Michael Cullen

Michael Cullen

Finance Minister Michael Cullen last night continued his fight-back against National's promise to cut tax, painting leader Don Brash as a "snake oil merchant" peddling unscrupulous promises based on myths.

Dr Cullen targeted "the myth of big government and the myth of high tax."

"You know it is election time when the snake oil merchants start to circulate," he told the Waipukurau Rotary Club.

Just because New Zealanders believed that Government spending was increasing and that they paid high rates of tax, "that does not make these things true."

Dr Cullen has been aggressively defending the Government's record of economic management since the poor reception of tax measures in his May 19 Budget that will give taxpayers between 67c and $10 a week in three years' time.

Dr Brash, who is delaying announcing details of his party's tax policy until closer to the election, said at the weekend there would be "relief" for all personal income taxpayers from April 1 next year if National won power.

Dr Cullen said that relative to GDP there had been a three percentage point fall in the size of central Government, equating to a 10 per cent fall.

In 1999, central Government spending - excluding state-owned enterprises and local government - was 33.3 per cent of GDP. It was now 30.1 per cent.

"In other words, over the last five years the public sector in New Zealand has shrunk in relation to the economies that we compare ourselves to."

Government spending had been increasing in numerical terms "but the economy has been growing, with the result that the relative size of the public sector has been falling relative to the tax base", the minister said.

Referring to tax cuts, Dr Cullen said they were very expensive and produced little gain for the bulk of taxpayers.

Adopting Dr Brash's own language, Dr Cullen said the best response to anyone who says Australians pay less tax was "baloney."

The top rate in New Zealand was 39c on income over $60,000. Australians paid 42c on income between $A58,100 ($62,670) and $A70,000 and 47c on income over $A70,000.

As well, Australians paid a 1.5 per cent Medicare levy, in essence a dedicated health tax.