ACT's alternative budget: Bump up defence spending by $7bn to counter China's 'foothold in the Pacific'

From left: ACT MPs Simon Court, Mark Cameron and leader David Seymour.
From left: ACT MPs Simon Court, Mark Cameron and leader David Seymour. Photo credit: Facebook

ACT's 'alternative budget' has been released and it includes a proposal to bump up defence spending by $7.5 billion over four years. 

"China now has a foothold in the Pacific. Labour agrees that the world is changing but they don't know what to do and they're too busy wasting money on poorly targeted spending," ACT MP James McDowall said on Monday. 

"Australia will soon reach 2 percent of GDP on defence spending but Labour won't commit to a pathway to do the same," McDowall, spokesperson for defence, added. 

"ACT says we should follow the NATO target and methodology. It would see $7.5 billion in extra capital expenditure over the next four years, this is almost double what Labour would spend."

The Stockholm International Peace Research Institute (SIPRI) revealed last week that the United States, China, India, the United Kingdom and Russia were the top five defence spenders in 2021, together accounting for 62 percent of global expenditure. 

While New Zealand did not feature in the SIPRI table ranking the highest increases in military spending around the world in 2021 as it did in 2020 (when it ranked number 13), Peace Movement Aotearoa said the Government's 2019 plan to spend NZ$20 billion on defence out to 2030 was wrong

"It is truly shameful that military spending continues to rise in the midst of a global pandemic and rapidly worsening climate catastrophe. A transition from combat-ready armed forces to civilian agencies that meet the needs of all peoples and the planet is long overdue."

But with Russia's invasion of Ukraine and China's controversial security deal with the Solomon Islands prompting concern about the erosion of adherence to international rules, there appears to be growing support for New Zealand to bump up defence spending. 

The Government's planned military expenditure pushed spending on defence as a proportion of gross domestic product (GDP) to 1.5 percent. ACT wants it increased to 2 percent, to match Australia. 

"The target of 2 percent of GDP is what all of our traditional allies, including Australia, are committed to and would demonstrate the seriousness with which we take our defence obligations," McDowall said. 

National, ACT's potential coalition partner in a centre-right administration, has also hinted at increasing defence spending to 2 percent of GDP.

"That's something we will be looking at," National Party deputy leader Nicola Willis told Newshub Nation. 

The bumped-up defence budget is one of three areas of new spending ACT has proposed. It would also establish a $250 million annual fund for school principals to reward outstanding teachers, and roll out a public-private partnership proposal for building houses.

ACT would share 50 percent of goods and services tax (GST) revenue raised from the construction of new homes with councils to incentivise building housing infrastructure. 

ACT is also sticking to its "simple two-rate tax system" of 17.5 percent and 28 percent. 

The way income tax currently works is, each dollar you earn up to $14,000 is taxed at 10.5 percent, and then each dollar you earn between $14,000 and $48,000 is taxed at 17.5 percent. 

These are known as 'tax brackets' and illustrate New Zealand's progressive tax system. If you earn $70,001, your entire salary isn't taxed at 33 percent - only the $1 is. 

The third bracket is $48,000 to $70,000, taxed at 30 percent. The next is $70,000 to $180,000, taxed at 33 percent. Each dollar earned above $180,000 is taxed at 39 percent - the final bracket introduced by Labour after the 2020 election. 

"ACT would reshape the income tax system to restore fairness, reward success and deliver much-deserved tax relief to hard-working New Zealanders," said ACT leader David Seymour. 

"ACT would create a two-tier tax rate system where anyone earning $70,000 and under would be taxed 17.5 percent and those earning above would be taxed 28 percent. This would restore fairness and reward the workers.

"We'd also cut wasteful spending, bringing the public service back to the size it was in 2017, reducing budget allowances and scrapping funds that let politicians pick winners for photo ops."

Finance Minister Grant Robertson has given himself $6 billion in new spending for the upcoming Budget, the majority will be spent on the Government's health system restructure and climate change initiatives. 

ACT's other policies

  • Scrap the rental tax and bright-line test
  • Gradually increase the superannuation age
  • Reduce wasteful spending by $5.3 billion in 2023
  • Scrap remaining COVID-19 rules "that no longer make sense"
  • Welcome overseas investment from OECD countries
  • "Carry out serious reform" of the Resource Management Act 
  • End the oil and gas ban and repeal the Zero Carbon Act
  • Reintroduce 90-day trials and create a moratorium on new minimum wage hikes
  • Scrap the Government's proposed social insurance scheme and Fair Pay Agreements
  • Liberalise genetic engineering laws
  • Introduce a Regulatory Responsibility Act
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