Wages, Not Tax the Key Issue says CTU

"Businesses need to lift wages rather than suggest that tax rates can bridge the gap between New Zealand and Australian incomes," Council of Trade Unions Economist Peter Conway said today.

"Wages in New Zealand are about 30% lower than in Australia, but our tax rates are similar when all factors are taken into account," said Peter Conway.

"The $45 billion of tax cuts announced for Australia last week needs to be put into perspective," said Peter Conway. "It applies to a population 5 times that of New Zealand and is a four-year total figure."

"On an annual basis it represents in New Zealand terms $2.25 billion a year - still a significant sum but much less than the $45 billion figure being promoted. And as is the case with most tax cuts it is those on the highest incomes that get the biggest boost in income.

"The CTU has supported lifting tax thresholds but our general view is that before tax rates are considered we need to ensure that there is adequate spending on key areas such as health, education, infrastructure and skill development."

Peter Conway said Australia had higher rates of investment in capital per worker so alongside boosting wages businesses in this country needed to lift their investment in capital.

Recent OECD figures showed that the tax wedge New Zealand is lower, at 20.5% for a single NZ worker compared with Australia's rate of 28.3%, Peter Conway said. The wedge is a measure of the difference between labour costs to an employer and the net take-home pay of an employee, including any cash benefits from Government welfare programmes.