Newsroom Pro's 8 things at 8 am: What a National-NZ First combo might do; Labour's diverted profits tax threat; Automating WFF etc

In this morning's email, we look at what policies a National-New Zealand First Government might adopt, report on Labour's threat of a diverted profit tax and look at the Government's plans to pay Working For Families and collect child support and student loan payments automatically, along with the usual quotes and numbers of the day and one fun thing.

1. What a National-NZ First combo might do

With just under 10 weeks to go before the election and signs of increasing divisions between Labour, Green and New Zealand First, it's worth looking at what policies a National-New Zealand Government might adopt.

New Zealand First Leader Winston Peters has progressively laid out some of his key demands and reiterated his main policies in recent days, including some that National may be willing to adopt to stay in power.

Those policies and 'bottom lines' include:

  1. Changing the Reserve Bank Act to broaden the bank's focus beyond inflation to include economic growth, employment and the value of the currency.

  2. Banning foreign buying of land and setting up a foreign ownership register.

  3. Reducing net migration to 10,000 per annum from over 70,000, although New Zealand First has yet to specify what policies it would pursue to achieve that, other than capping and restricting family reunion and the migration of older migrants. Achieving that sort of cut in a short period of time would cripple the international education industry and severely restrict the dairy, wine, kiwifruit, apple, aged care and tourism industries, which are increasingly dependent on temporary migrant workers.

  4. Having a referendum on removing the Maori seats and on reducing the number of MPs. National's official policy is to remove the Maori seats, although has been dormant since National's formed governing arrangements with the Maori Party.

  5. Building a railway link between the Whangarei to Auckland line and the Marsden Point port at a cost of over $100 million so more port operations can be shifted from Auckland to Northport. National is currently conducting a review of its investments in KiwiRail.

  6. Not changing the age of eligibility for New Zealand Superannuation from 65.

Other policies that New Zealand First might introduce into Government-forming negotiations include removing GST on food, making Kiwibank the Government's official bank (rather than Westpac) and introducing a Government-owned 'Kiwifund' option for Kiwisavers.

Winston Peters' speech to his party's annual conference on Sunday laid out many of his policy priorities.

Chances of a Labour-Green-New Zealand Government appeared to dissolve over the last week under a welter of insults between the respective leaders, ending years of an apparent truce when they focused their attacks on National.

Green Co-Leader Metiria Turei accused Peters of being racist last weekend, looking to differentiate the party from New Zealand First and create some leverage. She also said a Labour-New Zealand First Government would be unacceptable. Green MP Barry Coates then said the Greens caucus had discussed whether it would would force a new election rather than allow a Labour-New Zealand First Government

Peters described Coates' threat as the "height of political stupidity" and said there would be consequences for Turei's accusation of racism.

Labour Leader Andrew Little then accused Peters of leaking UMR poll results that showed Labour's support down to 26 percent and New Zealand First up to 14 percent, and ahead of the Greens on 13 percent.

Peters suggested that list candidate Little would not be in Parliament if Labour sank to 22 percent. That sparked speculation from Paddy Gower that Peters was quietly looking to undermine Little so he could swoop in and become Prime Minister of a leaderless Labour-Green-New Zealand first coalition after the election.

Little didn't take kindly to the idea. He described Peters as a "blowhard and this is blowhard politics."

"In the end this election isn't going to be fought on the basis of swinging dicks. It is going to be fought on the basis of what party has demonstrated that they are listening to the real concerns of New Zealanders," Little said of Peters in a NZ Herald interview.

The Green-Labour memorandum of understanding aimed at changing the Government also appeared to be in trouble this week as the Green Party launched a social welfare and tax policy that was significantly more left-leaning than Labour and aimed at gathering votes of Labour supporters. The decision by the Greens to support National's Working For Families package in Parliament and in opposition to Labour also surprised and disappointed Labour politicians.

National, meanwhile, were able to sit back and point across the political aisle at the infighting and contrast that with nine years of relative political stability within National's agreements with ACT, United Future and the Maori party.

"I think the public is entitled to think 'well, gosh, is this the alternative?'" Finance Minister and Campaign Manager Steven Joyce told reporters in Parliament on Monday.

National was able to successfully portray the Opposition as disorganised and divided during the 2014 election campaign. Its television advertisement showing National's sleek rowing boat vs a rowboat of chaotic paddlers was particularly effective.

However, National's poll standing of around 45 percent suggests it will still need New Zealand First's support to govern, given the relative weakness of ACT, the Maori Party and United Future.

Winston Peters could also still choose to join a Labour-Green Government in exchange for the types of policies outlined above, which are more in tune with the policies outlined by both Labour and Greens. His relations with Prime Minister Bill English have also deteriorated in recent weeks over the Todd Barclay affair, with Peters calling for English to resign and saying in Parliament he was guilty of a crime.

Peters has always kept his options open to preserve his negotiating power with both and is unlikely to declare his hand before September 23. But the implosion of any sense of unity between the Opposition parties has increased the chances of National being able to portray itself as a stability candidate in a strong position to soften Peters' bottom lines.

2. Labour's diverted profit tax

Labour promised this morning to collect an extra $200 million a year in tax from multinationals and has threatened to introduce a British and Australian-style diverted profits tax if companies such as Google, Facebook and Apple don't increase their tax payments here.

Labour Leader Andrew Little announced the policy at the same time as sending a letter to the top 50 multinational companies identified by the Parliamentary Library as potentially able to pay more tax.

He said he would convene a meeting of the leaders of the top multinationals in New Zealand if he formed a Government after the September 23 election.

"I intend to address the rising discontent among New Zealanders regarding multinational companies not contributing fairly," he said in the letter inviting them to the meeting.

Little said a Labour Government would inject a further $30 million per year into IRD's investigations unit to chase down extra tax revenues from multinationals.

"The fact is, many multinationals are ducking their tax obligation and leaving it to Kiwi taxpayers to foot the bill. This is simply not fair. At a time when we need to urgently invest in hospitals, schools and housing, we need multinationals to make their fair contribution too," Little said.

“If multinationals aren’t prepared to pay their fair share, Labour will introduce a diverted profits tax, to enable New Zealand tax authorities to impose tax at a penalty rate if they believe that tax has been deliberately avoided," he said.

Little said the British experience had led to Amazon booking its profits there rather than in Luxembourg.

“A diverted profits tax is an important tool to encourage multinationals to behave appropriately and pay their fair share of tax like every hard working New Zealander."

3. Automating payments back and forth

IRD and its $1 billion 'business transformation' computer system rebuild was also the centre of attention yesterday when Finance Minister Steven Joyce and Revenue Minister Judith Collins announced Working For Families, child support payments and student loan repayments would essentially be automated in tune with the 'real time' nature of the new computer system.

Currently, these payments are estimated at the beginning or end of the tax year based on previous reported incomes. The new system will automate the deduction of tax or the payment or rebates in 'real time' based on the actual incomes received.

The new system will take into account a wider range of incomes through the year, including income from trusts and investments.

Joyce and Collins said 40 percent of Working For Families recipients were currently underpaid, while 20 percent were overpaid and ended up owing money to IRD.

A spokeswoman for Joyce later said in the 2015 tax year there was overpayment of taxes worth $95 million by 85,000 families, while 151,000 families were underpaid $162 million.

She said 59,000 families were not paid any Working For Families payments during the tax year and claimed $252 million at the end of the year

Joyce said the net effects of the changes were likely to be revenue neutral.

The changes also mean child support payments would be automatically deducted from wages and salaries of liable parents, including income from trusts. Collins said it was hoped the changes would reduce the amounts owed by parents.

See more on this from Newsroom's Shane Cowlishaw, who reported last week that almost $1 billion was owed by parents overseas and $3.2 billion was owed in total.

The full discussion papers on the changes are here on IRD's site

4. Numbers of the day:

58.6 - The BusinessNZ-BNZ Performance of Services Index in June. This was down 0.2 points from May and shows the services sector expanding, albeit at a slightly slower rate. An index figure over 50 indicates expansion. The measures of services sector sales and activity, employment fell, while indicators for new orders, stocks and supplier deliveries rose. The BusinessNZ-BNZ Performance of Manufacturing Index issued last week showed a slowing of expansion in manufacturing. That index fell 2.0 points to 56.2 points.

6.9 percent - China's economic growth rate in the June quarter from a year ago was slightly stronger than expected and above the Government's official growth target of 6.5 percent.

5. People in the news

Janis Adair - The new chief prisons inspector began work in Wellington this week. Newsroom's Shane Cowlishaw interviewed her yesterday to find out more about her background and focus in a role that has taken on more importance in the wake of the Serco scandal and record high numbers of people in prison. Here's Shane's profile, which was first published yesterday on Newsroom Pro.

Michael Wood - The new Labour MP for Mt Roskill has been given the Labour Transport Spokesman role vacated by outgoing MP Sue Moroney. Palmerston North MP Iain Lees-Galloway takes over her role as ACC spokeswoman.

Peter Thiel - The Office of the Auditor General said yesterday against a request by Green MP Denise Roche to investigate the granting of citizenship to the US tech billionaire, saying it did not have a role in investigating citizenship decisions.

Simon Flood - The former Merrill Lynch banker said he had decided not to stand for the open National candidacy for the Clutha-Southland electorate, the Southland Times reported. MP Todd Barclay decided not to stand again in the September 23 election after Newsroom reported he had told Bill English he had secretly recorded his staff members.

John Key - New Zealand's former Prime Minister was awarded Australia's top award of the Companion in the Order of Australia yesterday. Other recipients include Nelson Mandela and Mother Teresa.

6. While you were sleeping

US President Donald Trump announced the granting of 15,000 seasonal work visas for the seafood, tourism and other industries (but not farm labourers) after heavy lobbying from the industries.

China's crackdown on poor quality lending in its shadow banking system and tighten capital outflows continued apace overnight with news it plans to cut off funding to Wang Jianlin's Dalian Wanda real estate conglomerate because of breaches to overseas investment rules.

7. Coming up...

Statistics New Zealand will publish June quarter Consumer Price Index data at 10.45 am. Economists expect quarterly inflation of 0.1 -0.2 percent for the quarter and annual inflation of 1.8-1.9 percent. The Reserve Bank forecast in May that inflation would be 0.3 percent for the quarter and 2.1 percent for the year.

The Reserve Bank said its Head of Prudential Supervision, Toby Fiennes, will deliver a speech on Wednesday on cyber security. It will be released at 10.30 am.

Fonterra's Globaldairytrade holds its fortnightly dairy products auction on Tuesday night and Wednesday morning.

Labour is expected to release its alternative Budget on Wednesday.

Statistics New Zealand is scheduled to publish its migration and tourism figures for June on Friday.

8. One fun thing

Deputy Prime Minister Paula Bennett, who is standing in for Prime Minister Bill English this week while he's having his last week of holiday before the election, said yesterday that Todd Barclay was still doing constituency work and advocating for his electorate, despite not attending Parliament or appearing in public.

This tweet from David Slack captured the mood on this issue:

"People all over Clutha-Southland coming home to find their laundry washed and folded, and a carton of Rothmans on the kitchen table."

Have a great day

cheers

Bernard