Economist Cameron Bagrie 'doesn't favour' tax cuts after Prime Minister Jacinda Ardern didn't rule them out

A leading economist believes tax cuts aren't the way forward for New Zealand and wants to see adjusted tax brackets to match rising inflation. 

It comes after Prime Minister Jacinda Ardern said her party wouldn't follow National's idea of scrapping the top tax bracket of 39 percent - which Labour introduced. She also didn't rule out tax cuts at the 2023 election.

National plans to move the tax brackets up and ditch the 39 percent top tax rate for high-income earners and a slew of other taxes.

Ardern has previously called National's plan to remove the top tax bracket "irresponsible", while Finance Minister Grant Robertson said it was "crazy". 

The Prime Minister told AM on Monday Labour hasn't created its election policy on tax issues yet, so can't comment on it. 

Independent economist Cameron Bagrie told AM on Tuesday he "doesn't favour tax cuts" and would rather see investment in New Zealand's future.  

"If you gave me a choice between throwing a lot of money into the education sector and offering tax cuts, it's pretty much a no-brainer for me," Bagrie told AM co-host Ryan Bridge. 

"I would far rather that money gets put aside for education as an investment in New Zealand's economic future, 20 to 30 years down the track." 

Bagrie said if the Government was looking at tax assistance, he would rather they focus on "tax thievery". 

"Tax thievery is just that impact of inflation, the impact of higher wages that moves you up into higher tax brackets. That nets the Government an additional $500 million every year over a five-year forecast horizon," Bagrie explains. 

"They're about $2.5 billion better off just because they forced you up into a higher tax bracket and you are paying more. So forget about tax cuts, I think they're off the table, they're far too expensive. 

"We don't want to be inflaming inflation, but let's level the playing field in regards to stopping the thievery that's going on."

Cameron Bagrie said he "doesn't favour tax cuts".
Cameron Bagrie said he "doesn't favour tax cuts". Photo credit: AM

Bagrie said moving Kiwis up tax brackets is the "common sense" move. 

"I think that's the common sense strategy that we need going forward. You imagine someone at the moment that's got a pay increase of 5.5-6 percent, you've gone from $48,000 to $50,500-$51,000. You've just made an additional donation of about $300 to the Government." 

New Zealand is currently battling a cost of living crisis driven largely by skyrocketing inflation, which has risen to a whopping 7.3 percent as the country came out of the COVID-19 pandemic. 

Data from Statistics New Zealand shows inflation is now the highest it has been in three decades. The last time it went above 7 percent was in the June 1990 quarter when it hit 7.6 percent. 

As a result, the Reserve Bank of New Zealand hiked the Official Cash Rate (OCR) up several times in an effort to dampen spending and control inflation.

Watch the full interview with Cameron Bagrie above.