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A budget of hand outs not hand ups

A budget of hand outs not hand ups

Today's budget is all about re-distributing the tax gains made during the best spell of growth we've had since the 1960's, the Employers & Manufacturers Association (Northern) says.

"Cullen's $10-15 billion spend up over the next three years, plus the extra billions since 2000 would have looked pretty sick without the last lucky four year burst of growth," said Alasdair Thompson, EMA's chief executive.

"Government surpluses should have been returned to those who earned them through tax cuts, or invested to lift New Zealand's outlook onto a higher plane and sustain it there.

"We certainly need to see much more investment going into infrastructure such as new roads, rail, electricity transmission, generation, potable water supply and waste water treatment.

"Instead Dr Cullen continues to patronize the voters by re-distributing the surpluses they have earned.

"While we applaud the intentions of the Budget to ensure low and middle income families get more income, we deplore the patronizing way this is being achieved.

"Business is confident lower income earners would prefer higher incomes from their own employment and entrepreneurship than from tax payer funded handouts, while their own ability to invest and create growth for themselves is reduced.

"Nevertheless we welcome the efforts to get more people off benefits and back into the workforce, including the extra day care benefits, and the steps taken for people to profit by getting work rather than rely on benefits.

"But Government does not create wealth or give out anything of its own making, and we are alarmed by the thought that to implement the new provisions an army of new bureaucrats will be required.

"We would much prefer to see far more of the surpluses invested in infrastructure, especially roading, to sustain the economy's growth.

"The greatest opportunity in decades to restore our infrastructure back to historical levels is being squandered.

"Daily and unpredictable traffic congestion in Auckland and annual power shortages are ample evidence of the underinvestment in infrastructure.

"Auckland's roading deficit is estimated to be costing about 1% of the nation's GDP every year. More rapid road building in Auckland would boost growth of this quantum.

"The underinvestment in electricity generation and transmission is alarming, and discouraging investment in new projects.

"Government had plenty of scope to double spending on capital projects to 2 - 2.5% of GDP phased in over five years to raise this type of investment back to historical levels.

"In fact we needed cuts to the company tax rate as well to lift New Zealand's private sector investment in capital plant and skills, through the retained earnings that that would allow.

"New Zealand's capital to output ratio declined 10% in the decade to 1997 and is likely to have worsened since.

"Capital stock has not kept pace with GDP growth. In 1992 our total capital stock exceeded 200% of GDP. By 1997 it had fallen to 180% of GDP by 1997.

"As a consequence our productivity has fallen well behind Australia's since 1975, largely due to our failure to invest in capital infrastructure and productive plant.

The consequences overall are that New Zealand's competitive advantage has been eroded. The Budget is a good time to address this, so its disappointing Cullen chose not to."

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