By Dan Satherley and Lloyd Burr
Labour has revealed how it will fund its election promises, and how it plans to pay back the extra borrowing this will entail.
Labour plans to return to a $497 million surplus by 2014/2015, and pay off debt faster than National.
Net debt at the end of a Labour Govt's first term would be $2.55 billion more than National, however.
"Labour will borrow more in the short-term to fund our schools and hospitals because we will never sell our assets," says leader Phil Goff.
"The extra borrowing in the first term of Labour government will be $15.6 billion, which is $2.6 billion higher than a National Government which would borrow $13 billion.
“Our borrowing peaks at $4 billion more than National, but from 2017/18 we will be paying back the debt faster than a National Government would because of the on-going asset returns and the increasing revenue of our fairer tax package."
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Mr Goff says Labour's plan is "realistic", and will be phased in over time to make it more affordable.
"Revenue will be slightly below PREFU in the 2013/14 and 2014/15 years as the $5,000 tax-free bracket comes into effect," according to the party's fiscal strategy document. "However, this is soon more than offset by the retained revenues from the SOEs that Labour won't sell and the capital gains tax."
The party admits its balance would be slightly worse than that in the PREFU until around 2016/17, after which it would run much larger surpluses.
"Our plan will prepare New Zealand for the future. We will take the hard decisions for the future rather than trying to kid everyone that nothing needs to change," says Mr Goff.
"John Key refuses to confront reality and also wants to sell our assets to the Australians, the Chinese, the Germans and any other foreign investor with cash."
A new top tax rate would raise significant cash in the short term, until the capital gains tax got going. Labour says the new tax, affecting only the top 2 percent of earners, will raise $881 million in its first term.
Labour's David Parker say National's numbers are wrong.
"They don't include the revenue of the dividends from keeping state assets," says David Parker. "They don't include extra tax revenue from contributions from Cullen fund."
Labour also points to a $1 billion hole.
"National has booked the revenue from asset sales but not the foregone returns," says Labour in its fiscal strategy. "When those foregone dividends are accounted for, net debt… would be almost $1 billion higher by 2015/16, than appears in the uncorrected PREFU."
Over the next 16 years, Labour says its capital gains tax would generate $26 billion. By 2015/16, it would already be bringing in $500 million each year.
By gradually increasing the age of superannuation, Labour expects to save $100 billion over 30 years, but hasn't included these savings in its current economic modelling, instead taking a "conservative approach".
"Treasury have said that if no changes are made to NZ Super New Zealanders would face a 19 percent GST or tax increases of $30 a week for someone on the average wage," says Labour in its fiscal strategy.
"If it is anything, I think this budget is conservative," says finance spokesperson David Cunliffe.
It expects New Zealand to be $19 billion better off by 2026 "as a result of income from retaining our assets and revenue from a capital gains tax".
"Labour will keep the assets and pay back the debt so we are all richer," says Mr Goff.
Prime Minister John Key has predictably slammed Labour's fiscal policy.
"It might be a form of economic management that Greece is happy with, but it will not work in New Zealand."
"If it's such a great idea and so guaranteed despite the fact that the world's stock markets are more volatile now than ever before, why doesn't he go and borrow $100b?
"Is he telling New Zealanders that when they borrow money against their house, it doesn't count, and they should go and spend the money today that they might one day make, even though they don't know what the property market's going to be like in four years' time?
"Their numbers don't add up. They're using a Greek calculator.
"Whether it's ultimately $14b or $17b, I don't know, but if it's $4b, I'm a monkey's uncle ... It really is farcical."
He reiterated National's plan not to put any more money into the super fund until the books returned to surplus.
Here are links to Labour's fiscal strategy documents with the full details:
• Labour's Fiscal Strategy Document
• Labour's Fiscal Strategy Fact sheet
• Labour's Fiscal Strategy Supplement
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