THE BUDGET AND HALF A MILLION KIWIS IN AUSTRALIA - TOO CLOSE TO HOME?

Despite the Budget, yet another financial advisor has suggested I go and live abroad because of our tax regime. So long as you don't stay more than six months in New Zealand and base yourself in London, Switzerland or Australia, you are only taxed on income earned in those countries. Some years ago I talked to some senior NZ politicians about this, their eyes glazed over, as mine did when I was in politics, thinking, "stop complaining, you must be earning it to pay it." That's now not true.

I never met my accountant when I was a politician for over 20 years, all income over my salary went to the Labour Party and a couple of local charities. New Zealand accounts for about 10% of my income, Australia 30%. There's a pattern, many of the company boards, university appointments, even my government appointments are by ex-pat Kiwis living and prospering overseas. Why are 100 talented and smart New Zealanders leaving every day?  It's difficult for a Kiwi to accept but Australia is doing better than NZ. Australia, since 1990, has moved from 17th in the OECD rankings to 7th, NZ has dropped from 20th to 22nd. Australia per capita income is a third higher, 75% higher in Western Australia. Tax is lower at every income level until you reach the top tier. Wages are rising in Australia, after tax, twice the rate of NZ. Clever NZ politicians suggest the Australian top tax is higher, it is but New Zealanders who are on quite modest incomes hit the highest tax bracket earlier. NZ has the highest private overseas debt per capita in the OECD as companies and banks borrow big time offshore due to domestic demand. Australia, thanks to a Labour Government, has a compulsory savings system that's fuelling the buyout of NZ companies. Useful steps in the Budget will help with savings, good, but it will cover just half the workforce. Both countries are running healthy surpluses. Apologists say, with some truth, Australia is enjoying a mineral boom, but service sector job growth is expanding at 4 times the jobs in mining, and her drought has shaved 1% off growth, pushing up commodity prices to NZ's benefit. Australia has concluded a preferential trade deal with the U.S., NZ has not yet begun, Australia is in full negotiations with a trade deal with Japan, NZ has not even done a formal study. Consensus politics sounds good but it's also an alibi for the lack of direction.  NZ's problems are systemic because of our proportional representation system.  MMP, Mixed Member Proportional representation was introduced into Germany in the 1940's to ensure no single political party could ever govern on its own.  Compromise sounds good but it's become a way of life. To stay in government, ban plastic bags, give somebody someone else's money? No new coalition deal has ever cut expenditure or promoted stern, forward-looking economic strategies. Serious and intelligent decisions on government expenditure, and most importantly, productivity through more effective competition doesn't rate much of a mention. Even our most heroic projections give us half the growth rate of Australia.

Stunningly, an answer to NZ's economic problems endorsed by all political parties is to have - wait for it - a committee of politicians, a select committee to study monetary policy. Paralysis by analysis.

The Government has shown much skill in keeping a coalition together and themselves in power. This is fine so long as the world has enjoyed the most sustained global growth ever. Just how our system will respond to difficult times is yet to be tested. The National Party's economic response is limp, their traditional arrogance has returned because of the opinion polls. Labour's spending on necessary infrastructure makes sense. Will National, as before, cut back on this? It's true that massive health expenditure is not getting appropriate returns, but you can't convince people health cuts will improve anything. Labour understands MMP, National doesn't. Next election will be about who forms the Government, not which of the main parties gets the most votes.

I'm not going to Australia but too many friends are. If Kiwis couldn't escape to Australia all hell would break lose in New Zealand. 500,000 Kiwis compares with 1 in 20 Australians living abroad, now 1 in 4 NZers live abroad. Like all migrants, they are eager, ambitious and are the highest earners of any new migrant group in Australia. Instead of a committee on monetary policy, a study on the Kiwi exodus might produce some chilling evidence.