New Zealand Herald – Thursday 22, September 2005
The NZ Government’s nett assets have increased by 41% (NZ$ 14.5 B) in the last year, prompting calls (again) for tax cuts.
Finance Minister Michael Cullen: “To further fuel consumption under these circumstances would simply risk pushing up interest rates.”
The concern about interest rates seems jolly decent of Mr Cullen. But wait – higher interest rates are a benefit to those with money on deposit, including many pensioners. So keeping rates down is not an unambiguous good – it trades off the gains of one group against the losses of another.
The money Mr Cullen is refusing to return to taxpayers is money they own. If witholding tax cuts is keeping interest rates lower than they otherwise would be, then those who would receive a nett benefit (after taking increased interest rates into account) are actually currently subsidising the interest payments of borrowers. Subsidising! And that’s in addition to paying a disproportionate amount of their income in tax! Anyone remember “Supplementary Minimum Prices”?
Why shouldn’t mortgagees pay the real cost of their borrowing?