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Social Spend-Up – Thanks To Business

Social Spend-Up – Thanks To Business

“Hard to be unkind, but equally difficult to be ecstatic.”

New Zealanders can thank business for today’s massive social spend-up.

Without the huge boost in tax revenue generated from the business sector over the past two years, the $1.1B a year “working for families” package would not be possible.

Michael Barnett, chief executive of the Auckland Chamber of Commerce, said the Budget’s measures for business in contrast, while modest, were welcome. In particular:

Recognition that skills shortages are holding back sustained growth, and the measures to address it; Funding for 500 more apprenticeships; Funding for 3 programmes to assist SMEs; $216m package to encourage off-shore trading.

The most disappointing aspect of the Budget was that there was no circuit-breaker to lift NZ from modest growth to the type of growth that would run NZ to the top half of the OECD.

The Government and business have agreed that 4% annual growth for ten years is needed to bring NZ’s living standards back to those of the top half of rich countries, and start closing the gap with neighbour Australia.

Instead, the Budget projects growth to decline for the next two years, when it should be heading up to meet the 4% target line needed to close the gap.

“If the Budget was truly working for business – as well as for families – a greater share of the tax generated by business would have been reinvested to improving basic infrastructure and encouraging business to perform even better”, said Mr Barnett.

He noted that in 2002 business generated 11% or $4.7B in tax revenue, and in 2004 this has grown to 16% of the tax take or $8B. In contrast, the share of tax from individuals and GST has declined over the same period.

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