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Positive, but misses the boat

New Zealand Institute of Economic Research (Inc) Media release, 20 May 2010

For immediate release

Positive, but misses the boat

Bill English’s Budget is the most positive change in direction for a decade, but it is still fumbling in its approach to stimulating long term growth. And it ignores the “elephant in the room” of an aging population, the New Zealand Institute of Economic Research says.

“We’re slowly turning the Government spending supertanker, but we’ve missed the boat on dealing with tough looming policy issues, such as the affordability of superannuation and healthcare,” said NZIER's chief executive Jean-Pierre de Raad. NZIER has provided independent economic analysis for the last 50 years, and takes a long term view of economic performance.

“The tax package sets the right course by rewarding work and enterprise instead of spending, borrowing, and tax dodging. It shows a firm resolve to constrain the growth in Government spending below the growth of the economy. This will help redirect resources to the most productive, competition-exposed sectors of the economy.

“But ultimately it is not a game-changing budget. The tax-reform package will not set us on a new growth path: the Treasury forecasts the package will only add 0.9% to GDP over 7 years. That is not going to be enough to catch up with Australia.

“The drop in the company tax rate is welcome, but only gets us level with Australia. Changes in depreciation offset any benefit. It does not help overcome other disadvantages New Zealand faces, or set us apart as a great place to invest and do business.

"The switch is positive and was needed, but needs to be built on."


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