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Finance Minister Bill English and Regulatory Reform Minister Rodney Hide have announced the creation of a Productivity Commission early next year to help boost New Zealand’s economic performance across the public and private sectors. The creation of the commission was part of the National-ACT confidence and supply agreement signed after the 2008 election.

“It is essential that we increase our economic growth if we are to create the jobs, higher incomes and opportunities New Zealand families deserve. Our main challenge is to ensure this growth is based on private sector investment and exports, rather than the unsustainable increases in government spending and borrowing of the past decade,” English said.

“This will require action across the board – and it’s why the Government will give the Commission wide scope in terms of the issues it directs it to consider,” Hide said.

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Finance Minister Bill English has unveiled a National Infrastructure Plan that has identified the need for a second Auckland harbour crossing within the next 10 to 20 years. It did not detail immediately what form the crossing would take (either a bridge or tunnel) or how much it would cost.

“The existing Auckland Harbour Bridge is being strengthened to ensure it remains a strong, safe and viable link long into the future. However, building an additional harbour crossing is an important priority as the city grows, and it is a key component of the government’s infrastructure plans for Auckland,” the Plan said.

English said the first National Infrastructure Plan covered a 20 year horizon and had identified NZ$6 billion in government spending a year on physical assets, and that the government held NZ$110 billion worth of infrastructure assets. The plan provided a snapshot of public and private infrastructure, planned investment and the government’s priorities.

“It gives infrastructure providers greater certainty about the Government’s plans and ensures that planners and stakeholders have a clear sense of what is happening across a range of sectors,” English said in a speech to the Trans Tasman Business Council.

I am reporting from this speech and will update with more details through the afternoon below.

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Finance Minister Bill English was asked by a couple of questioners at a Massey University Finance conference in Auckland today about his advice to young professionals thinking of leaving New Zealand because of relatively low wages and a lack of opportunities. One queried whether the government was being ambitious enough with its tax reforms.

One asked what his advice would be to a young New Zealander who wanted to work overseas. English replied:

“Just Fly Air New Zealand. Go off and do it. Any Kiwi kid is a globally attractive human resource.”

But English said the government’s role was to reform the economy enough to make it attractive enough for those New Zealanders to come home when it was time to have a family.

Asked what he told his own children at the breakfast table, he said: “I tell them I’m going off to work so that when they’re 30 they can be back here to raise their kids.”

English said the aim was to make New Zealand attractive for those wanting to run and start small businesses, rather than for those working in very global big businesses. “If you want to run a big oil refinery or be an M&A banker then off you go,” he said, adding that those who wanted a more entrepreneurial and innovative place to live and work should be able to return home.

He said there were no magic bullets for reforming the economy.
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Finance Minister Bill English has given more detail on the tax reforms likely to be announced in the May 2010 budget, arguing that the government may not need to fully align the top personal income tax rate and the family trust rate. It also does not necessarily need to align those rates with the corporate tax rate, which may end up significantly lower than the top income tax rate to ensure New Zealand does not get out of line with Australia.

The Tax Working Group recommended that the government look to align the top personal income tax rate, the corporate tax rate and the family trust rate to close a loophole that has encouraged investment in property, which is relatively lightly taxed.

English told a Massey University Finance conference in Auckland that the government was still considering how the corporate tax rate, the top personal tax rate and the family trust rate should relate to each other, “mindful that our company tax rate needs to be competitive internationally.” Aligning those rates remained the government’s medium term goal, but the government was considering “whether it was affordable and whether it fitted with other equity considerations,” he said.

Here are his full comments below. Here is a link to the full speech on Beehive.govt

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Bernard Hickey interviews Labour Finance Spokesman David Cunliffe about John Key’s speech last week on tax reform. Cunliffe says the tax reforms won’t transform the economy and aren’t likely to be fair. However, he says Labour agrees with the National Government about the need for economic reform and the causes of New Zealand’s imbalances. Labour has offered bi-partisan talks on tax reform, but the offer has not been taken up by the government, Cunliffe says.

Cunliffe, a member of Parliament’s Finance and Expenditure (FEC), also talks about Finance Minister Bill English’s comments to the FEC on a ‘bright line’ test for property traders to replace the current ‘intent’ test, and John Key’s comments on ring-fencing of losses by property investors.

Here we will include reaction to John Key’s comments on tax. For Bernard Hickey’s report on Key’s speech, which include his views, see here. (Update 1 includes NZICA comments. Update 2 includes Wellington Regional Chamber of Commerce, further KPMG comments. Update 3 includes comments on Agribusiness sector.)

Watch Key’s comments on tax on our video page here.

The full speech can be found here.

Here is what KPMG Senior Tax Partner John Cantin said on Key’s GST comments:

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