Gordon Campbell | Parliament TV | Parliament Today | Video | Questions Of the Day | Search


Budget 2007: Saving and investing

Hon Dr Michael Cullen
Minister of Finance

Saving and investing to secure our future

Saving and investing are the centrepieces of Budget 2007, helping drive the Labour-led government's strategy of putting the economy on a sustainable footing to meet the challenges of today and tomorrow, Finance Minister Michael Cullen said today.

"We must save and invest more if we are to continue transforming New Zealand into a more dynamic and innovative economy equipped to deal with our economic, environmental and social challenges," said Dr Cullen.

"That is why Budget 2007 enhances KiwiSaver, the landmark work-based saving scheme and introduces the most significant package of business tax measures in twenty years.

"My eighth budget is the right budget for these times and one only a Labour-led government could deliver. It deals with our economic priorities without compromising our fiscal objectives and continues our progress in delivering social investments to allow all families, young and old, to enjoy a better quality of life.

"New Zealand has experienced the longest period of economic growth for three decades, with record low unemployment and strong income growth. But our economic success has caused imbalances to build up.

"Budget 2007 has been prepared against the backdrop of persisting inflation, high interest rates and an over-valued exchange rate, which are putting pressure on our productive sector. We have a high current account deficit symptomatic of our poor saving record.

"There is much this government can do and is doing. We can be supportive of monetary policy by restraining the fiscal stimulus. We can help correct structural imbalances by addressing our poor saving record. And we can raise the speed limit of the economy by encouraging a shift in the mix of growth away from domestic demand and towards saving and investment.

"That is why we are enhancing KiwiSaver, the work-based saving scheme, through tax credits. These will help Kiwis save more, far earlier in their working lives so they can secure their retirement dreams.

"If we save more, we consume less, easing inflation and so pressure on interest rates and the dollar. Greater saving deepens capital markets so allowing our business better access to the capital they need to expand and at a lower cost.

"We must also grow more globally competitive firms if we are to build a higher wage economy. That's why the government is investing $3.4 billion over four years in a package of measures designed to encourage greater business investment and improved competitiveness.

"A lower company tax rate, tax credits for research and development, changes to international tax rules and greater export market development assistance will drive investment in innovation and expansion. The measures will improve productivity and encourage more exporters to produce the kinds of products that can demand a premium in overseas markets.

"These tax changes continue the targeted measures the Labour-led government has introduced to ensure tax policies are structured to ensure the best economic and social outcomes.

"Investing in world-class infrastructure is also critical to achieve higher sustainable economic growth. Budget 2007 invests further capital to support the construction of state highways. Regional fuel taxes will also improve the ability of regions to fund priority investments. Further state funding is guaranteed with all revenue from fuel excise taxes to be dedicated to transport improvements.

"The $600 million investment in rail in Auckland and Wellington (over six years) and the additional $50 million for track improvements to the national rail network, will help develop a more sustainable transport network and underscores the government's commitment to ensure New Zealand deals with the challenge of climate change.

"This government is sensitive to the challenges we face and we must continually reassess our priorities against the pressures we face. We have therefore decided to not to proceed with indexation of income tax thresholds at this time. This would only further stimulate the economy, when what the economy needs is further investment and saving.

"It is testament to our prudent fiscal management since 1999 that this significant set of policies can be accommodated within our medium-term fiscal strategy. Gross sovereign issued debt is now only 23 per cent of GDP, compared with 35 per cent of GDP in 1999, and is forecast to remain around 20 per cent over the next 10 years.

"The NZ Superannuation Fund is now $12.5 billion, building up assets to smooth the demographic transition due to an ageing population. Net core Crown debt is forecast to be only 3 per cent of GDP, and including the NZ Superannuation Fund; the core Crown will have net assets close to 5 per cent of GDP.

"In the short term, the government continues to support monetary policy by leaning against domestic demand. The fiscal stimulus in 2006/07 is substantially smaller than forecast in the Half-Year Economic and Fiscal Update. The average stimulus over the next two years is roughly what was forecast.

"I can proudly say that Budget 2007 both supports the short-term macroeconomic environment and builds on the foundations we have built over the last eight years so all families, young and old, can enjoy a sustainable and prosperous future," Dr Cullen concluded.


© Scoop Media

Parliament Headlines | Politics Headlines | Regional Headlines

Gordon Campbell: On The Tax Working Group’s Road Map

Trying to analyse the interim report on the Tax Working Group (TWG) is like trying to review an entire All Blacks game, but at the half- time mark.

With so much still to be finalised, Sir Michael Cullen and his colleagues are going to need all the All Blacks’ fabled finishing skills to get a coherent, fiscally neutral package together by the February 2019 deadline. More>>


Meth Testing Report: Housing NZ "To Right Wrong"

Phil Twyford “Housing NZ acknowledges that around 800 tenants suffered by either losing their tenancies, losing their possessions, being suspended from the public housing waiting list, negative effects on their credit ratings or, in the worst cases, being made homeless.” More>>


No Reshuffle: Meka Whaitiri Removed As A Minister

Meka Whaitiri will be removed as a Minister with immediate effect... The decision was made after receiving a report into an incident that occurred on 27 August in Gisborne, involving Meka Whaitiri and one of her staff. More>>


Pay Equity Bill: Making History For Women’s Pay

The Equal Pay Amendment Bill, introduced to the House today, will make it easier for workers to make a pay equity claim , using a more simple and accessible process within New Zealand’s existing bargaining framework. More>>


Suffrage 125: NZ A Trailblazer For Women

“We acknowledge the work of Kate Sheppard, Meri Te Tai Mangakāhia, and all of the suffragists who tirelessly campaigned for the vote… Today we also need to ask each other: how we can continue to make our country a fairer and better place to continue the legacy of the suffragists.” More>>


Asylum: Refugee Quota Increasing To 1500

“The quota increase will take place from July 2020. In the meantime, we will work to increase the number and spread of refugee resettlement and support services. We need to make sure we’re prepared for this change in policy.” More>>





InfoPages News Channels