WCOC: Comments to Dr Michael Cullen
Comments to Dr Michael Cullen, Minister of Finance, By Charles Finny, CEO, Wellington Regional Chamber of Commerce, Post Budget Lunch, Friday 18 May 2007
Over the past three years it has been our habit at our post budget sessions here at the Chamber to focus on the positives, rather than the negatives for business. The reason for this was that in 2005 and 2006 the negative comments seemed to be the most predominant comments in the media. We wanted to restore some balance. It is pleasing this year that comment is more in balance. Indeed judging from the reactions of those in the superannuation industry who were sitting in the same lock up as me, there are some elements of the business community who are ecstatic.
From our perspective we aren’t exactly in ecstasy but we do acknowledge that there were many positives in the Budget. Indeed I would go so far as to say that the positives outweigh the negatives. We were particularly pleased to see the announced reduction in company tax rates to match Australia’s rate. The R&D announcement is also something we had been calling for, as was the increased assistance for export market development, and increased support for NZTE activity in North Asia. We also welcome the encouragement given to active investment offshore. The increased funding that was announced prior to the Budget for Wellington’s double tracking and rail electrification projects are also gratefully received. These are all necessary policies and will help steer this supertanker economy in the right direction over the long term.
The Chamber is supportive in general of Kiwisaver, but we are concerned about the impact of the direct costs compulsory contributions will impose as well as the indirect compliance costs. While incentives are probably needed to change the savings culture in New Zealand, we do see the policy as something of a money-go-round which is likely to lower wage growth.
On the negative side of the ledger, we are concerned about the continuing growth in Government allowed by yesterday’s Budget. Overall, we see the Budget at stimulatory, and that is not something we need right now. And of course, many of our members would like me to remind you Minister, that many businesses are not incorporated so the tax rate that really matters for them is the personal tax rate. We look forward to you announcements next year on how these rates are to be reduced.
But most importantly I want to say a few words on land transport – roading to be precise. We welcome the fact that the Government is thinking creatively about extra ways to raise the capital needed to accelerate construction of key infrastructure, but we have several concerns about the proposal to allow regional fuel taxes:
- First, the cynic in me sees these as a recipe for ensuring no progress on projects such as Transmission Gully. Already Kerry Prendergast is using the proposal to her advantage – in case people have not noticed, Kerry takes every opportunity to try to delay Transmission Gully so her pet Petone-to-Grenada road can be jumped up the regional priority list.
Second, if regions are to have the right to chose and pay for infrastructure, surely the regions should be allowed to chose how to spend the money? Government is telling us in the Budget that only 5c a litre can be raised for roading (if you raise the full 10c half has to be spent on public transport)– this might be fine in Auckland but in Wellington the real deficit is roading – we already have the highest public transport modal share of any city in Australasia.
- Finally, we don’t believe that there is much of a funding deficit for Transmission Gully. But even if there is one, we don’t think that this is a regional problem – it is a national problem. The realignment of SH 1 through Transmission Gully is an issue of national strategic importance. When the current state highway closes for even a few hours the South Island and Wellington start running out of essential supplies – the current road is hugely vulnerable, and if you really believe the science underpinning concerns on climate change – which we do – the last thing you want is the main transport artery in country traveling along a metre or so above sea level beneath an over-steepened slope that is highly vulnerable to slippage from heavy rain. And don’t forget earthquakes.
We have no issue by the way with the region being expected to fund the proposed Petone-to Grenada road but lets keep thinking creatively about the funding of key infrastructure projects. Here at the Chamber we tend to feel that tolling, private sector investment and cordon or electronic pricing are better potential solutions than regional petrol taxes.
Dr Cullen, thank you again for what you have announced. Yesterday’s key policies are mostly steps in the right direction – but to achieve the more productive economy we are all seeking, you need to go further next year, at both personal and company tax levels.