Top Scoops

Book Reviews | Gordon Campbell | Scoop News | Wellington Scoop | Community Scoop | Search


Molesworth & Featherston: Budget 2007 May Surprise

Molesworth & Featherston - Weekend Update edition

Business and Political News
Thursday, May 17, 2007

Budget 2007
May Surprise

Michael Cullen has unveiled a budget more substantial and containing more surprises than anyone guessed.

It plunges billions into Kiwisaver (and makes employers pay more towards the cost of it), puts billions into a Business Tax Package that cuts company tax, and it goes on a spending spree on roads, rail, tertiary education, and energy.

The 'chewing gum' adjustment to personal tax thresholds that attracted derision last year have been ditched and a ten cents a litre regional fuel tax will be available to build still more roads.

This is the most spectacular budget since 1991.

And it’s a huge political risk. Michael Cullen has rolled the dice on an untested savings scheme and business breaks unlikely to appeal to his constituency.

The riskiest new policy is a mandatory employer contribution. Bosses will have to kick in matching savings for anyone who saves four percent of their salary through Kiwisaver. The government has removed some of the sting by giving employers a matching tax credit and phasing the scheme in so it won't take full effect until 2010. The government says the net employer contribution will be about one percent of wages by the time it comes into full effect.

Savers will also get a $20 a week tax credit directly, making an overall subsidy worth $40 a week to earners who join the scheme, on top of the $1000 kick-start and $5000 first-home subsidy already in the scheme.

The Kiwisaver expansion blows $3.2 billion over four years and its ultimate cost is expected to rise to $1.6 billion a year in a decade.

Another $3.4 billion over the next four years is going into the business tax cuts.

The headline corporate rate, as widely foreshadowed, is coming down from 33 to thirty percent from next year. Modest tax credits for research and development are being introduced and international tax rules are being relaxed.

After signalling two weeks ago there would be no export tax credits, Dr Cullen announced $87 million of grants for research and development.

In a thundering response, John Key focused on the cancellation of the personal tax threshold changes, attacked the regional petrol taxes, the forecast that half the workforce "can't afford" to join the scheme and the impact on employers of the Kiwisaver payroll tax.

National appears to favour a much more stimulatory fiscal stance.

Economy - Stronger outlook
Politics - Does the budget score?
Kiwisaver - Saving scheme grows; employers growl
Tax - Business tax package
Transport - Rail road


UPGRADE TO READ Molesworth & Featherston WITH MORE DEPTH
The ‘Governor’s Edition’ of Molesworth & Featherston is released from its trap deep in the Earth every week.

Bulk subscriptions are available with heavy discounts for organisations to send one to every decision-makers’ in-box.

Just email us for details or secure an individual subscription online through the awardwinning Good-Returns site with your credit card HERE.

Direct Link To This Week's Weekend Update Edition:

© Scoop Media

Top Scoops Headlines


Using Scoop Professionally? Introducing ScoopPro

ScoopPro is a new offering aimed at ensuring professional users get the most out of Scoop and support us to continue improving it so that Scoop continues to exist as a public service for all New Zealanders. More>>


Don Rennie: Is It Time To Take ACC Back To First Principles?

The word “investing” has played a major part in the operations of the ACC since 1998... More>>

27-29 Sept: Social Enterprise World Forum Live Blog

1600+ delegates from more than 45 countries have came together to share wisdom, build networks and discuss how to create a more sustainable future using social enterprise as a vehicle. Attending the Forum were social enterprise practitioners, social entrepreneurs, policy makers, community leaders, investors, activists, academics and more from across the globe... More>>

HiveMind Report: A Universal Basic Income For Aotearoa NZ

Results from this HiveMind suggests that an overwhelming majority of Kiwis believe that due to changing circumstances and inefficiencies in the current system, we need a better system to take care of welfare of struggling members in our society. More>>


Scoop Hivemind: Medical Cannabis - Co-Creating A Policy For Aotearoa

Welcome to the fourth and final HiveMind for Scoop’s Opening the Election campaign for 2017. This HiveMind explores the question: what would a fair, humane and safe Medical Cannabis policy look like for Aotearoa, NZ in 2018? More>>