Not doing too bad, could be doing much better too!

The New Zealand economy is almost stagnant. Our GDP has only grown by 1.5% in 2010. In comparison to China (10%), Singapore (14%) and Australia (2.7%); our growth has been miserable. However, it is doing much better than Spain, Ireland and Greece which are experiencing negative growth.

NZ is smack in the middle of all OECD countries in terms of growth. Obviously we have done a few things right to be way ahead of Spain, Ireland and Greece but have been inadequate in many ways to lag behind South Korea (6.1%), Japan (3.9%) and Australia.

NZ balance of payment stands at -3.21% of GDP compared to Spain (-5.23%) and Greece (-10.84%). Before the global financial crisis, the labour government finance minister Michael Cullen made a concerted effort in paying down our debt. Critics said that he should have given tax cuts in those good years but thankfully he didn't. As the saying goes "Make hay while the sun shines", Michael Cullen has put NZ is a healthy position now to weather the current economic downturn.

Ireland has one of the lowest corporate tax rates in the world. It was touted as the Celtic Tiger for this and look where it is now. Constraint by the EU to keep debt under control and with not enough tax revenue, it has cut spending by 6 billion in 2010. This has resulted in their negative economic growth and high unemployment rate (14.6%). I can remember before the financial crisis, many right wing supporters complained that NZ is not emulating the success of Ireland, those people have now suddenly gone very quiet.

NZ and Ireland both have the same population of around 4.5million. NZ had a healthier balance of payments and so we only had to cut spending by about a third of what Ireland did. It is the governments duty to maintain or increase spending during economic hard times when private business cut back on spending. Otherwise, the economy would shrink and unemployment rise. Government spending was how the United states lifted itself out of the great depression. But how is it possible to increase spending given that we have to keep the balance of payment under control?

Tax avoidance is the key issue here. It has been estimated that the government loose 300 million a year just from tax hidden by trusts alone. The government could recover billions if it investigated these trusts and other tax avoidance like GST, property trading etc. The Inland Revenue estimates that for every 100 million it uses to investigate fraud, it has recovered 400million. When the National government came into power in 2008, one of the first thing it did was to downsize the IRDs tax investigation team and stopping many of their high profile cases. Talk about the rich protecting their own, Dodgy!

And now the National government wants to sell our state owned power utilities to pay off our debt. Well, if it allowed IRD to recover those taxes avoided, it wouldn't need to sell our assets. The National government is simply letting the filthy rich buy up our public assets with avoided tax that should belong to the public, no wonder the rich are getting richer and the middle class is just floundering.

It is simply unfair to let the middle class salary and wage earners shoulder most of the tax burden.