The scare campaign begins

Heard the PM on radio saying how she would try to portray tax cuts as resulting in the spending cuts of the early 1990s.

Pretty desperate stuff, but as some may fall for it, let’s make clear the difference:

In 1990 National inherited a government which had been running Enron style books. The ‘public’ surplus turned out to be a $5 billion projected deficit. Spending cuts were needed to keep the country from bankruptcy. Incidentially they worked, the budget got balanced, and the economy grew from 1991 until the Asian Crisis. National also passed the Fiscal Responsibility Act to ensure that no Government could ever do what Labour had done and use the cash accounts to portray the overall health of the economy.

In 2005 rather than a $5 billion deficit, we have what looks to be an $8 billion surplus. This is possibly the largest surplus as a % of GDP in the world. It is certainly many times higher than Australia (which is also offering tax relief). One can offer significant tax relief, and still have a surplus. Labour would claim there is no money for tax relief even if the surplus was $20 billion.

So trying to equate tax cuts when faced with an $8 billion surplus, with necessitating the expenditure cuts of 1990/91 which was due to a $5 billion deficit is dishonest on many levels.

Having said that a National Government will of course cut out wasteful spending in areas where this can be done without affecting desirable services. In fact any responsible Government should be doing this. And anyone who thinks there is no waste, has been in a different country for the last few years.

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