National Party leader, Christopher Luxon, says reforming the tax system and making New Zealand more productive are the key tools to help Kiwis in the grip of a cost-of-living crisis.
National has been calling on the Government to stop what Luxon has called “bracket creep”, where people pay more tax due to inflation.
“What’s actually happened is, because we’ve had 11% inflation under this Government, the tax thresholds have stayed the same and people have had a nominal pay increase,” he told Breakfast. “It’s not enough because it doesn’t cover the cost-of-living increase. All of a sudden, they find themselves in a higher tax bracket and that’s just not right.”
The Government says its $1.20 raising of the hourly minimum wage to $21.22, which happens next month, will help people cope with the rising costs. Luxon argues that while he supports wage increases in general, now isn’t the time.
“The Government doesn’t pay the minimum wage, it’s small businesses that pay it,” he says. “When you start to slug small businesses with increased costs around an extra public holiday, extended sick leave, minimum wage increases, at a time when businesses are doing it really tough.”
He says the effect of wage increases on small businesses is that they have to offset the cost by raising their prices, which then feeds further into inflation.
Instead, Luxon believes the best way to get wages up is to make New Zealand more productive, meaning being able to sell more goods and services at higher prices.
This would in turn, he believes, create safer economic conditions under which to raise salaries.
“We’ve done a very poor job on that across the developed world in the past 30 years.”
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