Cameron Bagrie spoke to Laura Tupou. Credits: Video – AM; Image – Getty Images
An independent economist is warning against tax cuts amid global market turmoil, as central banks throughout the world try to bring down inflation.
Cameron Bagrie’s comments come after the UK pound slumped to an all-time low against the US dollar overnight. The slump came after the new British Government outlined its plan to boost the economy – including tax cuts. Among the cuts was the top of rate of 45 percent, putting money into higher earners’ pockets.
At home, the Opposition has also floated tax cuts if elected. The National Party wants to increase tax brackets to meet inflation and stop low-medium income earners from being trapped in higher brackets – which would see leader Christopher Luxon himself pocket an extra $18,000 in income tax reduction if he became Prime Minister.
But Bagrie said tax cuts were "the wrong policy response".
"We’ve seen that mini-budget… tax cut package come out which just, in all honesty, looks to be money for the greedy as opposed to the needy," Bagrie said of the UK’s policy.
From New Zealand’s perspective, he told AM tax cuts were "the last thing we want".
"What we want is what’s called ‘micro-economic policy’ – these are all the levers such as immigration settings that can help our economic car drive a little bit faster."
Bagrie said future immigration settings would be critical to New Zealand weathering the economic storm.
Firms throughout New Zealand were fighting major labour shortages – something critics have blamed on the Government’s border policies.
"We’ve got a big imbalance here between demand… and supply," Bagrie told AM fill-in host Laura Tupou. "If you want to fix that mismatch, then let’s get our economic car driving a little bit faster through a supply-side lens.
"This is where things like immigration settings etc are going to be really critical going forward."
In the annual NZ Herald Mood of the Boardroom survey last week, chief executives rated the skills shortage (8.26/10) as the top global risk to New Zealand’s business confidence – renewing calls for immigration settings to be reset.
Meanwhile, Bagrie said Budget 2023 would be "one of the most important in Grant Robertson’s tenure as the Minister of Finance".
"We don’t need more spending, we don’t want a bigger bang Budget. We want a small, we want frugal Budget to help monetary policy in their target to actually get the inflationary thief back in jail."
"What we’re seeing at the moment is an awful lot of temptation to spend more as opposed to being frugal."