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The BFD. National MP Nicola Willis

Disgruntled of Eskdale


Like the aptly named Red Queen of ‘Alice in Wonderland’ fame, who could believe “as many as six impossible things before breakfast’, it seems the socialist politicians and economists of New Zealand can also believe at least two impossibly opposite ideas at the same time.

The current narrative from the left would have it thus:-

Putting more money in the pockets of Kiwis by increasing benefits, raising the minimum wage and removing GST from food. Good.

Putting more money in the pockets of Kiwis by raising tax thresholds so we keep more of our wages. Bad.

Their logic suggests the same dollar in the same pocket is both inflationary and not inflationary at the same time. A claim that would seem to be, and is, clearly ridiculous.

As Nobel prizewinning economist Milton Friedman famously said, “Inflation…can be produced only by a more rapid increase in the quantity of money than in output.”

Consequently, provided government spending is cut elsewhere, by trimming the fat in the public service bureaucracy for example, then tax reductions which allow Kiwis to keep more of their earnings, do not increase the supply of money and are not therefore inflationary.

One could argue that extra dollars in the pocket would temporarily increase demand if a large, lump-sum tax rebate was to occur, but tax adjustment via threshold level movements are gradual and incremental to the point where they are easily absorbed by the economy without inflationary effect (even if corresponding cuts to government spending did not occur, which they will).

The only reason some people are claiming that tax reductions are inflationary, but raising benefits, increasing minimum wages, and cutting GST are somehow not, is political.

Concern for the Kiwi taxpayer is not what is driving the left in this. With so little else to justify their existence at the moment they are fixated on pushing for the abandonment of these long overdue tax adjustments so the mainstream media can then attack the new government for U-turning on election promises. An obvious case of attempted political points scoring at its most infantile.

Nicola Willis would be well advised to follow the dictum of that great conservative politician, Margaret Thatcher: “To those waiting with bated breath for that famous media catchphrase, the U-turn, I have only one thing to say: ‘You turn if you want to. The lady’s not for turning.’”

Thatcher, with her iron resolve, saved the country by facing down socialism and breaking the power of the unions so that Britain for a few years regained some semblance of greatness. (That is before Boofhead Boris condemned it to future obscurity by pandering to nationalistic populism and causing Brexit, but that’s by the bye).

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