After tax income gap with Australia
March 29th, 2008 at 12:59 pm by David FarrarThe Press reports on the figures put out by National showing the growing gap in after tax income between Australia and New Zealand.
In 1999 the average after tax income was $32,704 in Australia and $27,128 in New Zealand. That is a gap of $5,576 and has average NZ after tax income at 83% of Australia’s.
In 2007 Australia is $46,000 and NZ $34,000. That is a gap twice as large at $12,000 and means average NZ income is now only 74% of Australia.
Related posts:
- No tax free income for New Zealand
- Costs rising faster than net income
- Mike Moore on Australia vs NZ
- NZ vs Australia tax rates
March 29th, 2008 at 1:05 pm
Given the great exodus, Is it possible to ever close this gap? Surely it cannot be achieved in one Parliarment, Are we doomed to a sinking acceptance that Cullen’s legacy will be with us for at least a generation?
Vote:Then consider the gross losses of all those who are leaving for Oz, and their offspring and their offspring. I am coming to the conclusion that with NZ losing more people per week than the US is in Iraq, the economic cultural and political damage that NZ is presently sustaining will haunt it for decades to come.
March 29th, 2008 at 1:17 pm
How could it get soooo bad in kiwiland ?
Vote:March 29th, 2008 at 1:32 pm
How come I came home to real wage gap between what I was paid in Australia and the much higher pay in NZ in 1988.
What happened between 1988 and 1999. Seems the story has this bit which DPF missed..
..The graphs show the disparity began about 1984. It widened substantially between 1991 and 1999, during National’s years in power..
Vote:March 29th, 2008 at 1:40 pm
“You’re better off with Labour”
Compared to…?
BTW GWW, the “blame the last National government for everything” drum is really really tired. A ot of voters aren’t even old enough to remember it. Find a new boogyman.
Vote:March 29th, 2008 at 1:45 pm
GWW plays lets blame National card again and again. Yawn, what’s new ,next patient please!
Vote:I hope it’s not another sicko from the Liarbour Party?
March 29th, 2008 at 2:05 pm
GWW: right, and National caused the gap to double between 1999 and today? And leaving aside blame in the past for what may or may not have caused it, what exactly are the policies of the different parties in seeking to address this? Labour’s policies are pretty clear – they’ve been following them for the last 9 years, and their effect is for the gap to continue to grow. National’s turn?
Vote:March 29th, 2008 at 2:13 pm
Those figures cant be right.
We are getting into the top half of the OECD.
We have the knowledge wave economy.
We have economic transformation.
Ha. But what we actually have is a joke. This labour govt have surely by now proved to everybody that they have no idea how money and economies (which is simply people) actually work.
Vote:March 29th, 2008 at 2:47 pm
Australia has some fundamental advantages over NZ so its not a simple task to close the gap. I expect even if National wins they don’t have nearly enough “balls” in regard to policy to even stop the before tax gap from growing let alone making serious headway in closing it. Of course they can reduce taxes but that isn’t a long term strategy unless its accompanied by a reduction in spending which we keep getting promised national won’t do.
Vote:March 29th, 2008 at 3:35 pm
AND what people keep forgetting is that the Australian wage earner gets an employer contribution paid into their Superannuation account of 9% of their gross wages, and taxed at just 15%.
Vote:So on top of the $46,000 the average Aussie get at least another $4000 paid in to their super fund.
Therefore the correct comparison is Aussie $50,000 to New Zealand’s $34,000 a gap of $16,000 and which in effect means the NZ average wage is only 68% of Australia’s -(if my maths is right)
March 29th, 2008 at 3:41 pm
The interesting point is that NZ is falling behind Tasmania. I can accept the argument that Australia as a whole has a scale advantage, and to some extent a natural resources advantage (although on that one I would argue that NZ has plenty of natural resources, we are just not as good at using them). I am really hard pushed to explain what advantage Tasmania has over NZ, other than a peculiar medical specialisation in removing spare toes and second heads.
Vote:March 29th, 2008 at 4:37 pm
“Working for families” makes the comparison more complex again, for low income workers with children.
Vote:Is there an online NZ vs Australia comparison calculator? Or spreadsheet download?
No?
Well, I’ll trawl through a previous thread about this looking for clues.
http://www.kiwiblog.co.nz/2007/05/nz_vs_australia_tax_rates.html
March 29th, 2008 at 5:01 pm
Ross, WFF is very similar to some Australian programs, such as the Family Tax Benefit (FTB), Childcare Tax Rebate (CCTR), and I believe there is some level of income splitting possible around superannuation. In short, don’t look at only one side of the coin – there are some rather complex programs that run in the Australian tax system that also target specific people in the tax system. I think the only real way to do it is via median after tax income, or some such, because there are too many variables that impact specific sections of the population. The last thread I saw on this degenerated over a couple of weeks into arguments about use of statistics and ultimately became meaningless – I think those on the left saw the obfuscation as a victory, my view is that the raw numbers are clear no matter how may ways you try to cloud them.
Vote:March 29th, 2008 at 7:20 pm
SO we can all see that the indroduction of Rogernomics in 84 saw thew start of the ‘gap’.
So more of the same from Key and English will reduce it!
Pleaseee
Vote:March 29th, 2008 at 7:34 pm
Ghostwhowalks3
Whatever happened to Ghostwhowalks and Ghostwhowalksnz? Are you a cat with nine (lives) – and have you exhausted 33% of them?
DPF wrote:
And your idea of rebuttal is to rabbit on about Rogernomics in 1984?
Here’s a hint: 1984 was 15 years before the base case (1999) and 23 years before the comparable (2007).
Here’s a second hint: we’ve had 9 years under Labour since 1999 – and there’s been no meaningful reversal of Rogernomics under their watch.
What part of that can’t you understand?
Vote:March 29th, 2008 at 8:23 pm
It’s really quite simple, practically everyone of those tax paying kiwis departing for Aussie is one less vote for the opposition. Helen and her hangers on couldn’t be happier. This country is headed for serious trouble, the tax payers are finite. One more month in NZ and counting. My salary will be the same in Aussie, but I will have $63 a week in the hand more than I do in NZ. Not a lot but better than nothing.
Vote:March 29th, 2008 at 9:17 pm
Yes, taxpayers have wings. Tax consumers don’t. Perfect storm warning…
Vote:March 29th, 2008 at 10:44 pm
both parties are responsible for this gap
simple as that
and Murray M
Vote:if you want to move then move
but $63 a week doesnt seem like enough to be the only reason to move
March 30th, 2008 at 4:41 am
GWW, do you remember CLOSING THE GAPS?? Care to elaborate on how successful that was.
Labour seem caught up in these wonderfully names social projects that seem to have propelled us out of the tables for wealthy nations. Whatever next? The great leap forward?
While Kiwis are voting for these fools the rest of the world is embracing lower taxes and creating greater wealth. NZ was once known as the Poland of the South Pacific, and yet in Central Europe citizens are enjoying flat taxes and still getting good quality health and education and no cuts in spending to get it. Labour are being very dishonest when they say the Nats will slash expenditure….. but yet 38% of Kiwis believe them.
You guys reap what you sow
Vote:March 30th, 2008 at 7:09 am
Most people going to Oz from New Zealand are not in the top tax bracket. They are workers looking for higher pay and whether the tax cut here is $15 or $50 a week, that will not change. As for doctors and the like on the top rate, they have the 45 cents rate there to look forward to.
Increasing our wages – via the minimum wage rising from 12 to $15 over 3 years (only 140,000 workers under the new 12 rate, but it impacts on wages that employers offer their workers to attract and retain staff – which we used to call relativity in the award days, so by the time it reaches $15, it would have upward impact on the pay of hundreds of thousands of people) will do more to retain workers here than National’s tax cuts plans.
But I suspect National’s policy is to provide for its voter base via tax cuts etc and drive poorer workers over the ditch to become part of their property owning democracy – then hire in skilled immigrants with the capital to buy the inflated value investment properties they cannot sell to people on our wage rates.
It may not be popular to state facts here, but our wage levels really fell behind Oz in the 1984 and 1999 period. And yes government focus being on debt repayment, the NZSF. Kiwi Saver, infrastructure funding out of surplus – restoration of 65% Super, income related rents in state housing, Working Families tax credits instead of tax cuts, interest free tertiary debt etc, (and this while Australia handed out large measurable tax cuts) does make it seem that we are falling further behind. Anyone investing in public capability for the long term (which I argue we needed to) will face the fact that this was a choice at the expense of increasing the after tax pay of New Zealanders – but did they really have any other choice?
The real issue is how to increase wage levels. A government with a surplus can pay higher pay to staff (it cannot so easily if it does not sustain a surplus and we do need scientists, health and education workers), we can increase the minimum wage, but as for increasing profitability of companies and developing real wealth gains (via export companies or local productivity) this requires a more competitive value dollar and cheaper finance for business investment. And also a directed focus to economic growth rather than speculation.
Much of our foreign debt rise of recent years is the borrowing to finance our local house value bubble – the amount involved is horrific and its consequences will be with us for years. It’s tens of billions. Its impact might be as consequential as the Think Big Debt and associated Muldoonism was prior to 1984 – in restraining us from the possibilities that might otherwise have been. Do not pity the poor workers going to Australia in 2007/2008/2009/2010/2011 because they cannot afford a home here and because Nationals coming to power is not to do anything to assist them to higher wages, for they will have a better future over there. Pity the third world poor, as we profit from rising prices (the money being used to sustain rising farmland prices and pay off the foreign debt from property investor greed) as the developing world middle class buy our food, they have to compete with livestock and bio-fuel makers for scarce food supplies.
But there are solutions to these two problems – the billion rural poor in the world disappear and we have a state owned bank nationalise all of our local housing mortgage debt, then declare itself bankrupt … post ourselves to Argentina …
Politics here is about whether we will ever get economic policy direction right and otherwise how we share out the consequences of our past and present poor economic policy. Sure 2009 offers a distinct L-N choice, if not on the 2005 scale, but neither offers us the real economic policy change we need (and ACT would make things even worse).
Vote:March 30th, 2008 at 7:36 am
Hi SPC,
I agree with some of your sentiment regarding a hard road ahead but if you argue that people are rational and make rational economic decisions then surely there is no National party “driving” the downtrodden working classes to Australia by favouring the “rich pricks” with tax cuts. What New Zealand needs is rational economic leadership not a tax and “social spend” mentality that even the champagne socialists of Grey Lynn have seen through now the wheels have fallen off the property juggernaut.
Importing rich retiring boomers from the UK and free loading students with some of Dads (transient) cash obviously hasn’t done the job so surely we need another strategy? Perhaps.
Vote:March 30th, 2008 at 9:59 am
They reduced your benefit payments?
Vote:March 30th, 2008 at 7:50 pm
Yes Short & Shriveled, it’s not just the 63 bucks although I have already stated that it is not much but better than nothing.
Vote:I am also escaping the grievance industry, the PC brigrade, a welfare system that is keeping people down, but most of all I am escaping MMP. Mostly Morons in Parliament.
March 30th, 2008 at 8:00 pm
SPC The house value bubble was started when the reserve bank raised the OCR (to combat inflation) only to bring a flood of money into the country leaving banks flush and starting a “mortgage war”. Since then the reserve bank continued to raise the OCR several times. Now tell me who is to blame? Simply put if you raise the OCR and it does the opposite of what you intend, why keep on doing it for the next three years. There was an excellent article in the Dominion about this last week, and what could have been done instead (I haven’t found it on line). You could argue that the RB is constrained by it’s narrow terms of reference and it is supposed to be free from day to day political intervention but the preferential tax treatment of overseas investors is something that could have been fixed and the blame for that lies with Cullen (given his demonstrated ability to shaft overseas investors in relation to the Auckland Airport, for the wrong reasons I might add).
Oh and “on the hard road ahead”. Well who can say what it will be, if you belong to the “train wreck ghoul” camp of Philu then it’s as you describe. I would put my money on Key and English understanding the situation better than Cullen and while we have have high employment rates it’s not going to be too bad and at some point there will need to be increased Government spending to provide a stimulus but it depends on what it is on.
Vote:March 31st, 2008 at 11:55 am
“The real issue is how to increase wage levels.”
Umm, no it’s not! If economics really was that simple, you certainly wouldn’t need a degree or atleast some education to understand it. If it really was THAT simple, Labour could just legislate it. What we really need to do is increase productivity. Just look at the OECD rankings to see that correlation. A more productive country is a wealthier happier country.
And please don’t go on about how we’re shafting the third world. The Rwandans are pretty good at shafting themselves and that’s without listing any of their continental neighbours…
Vote: