New Zealand’s Prime Minister, Christopher Luxon, has described the prospect of introducing a capital gains tax as a “wrecking ball” for his country’s economy, firmly ruling out the move as a light-hearted trans-Tasman exchange highlighted a deeper policy divide with Australia.
His comments followed a pitch last month from New Zealand Finance Minister Nicola Willis, who urged Australians considering starting or growing a business to look across the Tasman, citing New Zealand’s lack of a capital gains tax and its “very pro-growth, anti-red tape” settings.
On Saturday, speaking alongside Prime Minister Anthony Albanese in Noosa, Luxon sought to downplay any suggestion of a critique of Canberra, insisting Willis’ remarks were aimed squarely at New Zealand’s domestic debate rather than Australia’s policy settings.
“Within the New Zealand domestic context, there’s been a long-running debate now for over 10 years about the merits of introducing a CGT or not,” Luxon said. “We haven’t ever introduced one in the country.”
He said the comments were not directed at Australia, but reflected the internal New Zealand political debate over whether a capital gains tax should ever be adopted.
“Her comments were really in the context of that debate domestically, rather than … comments about the domestic settings of the CGT here in Australia. That’s up for you guys in your different economic context to obviously make your decisions.”
The exchange came as the Albanese government attempts to reshape its treatment of capital gains tax concessions, with changes announced in the federal budget to take effect from July next year.
The reforms, which have drawn sharp criticism from small business and political opponents, will replace the long-standing 50 per cent discount on capital gains tax from assets held for more than a year with an inflation-indexed approach and a minimum 30 per cent effective tax rate on gains.
The issue is also increasingly shaping as a fault line in New Zealand politics ahead of the November 7 election, with the opposition NZ Labour Party continuing to advocate for a broader capital gains tax, while Luxon’s centre-right coalition has ruled out introducing one.
“We don’t think that’s appropriate for New Zealand, and we feel pretty strongly about it,” Luxon said. “We’ve got a recovery underway, and we just think of CGT being introduced to New Zealand now would be a wrecking ball for our economy.”
The Australia New Zealand Leadership Forum also convened a business dialogue alongside the prime ministerial meeting, with industry leaders outlining how firms were responding to geopolitical uncertainty, supply chain pressures and rapid technological change across an increasingly integrated trans-Tasman economy.
Albanese leaned into familiar trans-Tasman humour when asked about the exchange.
“What next? The Wahs (NRL club NZ Warriors) signing another Jackson Ford?” he joked.
“I mean, we have a relationship which is often a bit tongue-in-cheek, that’s the truth of the matter.”
He noted the depth of people-to-people ties across the Tasman, pointing out that about 638,000 New Zealanders lived in Australia, while around 90,000 citizens had gone the other way.
“Occasionally, there’s a bit of cheekiness to the relationship. Long may that continue,” Albanese said, before offering to fast-track any citizenship requests from New Zealand rugby All Blacks stars to play for the Wallabies.
Luxon agreed the tone reflected long-running good humour between the two countries.
Rob Harris is the national correspondent for The Sydney Morning Herald and The Age based in Canberra. He is a former Europe correspondent.Connect via email.