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Another Budget That Puts The Cart Before The Horse


“This is another Budget that has focussed on delivering social, cultural and other outcomes without any apparent recognition that you first need sustained economic growth to pay for them”, said David Moloney Chief Executive of the New Zealand Manufacturers Federation. Mr Moloney was responding to the Government’s first Budget.

“This Government promised industry a lot, both prior to the Elections and immediately after, in terms of delivering a high skills, high employment, and a high valued added economy. This Budget was the critical opportunity to ’stump up with the goods’, providing as it did the only chance to put in place policies that could get some traction before the next election.

“But it has failed to give us the integrated set of measures necessary to move us away from our chronic dependency on commodity exports, to accelerate growth in the value added goods and services export sector and to reverse the continued slide in New Zealand’s relative standard of living. Assessed against these criteria this Budget falls sadly short of the mark.

“While it was no doubt unrealistic we would have welcomed a cut in business tax to at least match that contemplated by the Australians, as the single most important measure to enhance New Zealand’s global competitiveness. We had hoped to see steps to address the issue of 100% deductibility for R&D expenditure in the year that it occurs. I had expected to see details of the promised, but as yet unseen, review of the tax structure. Other welcome measures would have included steps to reduce compliance costs for industry and business, including reining in a burgeoning local government sector, a greater emphasis on debt-retirement rather than increased expenditure, and the basis for effective debate on superannuation policy and the sustainability of a dedicated fund.

Instead, in terms of its specific offerings to industry we have a Budget that offers a modest start-up for Industry New Zealand but without clear signals of its purpose and priorities, and considerable new expenditure on R&D. The Government is to be commended for its focus on the importance of greater R&D in a so-called knowledge based economy. The extra $9 million for Technology New Zealand is tangible evidence of its support. We hope that the money goes to small and medium enterprises. Nevertheless, we also wanted the promised equitable tax treatment for R&D.

The Government’s moves in the area of funding to address issues relating to literacy, numeracy and industry training will be welcomed by manufacturers as the sector has identified the resolution of these issues as pivotal to a competitive, growing economy.

These measures, however, are hardly sufficient in themselves to offset the impact, in terms of lost competitiveness, of policies already enacted or in place since the Election, and of promised initiatives that the Government has subsequently rethought.

Further comments:
David Moloney 04 388 8355 (bus)
04 479 6230 (pvt)

Simon Carlaw telephone 04 473-3000 (bus)
04 476 7729 (pvt)

Peter Crawford telephone 04 473 3000 (bus)
04 389 8945 (pvt)

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