Friday, May 12, 2006

Aussie Tax Cut Could Intensify Kiwi "Brain Drain"

Australian Treauserer Peter Costello recently announced tax cuts worth A$37 billion (US$28.5 billion), in the form of raised thresholds for each tax bracket and lower rates for many brackets. The top rate will for example be reduced from 47% to 45%.

Not surprisingly, this was condemned by communist web site "World Socialist Web Site" as a "blatant appeal to the rich".

Notwithstanding the communist objections however, this is a smart move which will help the Aussie economy sustain strength even when the commodity price boom ends.

As Bloomberg News reports, this will likely increase the emigration of skilled workers from New Zealand to Australia, as the Aussie advantage in tax rates widens. After the changes, a worker earning $75,000 in Australia will pay $17,850 in taxes, versus $20,520 in New Zealand. New Zealand's left-wing Finance Minister Peter Cullen have rejected calls for following Australia's tax cuts, claiming that tax rates don't matter very much and that quality of education and health care is just as important. As if increased government spending have any proven positive effect in those areas.


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