Patrick Smellie sniffs an unusually successful Budget:
What makes the Budget particularly strong is the extraordinary state of the Crown accounts. If net Crown debt is to peak at less than 30% of GDP after the most wrenching debt crisis ever to hit the developed world, then we’re looking in reasonable shape.
If it weren’t for the fact that the Budget economic forecasts still have current account deficits at around 7% of GDP for the foreseeable future, there would be an argument that English could borrow a bit more and get the place really going.
Tax experts say it’s bold and radical:
“The property sector will understandably not welcome some aspects of this Budget,” said accounting firm KPMG’s chief executive, Jan Dawson. The surprise cut to 28% in the company tax rate from next April would help offset any negatives among a raft of changes removing or tightening property investment and other sources of tax deductibility.
The Budget was “the most radical in years”, said Deloitte chief executive Murray Jack, and represented “a big bet on the delivery of the required impetus for the government’s growth strategy.”
The New Zealand Institute of Chartered Accountants pointed out that it was history repeating. The corporate tax rate was 28% in 1989, while the top tax rate only rose beyond 33% in 2001.
“Ever since then, the tax system has fallen into disarray as governments have tried to apply band-aid arrangements to avoid the 39% rate,” said NZICA’s Craig Macalister. “This is a welcome return to a simpler tax system, and it removes some of the incentives to structure for tax purposes rather than for commercial purposes.”
Chapman Tripp tax partner Casey Plunket said “no one should mourn the passing of the 38% top personal tax rate.”
“It was always a fraud, the cost of which was not borne by the wealthy but by those who earned … income which they could not shelter in companies or trusts,” Plunket said. “People with substantial assets, the real wealthy, were almost completely unaffected by it.”
. . . The New Zealand Property Council wasn’t happy with the investment property tax changes, but called it a “bold Budget” that was “good for New Zealand, at the property sector’s expense.”
Federated farmers applauds the tax incentives but wanted more for agriculture:
Federated Farmers is welcoming Budget 2010 with some misgivings about the ongoing growth of Government spending and the impact of higher Government charges, particularly the Emissions Trading Scheme (ETS), will have on inflation.
“The Government’s ambition to rebalance the economy in favour of the tradable sector is admirable,” says Philip York, Federated Farmers economics & commerce spokesperson.
“The Government’s emphasis on encouraging sustainable growth, based on productivity and competitiveness is strongly endorsed and we welcome a much improved economic and fiscal outlook. . .
. . . “Federated Farmers is very disappointed the Regulatory Responsibility Bill, something designed to introduce discipline to regulation, continues to languish. There’s actually no need for further consultation, as stated in the Minister’s Budget speech. It’s a high quality well drafted Bill so let’s get on with it.
“All in all this is a Budget that looks good but it is very much work in progress with more needed to be done if we are to get the tradable sector led growth we all want,” concluded Mr York.
The Business Round table says there are sound steps but no step change:
“The government deserves credit for correcting some of the economic mistakes of its predecessor but is still well away from putting the economy on a strong and balanced growth path”, Roger Kerr, executive director of the New Zealand Business Roundtable, said today.
Colin Espiner writes English sprinkles the fairy dust:
Somehow, English has managed to please all of the people all of the time – at least, everyone except the unions, Labour, and Hone Harawira. And it’ll be a cold day in the Beehive before those three agrees with anything National does. . .
. . . Overall I reckon this is easily a better Budget than last year’s effort and probably trumps anything Labour came up with in the past nine years as well.
And over at No Minister The Veteran discusses whose views can be disregarded and why.