Election 2023: National’s tax cuts could push interest rates up, Goldman Sachs analysts warn
Goldman Sachs analysts warn National’s proposed tax cuts risk exacerbating inflation, and therefore causing interest rates to remain higher for longer.
Andrew Boak and William Nixon believe a National-led Government would increase the chances of the Reserve Bank of New Zealand (RBNZ) either keeping the official cash rate (OCR) on hold at 5.5 per cent for longer than expected or lifting it above this level.
While National has argued its tax cuts would be fully paid for using revenue generated from new taxes and savings made from cutbacks to public spending, Boak and Nixon said in a research note these measures “may not fully offset the stimulatory impact of the tax cuts”.
They believed National’s proposals to tax foreigners who buy residential property, increase the fees people who apply to migrate to New Zealand pay, and remove the ability for commercial building owners to deduct depreciation as an expense when paying tax would have “small multipliers on domestic spending”.
In other words, these measures wouldn’t offset the stimulatory effects of National’s plans to provide income tax cuts by adjusting tax brackets for inflation, and reduce the tax burden on residential property investors by bringing the bright-line test back to two years and phasing out the interest limitation rule.
If you are suffering high food prices now and bleeding out with Mortgage rate rises, wait until National gets into power.
Their Tax Cuts were always questionable but basing it all of a Foreign Buyers Tax now one believes highlights how weak the whole plan is.
What Goldman Sachs, who have no dog in this fight are saying is that National’s economic plan will exacerbate the current inflationary pressures and push them up even further triggering more OCR rate rises and high inflation all round.
When you see the fear of the Fed going harder for longer weighing on the Dow Jones today…
…National’s plans are going to be viewed by the market as inflationary and it will react.
Add into this chaos the type of horse trading required to get anything through a ACT/NZF/National coalition and the future looks far more economically grim under a ACT/NZF/National Government!
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National’s tax cuts often lead to an increase in inflationary pressures. Also National often state that ordinary kiwi families will benefit the most from their tax cuts and then those earning over $100,000 a year benefit the most from the tax cuts
Goldman Sachs and their kind exist deep in the belly of Finance Capital–as did sirkey–so it is amusing that Baldrick and Dracula’s Daughter think they can ignore such views.
Perhaps “revenge voters” realise at some subterranean level that the Natzos are not going to lower petrol prices or any other significant retail prices? Will this subset of voters hands start to shake when they hold the big black marker in polling booths…this will be an interesting part of October 14.
They are going to union bust–which flows on to non members who benefit from the various wage floors–and they are going to attack on all fronts: the social wage, Māoridom, and effectively women and kids (Martyn has detailed this many times).
If the Nats and buddies get in – which looks likely – only the high income folk in Aotearoa will benefit. The other 95% will go backwards with those at the bottom of the pile the most severely impacted. This is, of course, highly likely to further unravel the social fabric of our society – welcome to the latest banana republic of Aotearoa NZ under NATS/ACT and probably Winstons storm troopers – we are fucked!
Everything short of balancing the budget (or berter still running a surplus) is going to boost inflation. All deficit spending = more money that is chasing the same amount of goods and services = inflationary. Neither National OR Labour seem to understand basic economics. Labour is no better with any of their policy (i.e. moar money for govt workers, moar money for hospitals, moar money for education, less tax on food, increased spending on green energy…. all of that paid for with higher deficit spending = inflationary).
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