The National-led coalition government has delivered a budget clearly geared towards the business sector.
Inevitably, Finance Minister Nicola Willis’ second annual budget has drawn complaints and disapproval from the opposition. However, as veteran business journalist, Fran O’Sullivan, said in the NZ Herald, the budget could be summed up as: “pragmatic, ruthless and generous.”
At this point in the electoral cycle, the governing coalition has little need to take any notice of opposition complaints and it has largely ignored them.
Perhaps the most significant point, though one often overlooked, is that New Zealand remains a small, isolated country with a relatively low base of taxpayers.
Inevitably, this forces any responsible finance minister to cut budget aspirations to reflect these realities.
Extraordinary 20 per cent
Former National Party and Tauranga MP, Todd Muller, singled out the budget’s 20 per cent write-off for businesses buying new premises (for example) as being one of its most significant aspects.
Muller is also the independent chair of Bay of Plenty-based economic development group, Priority One.
Noting that this rebate comes on top of several other business-friendly moves, Muller described the 20 percent as “quite extraordinary.” When governments try to make structural adjustments or incentives, it always seems a bit too little, but that was not the case this time, he said.
“If you’re a business person, whether [it’s] a large business or a small business, this is helpful,” said Muller. “If you think of the kiwifruit industry [producers] in particular, they have significant assets, they’re an asset-heavy industry with more investment being required to support the growth of the industry.
“Now, they’re going to get real tax benefits by investing in new kit and I think that’s going to be welcomed, frankly. And, hopefully for the businesses that are considering when to start investing, that will bring it forward a bit.”
Matt Cowley, chief executive of the Tauranga Business Chamber, noted that the government faced a tough challenge in stimulating the economy while reducing tax revenue and limited borrowing capacity.
Businesses had largely been neglected since the initial Covid-19 lockdowns, Cowley said, adding that it is encouraging to see the government incentivising businesses to invest in their operations, alongside a significant public infrastructure programme.
With a legislative agenda reducing regulatory hurdles and the Reserve Bank lowering borrowing costs, businesses should anticipate a warming economy later this year, he said.
The Covid shock to the economy has now passed, but it has left behind a degree of anxiety and continuing deficits for responsible governments to deal with. By contrast, successive Labour-led governments have tended to extend welfare credits to a level some regard as untenable.
Slamming the pay equity door
When Willis found $12.8 billion in the budget by, essentially, closing the pay equity door aimed at balancing gender disparities in pay, the decision was greeted with horror by the opposition.
Willis argued that the proposed pay equity settlement wasn’t working as equably as it was intended and opted to redistribute the funds elsewhere.
Labour leader, Chris Hipkins, argued that the reversal of 33 pay equity claims – netting the government $12.8 billion – was: “unacceptable and Labour will not stop fighting until pay equity is restored and respected.”
As many on the right see it, Labour’s approach is flawed. Muller said that people trying to build businesses, and jobs in the process, are labelled as: “the class enemy, and that somehow [this is] going to create a future for a country of 5.3 million people – it’s just bizarre.
All this expectation around future investment in health, education, defence and roads, and we’re asking the same few million taxpayers to do it?”
New Zealand’s balance sheet is under pressure, Muller said.
“If you are committed to tax the wealth-creators any more, then the only way that you can recover is to look at the areas where you are spending more and try and peal it back a little bit.”
The impact of the budget remains to be seen, as Cowley added:
“While I give the budget a pass mark, all eyes will be on next year’s budget to assess whether this coalition government has achieved its goals ahead of the next general election.”
