertson described Luxon’s ‘State of the Nation’ as a retread of National’s policies and said Luxon risked entering the ‘Bermuda Triangle’ that Paul Goldsmith entered before the last election when he couldn’t explain where cost reductions would come. (See my analysis of the National plan below the paywall fold, including detail on the costs of the tax cuts and what was missed out in the list of reversals)

There’s a bit of a hole in Luxon’s plan to reverse Labour’s ‘six new tax increases,’ while at the same time not worsening public debt nor cutting education or health spending. Photo: Lynn Grieveson/TheKaka

Elsewhere in the news this morning:

  • oil prices are set to rise even further this morning on renewed doubts an Iranian nuclear deal would allow Iran to export more oil, and US threats overnight to fully block Russian oil and gas exports;

  • Heart of the City CEO Viv Beck declared this morning she will run for Auckland Mayor, pitting her as the National-aligned candidate against the Labour-supported Efeso Collins; and,

  • stress in global money markets is rising on fears Russian payment defaults could starve traders of US dollars, which is a factor in a flight to quality driving longer bond yields down again, including the German bund down under 0% again.

Watch out today for a post-Cabinet news conference after 4pm, in which PM Jacinda Ardern may talk about a Three Waters review report due back today. I welcome suggestions for questions and lines of inquiry in the comments below.

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The Kākā by Bernard Hickey
The Kākā by Bernard Hickey
Bernard Hickey and friends explore the political economy together.