More and more Kiwis will continue to head overseas, especially to Australia, predicts ASB economist Mark Smith. (Marianna Massey/Getty)

14 May 2018

Hamish Rutherford – Stuff

Budget ‘could re-start the brain drain’, National says, as Australia looks to tax cuts

National leader Simon Bridges says the Government risks restarting the “brain drain” as it hikes petrol excise while Australia promises tax cuts.

On Thursday, Finance Minister Grant Robertson will deliver his first Budget, a week after Australian Treasurer Scott Morrison announced a Budget package which included tax cuts targeting low and medium income earners.

Bridges said in contrast to Australia, the Labour-led Government had cancelled National’s proposed tax cuts was proposing a major hike in petrol excise. Over time, this could add 25 cents a litre to petrol in some areas.

The MP for Tauranga said the moves could risked “re-starting the brain drain to Australia”, the term used to describe periods when tens of thousands of Kiwis move across the Tasman each year, typically for work opportunities.

Bridges said while Australian politicians were battling to outbid each other with the scale of middle-income tax cuts, “our Government is being ridiculously tough on family budgets.

“We don’t want to go back to planeloads of Kiwis moving to Australia and our young families becoming economic refugees once again,” Bridges said.

National leader Simon Bridges says “opposite” approaches to family incomes on either side of the Tasman risks restarting the “brain drain” to Australia. (Rexine Hawes/Stuff)

In a statement, the finance minister accused Bridges of “talking down” the economy.

“Unlike the Opposition, we believe that higher wages, rather than lower taxes, are the reward for their hard work. That’s why this Government has a plan to improve productivity and grow the economy. Simon Bridges needs to stop talking down the New Zealand economy.”

While it cancelled National’s proposed tax cuts, Labour’s families package includes increasing working for families payments for all recipients as well as extending the scheme to 30,000 extra families.

A spokesman for Robertson said that workers in Australia earning less than $37,000 would get less than $4 a week, which would only get when they claimed a tax rebate in 2019.

“By contrast, our families package, which we paid for by cancelling the previous government’s poorly-targeted tax cuts, will benefit 384,000 families by an average of $75 a week when it is fully rolled out,” a spokesman for Robertson said.

An Air New Zealand Boeing 787-9 Dreamliner on final approach at Auckland International Airport. While the numbers have dipped slightly, New Zealand continues to experience historically high gains from migration, with arrivals exceeding departures by around 68,000 in the year to March 31. (Jarred Williamson/Stuff)

National claims the trans-Tasman “income gap for middle-income earners [is] about to start widening for the first time in a decade”.

According to figures released by National, the gap in the average net weekly employee earnings between Australia and New Zealand dropped from just under $155 a week in 2007 to just over $98 a week in 2017.

The “brain drain”

While the term has been used little in recent years as New Zealand experiences the largest migration wave in relative terms in decades, the so-called “brain drain” has previously been a major political issue.

When he was in Opposition in 2008, John Key staged a photo opportunity by standing in Wellington’s Westpac Stadium to illustrate the stadium’s capacity – 36,000 – was roughly the number of Kiwis who were moving to Australia each year.

The joke was later turned on him as Australia’s mining boom saw the exodus climb. In December 2012, then Labour-leader David Shearer returned to Westpac Stadium to mark the symbolic departure of the 50,000th Kiwi to moving to Australia of that year.

But since than, a combination of strong economic growth in New Zealand and a sharp slowdown in large parts of the Australian economy saw trans-Tasman migration change dramatically.

By October 2015, the number of people moving from Australia to New Zealand exceeded those going the other way, for the first since since 1991.

The news may have ordinarily been celebrated by the Government. But coming as New Zealand was seeing a net gain from migration of more than 70,000 a year, the largest gain in nominal terms on record, Key could only manage to mark the milestone by saying it was a reason for celebration “in a way”.

Labour’s position on how many migrants it wants to let in is difficult to pin down. While in Opposition it pledged to cut net migration by tens of thousands of year, since taking office it has wavered on defining any particular target.

The timing of Bridges’ claims could be seen as opportunistic. Changes in migration patterns tends to take years, but there are already clear warnings that the tide is turning.

In April, as net migration hit a two-year low of just under 68,000, ASB economist Mark Smith predicted more and more Kiwis would continue to head overseas, especially to Australia.

“Departures will continue to trend up as the global economy strengthens and the tight Australian labour market allures more kiwis across the ditch.”

[Read the Stuff article].