Being in the media lock up in Parliament on Budget day feels like you’re about to write an exam. At precisely the appointed time, budget papers and estimates are distributed to the at least couple of hundred assembled journalists from across the country. The thought of combing through them and coming up with news and analyses for the next day’s paper in time for the lifting of the embargo (when we are permitted to transmit and broadcast our stories to our media outlets) some three hours later can be daunting.
The highlights of yesterday’s Budget, though, were all in line with expectations that were discussed in the media for weeks: GST was increased, tax rates were lowered across the board, depreciation rules for property investment were altered and the horizon for running deficit budgets was revised – something that sends a message that New Zealand is emerging out of the global crisis far faster than was originally surmised.
The big surprise was the lowering of the company tax rate to 28 percent. New Zealand has clearly stolen a march over Australia in this regard, which will start rolling in lowered company tax rates from 2012. This will certainly encourage Kiwi companies to stay home and also attract overseas companies to set up here giving us an edge over our trans Tasman neighbours.
On my return flight from Wellington, I happened to be sitting next to former governor of the Reserve Bank of New Zealand and the man who almost became prime minister in 2005 – Don Brash. Dr Brash, who is on the taskforce that consults the government on catching up with the Aussies by 2025, told me he was happily surprised at the lowered company tax rate.
When I asked how he rated the budget on a scale of one to ten, he said he would give it a seven or eight – which he also told a radio station before he boarded the plane.
Sitting in the lock up analysing the sectors, it was easy to spot the winners because there are plenty of them in this Budget. Though no budget can ever please all, the list of losers is comparatively shorter this year. The big losers of course are property investors – more particularly the highly geared ones. Non-residential landlords are tipped to pay most of the $700 million garnered by changes to the tax rules since about 70% of depreciation claimed was for non-residential property.
What exact effect this will have on the property market is hard to predict – even Finance Minister Bill English couldn’t say when asked.
The changes in taxation will benefit almost all New Zealanders despite the rise in GST. Tax rules have been tightened across the board and there has been an attempt to plug loopholes and remove grey areas, again affecting property trusts and depreciation. It all points at a genuine attempt to make taxation rules more equitable to all New Zealanders and the result could well be that the new regime, that also promotes better tax compliance with clearer rules and a bigger budget to implement them (tax dodgers watch out), will leave most New Zealanders better off.
The finance minister has also taken care to boost the infrastructure and social sectors. Though we would have liked to see more public private partnerships, a beginning has been made in the area of corrections and there is some allusion to government and private sector working together in building the superfast broadband network across the country. Healthcare and schools will also receive more funds. The pre-announced $30 million for tourism marketing will concentrate on getting more tourists here from New Zealand’s traditional source markets.
Clearly, the government has delivered a Budget in line with what New Zealand has needed most in recent years: encouragement to boost savings, reduce debt, invest at home, boost productivity with better transportation and communications infrastructure, enhance the quality of life – and of course remove the overwhelming dependence on property as an investment vehicle.
It is a confident budget, one that reflects the mood of New Zealanders emerging out of the recession relatively unscathed and all set to ride the wave of resurgence with a growth factor that has handsomely surpassed estimates made as recently as last December.