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Budget 2015 takes an incremental approach

21 May 2015

Budget 2015 takes an incremental approach

The Government has taken an incremental approach to reform in the 2015 Budget, says BusinessNZ.

BusinessNZ Chief Executive Phil O’Reilly says that the government’s accounts continue to improve and the key economic indicators by which country comparisons can be made continue to move in the right direction, but the jury is still out as to whether a slowly slowly approach is ideal.

“In terms of Budget specifics, moves to cut Accident Compensation (ACC) levies by around $500 million will be welcomed not only by business, but also by employees and motorists alike. It is effectively a tax cut which means more money in the pockets of businesses to invest in achieving higher growth, said Mr O’Reilly.

“Signalling potential income tax cuts from 2017 as fiscal conditions permit is welcome. Given New Zealand operates in a competitive global market it is important that both our tax and regulatory policies are internationally competitive given the relatively free flow of capital and labour around the world. However, it is important that company tax cuts are also included in any future tax rate changes.

“Moves by Government to free-up more Crown-owned land for new housing in Auckland are a step in the right direction, as is a boost to R&D funding by way of supporting the establishment of new privately-led regional research institutes, along with an additional $80m for R&D growth grants.”

BusinessNZ supports the Government’s decision to remove the $1,000 kick-start for new members of KiwiSaver. Given KiwiSaver has cost taxpayers $2.5b since it began, this should help alleviate some of the future costs of the scheme.

Mr O’Reilly said that it was a pity bolder reform in key expenditure areas such as the age of eligibility for superannuation and interest-free student loans continue to be ignored by Government and that these issues will not go away by doing nothing.

“Also, moves to tighten the rules surrounding the purchase and sale of investment property may have unintended consequences if investors are effectively locked in to holding houses for a two-year period.”

“While the Government’s gradualist approach to economic reform continues to deliver fruit, there is a risk of being left behind other countries that have much more ambitious reform agendas.”


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