Act attacks Labour and National over finance

NATIONAL BUSINESS REVIEW: ACT backs the Government guaranteeing bank deposits, but says other responses to the economic crisis by National and Labour have been woeful and irresponsible.

ACT leader Rodney Hide and finance spokesman Sir Roger Douglas today re-released its economic and tax policy in light of the opening of the Government's books last week and the international economic turbulence.

Mr Hide said National and Labour's plans to bring forward infrastructure spending and get more of the New Zealand Superannuation Fund invested in New Zealand were not the answer.

"The political response from both John Key and Michael Cullen has been both woeful and irresponsible. Their policy promises will make tough times worse," Mr Hide said.

New Zealand had been in recession all year and the current account deficit of $14 billion a year would be more difficult to fund because of the international credit freeze.

Mr Hide said the credit crisis would mean New Zealand would have to live within its means.

"It is going to force an adjustment on us, no matter what politicians say."

The falling dollar would put costs up for households and businesses, exporters would also struggle because of the lack of money around to fund their debts.

He said Labour's response had been to spend more money and National had accepted this.

National's intention of directing the New Zealand Superannuation Fund was "nuts" as it would do nothing but shift ownership from private hands to the state.

It would be better to cap government spending to the rate of inflation plus population growth and this over time would lead to tax cuts which would increase wealth and set the economy going.

Under ACT's policy, Mr Hide said the 39 cents tax rate would be gone by Christmas.

Sir Roger said the growth rate of government spending would be capped at about 3.6 percent which would free up large amounts of money for tax cuts.

The only exceptions to the growth cap would be law and order which would get up to $1 billion more a year and a one-off elective surgery boost of $500 million.

Mr Hide said special treatment for law and order was justified as the Government was failing to protect its citizens.

Sir Roger said outside this exception if spending in one area increased by more than the cap, then spending would have to be reduced elsewhere.

If the growth cap policy had been in place for the last 10 years government spending would be $18 billion lower today which equated to $1000 a month per household.

This policy would mean within 10 years there would be a top personal tax rate of 15 percent over $20,000 and 12.5 percent below that.

The company rate would be 15 percent, GST 10 percent and there would be a $500 million drop in petrol tax.

Sir Roger said investors were looking for confidence and credible economic policy offered by ACT not "mad", short term policies.

ACT supported the deposit guarantee scheme because there was no alternative.