Treasury announcement could bring adverse knee-jerk reaction

Treasury announcement could bring adverse knee-jerk reaction

Peter Sherwin, Partner, Grant Thornton New Zealand in Wellington, says Treasury announcement that it has cut its forecasts for economic growth and warned of higher national debt has several ramifications:

Expect the Greens and Labour both to again call for an increase in tax and an introduction of capital gains. At a time when a steady hand is required this would be a knee-jerk reaction resulting in:
• overall further weakening of growth and confidence
• businesses unable to pay down further debt thereby putting their businesses into a stronger financial state
• Not allowing the business cycle to complete its full turn
The Government has signalled to the major international ratings agencies that it will keep national debt below 30 per cent
• As the Government approaches this threshold, greater emphasis will be put on PPP to complete major projects
Petrol tax hike
• Petrol consumption in New Zealand is dropping. We either pay more tax orhave inferior roads and highways.

ENDS

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