Tax hikes likely in coming years, economist Cameron Bagrie predicts

A leading independent economist says New Zealand might need to introduce tax increases in the next few years to handle the recent blows dealt to the country's economy.

The Reserve Bank (RBNZ) has been going hard on tactics to cut New Zealand's spending in an effort to curb inflation. The central bank last week raised the official cash rate by 50 basis points - more than expected - and has said the economy is set to plunge into recession this year.

Annual inflation was expected to remain above 7 percent for "a longer period" than first thought, largely due to the costs associated with the rebuild from Cyclone Gabrielle, the RBNZ said in February.

It comes as thousands of New Zealanders are already struggling with a cost of living crisis. The country's annual inflation is 7.2 percent, as per the latest available data. 

Asked about alternative solutions to curb inflation on Tuesday, independent economist Cameron Bagrie told AM he wasn't in favour of a tax on higher corporate profits.

"If I step back, though, and think about tax rates in general over the next 10 years - where do I think they're going to be headed? I think they're going to be biased up as opposed to down," he told co-host Amanda Gillies.

Bagrie said New Zealand had long-term structural issues when it came to the economy, including an aging population and an "infrastructure mess".

Labour introduced a top rate of 39 percent on income over $180,000 after it was re-elected for a second term in 2020. The party has yet to set its tax policy for election 2023.

"As you know, we don't publicly comment on things that may or may not be under consideration in the Budget," Prime Minister Chris Hipkins told AM in February. "[We] never have and don't intend to start doing that now. People will know exactly what our tax policy is well in advance of the election though." 

With 2023 being an election year, Bagrie urged political parties to pull some levers on economic policy to assist the RBNZ with inflation. 

"These are levers that lie at the hands of the Government… the big one out there is obviously getting migration settings right," he said.

"It's looking at the whole story through a fundamentally different lens; through a supply lens as opposed to a demand management lens. What we're seeing out there at the moment is a lot of talk about demand and not enough talk about supply."

Watch the full video for more.