06 November, 2017

Business is keen to know how Finance Minister Grant Robertson intends to lift productivity.

New Finance Minister Gives Indications
Of Fiscal and Policy Priorities

INSIGHTS ABOUT THE NEWS - Finance Minister Grant Robertson says he is not “especially concerned” at the sharp fall in the dollar. Against the greenback, it has slid about 3.5% since Oct 19. The TWI is at a 17-month low.

In reality, the Govt may secretly be pleased at the currency’s downward trend since it boosts returns from commodity exports (which in turn may soothe the rural community) and drives economic growth at a time when Winston Peters is warning of a pending recession.

The Trans Tasman Political Alert covers short and mid-term priorities confirmed by Finance Minister Grant Robertson in a few interviews over the last week. Areas covered included:

PROPERTY - Bright line test on selling property’s on for profit increased from two years to five years by early next year. New rules on negative gearing “we’d expect that work to be well underway in the new year.”

TOURIST TAX - Due to differences in design preferences between coalition partners, not till early next year.

RESERVE BANK CHANGES - “I'm very conscious of the fact that we have a governor due to be appointed in March next year. I want to make sure that people understand that for now, the Policy Targets Agreement stays.” Once a new governor is appointed the agreement will reflect a “slightly broader objective, but we are maintaining price stability. There will still be that band for inflation.” In the future when the Bank was making decisions about monetary policy, in addition to inflation it also “thinks about other goals in the economy, such as making sure that we maximise employment.”

CALLAGHAN INSTITUTE - A better balance between the grant-based system Callaghan covers and a Research and Development tax credit. “Both of them have a role to play,” but the grant role will be reduced.

FOREIGN INVESTMENT - “We still welcome foreign investment where it adds to the productivity of NZ… but equally, we do want to see NZers being able to make sure that they do invest in their own future, and we want to have some conversations with the Super Fund about the way in which they’ll be able to contribute.” Contributions to the Super Fund will start before the end of the year.

BUDGET PRUNING - All Ministers will be asked to achieve productivity gains and where there are “spending plans underway that don’t line up with both Labour’s plan and what we’ve agreed in our coalition agreements.”

SMALL BUSINESS - “Australia has this — the idea of potentially a progressive tax rate for small businesses with low turnover. We want to take a look at that and see whether that could work in NZ.”

TAX WORKING GROUP - Announcements about the membership of the group and its final terms of reference before the end of the year. Terms of reference will reflect a focus on “the housing market, on how we shift from a speculative economy to a productive economy.”

The pressure will be on Robertson to unveil a mini-Budget before Christmas to set out the first steps in his strategy. Business will want to get an early sight of how the Govt will be more actively involved in lifting productivity, as at the same time it insists higher wages must be paid (either through the minimum wage mechanism, gender pay equity or collective wage agreements).

For analysis and further updates see this week’s edition of the Trans Tasman Political Alert

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