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Federated Farmers: Budget 2007 A Mixed Bag

17 May 2007

Federated Farmers: Budget 2007 A Mixed Bag

There is good news in Budget 2007 but it comes with a price that will require increased government spending, add costs to business, and keep interest rates and the dollar higher for longer, said Don Nicolson of Federated Farmers of New Zealand.

"New Zealand's primary sector was looking for a Budget which exercised fiscal restraint. Low or flat spending could have taken some of the heat out of the domestic economy, helping lower interest rates and the exchange rate.

"While there are positives in the Budget, there is nothing to reduce the pain caused by a soaring currency and interest rates," Mr Nicolson said.

According to Budget documents, core crown spending will rise from $53 billion in this June year to $65 billion in 2010/11. This growth in spending will continue to keep pressure on the economy.

"Another disappointment is the government forcing employers to pay up to an extra four percent of their employees' gross salaries to match their employees' contribution to KiwiSaver. This is in essence a compulsory payroll tax. Farmers cannot pass these costs on, as other employers will.

"That said, there are some positives in Budget 2007 for farmers:

* A research and development tax credit at the rate of 15 per cent of eligible expenditure.

* An extra $8 million on climate change research, and $12 million on Pastoral 21, which will benefit agriculture and sustainability.

* $37 million for improved biosecurity measures at the border.

* An investigation into full "hypothecation" of fuel excise duty. This would mean that all revenue collected from road users would be permanently dedicated to land transport, including public transport.

* A reduction in the corporate tax rate which will benefit the minority of farmers who run their farms as companies.

"However, Federated Farmers is very disappointed by the Government's decision to abandon movements in thresholds in personal income tax rates, and the imposition of another tax on fuel, including diesel. It is also disappointing that while state highways and public transport continue to get big funding increases, the funding of rural roads continue to be neglected.

"Overall this Budget will be remembered as yet another missed opportunity and yet more evidence that the Government thinks it can spend taxpayers' money better than taxpayers themselves," Mr Nicolson said.


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