Our compilation of some of the key business, property, farming, retailing and economic comment made in response to the 2017 Budget

Quite good, but could possibly have done a bit more is probably the most predominant reaction from various business interests to Steven Joyce's first Budget.

The Taxpayers' Union can usually be relied upon to provide some colour.

And sure enough, this is apparently not a taxpayer's Budget, but rather "a naked election year spend up", according to Taxpayers' Union executive director Jordan Williams.

But the property types like it, while the farmers would have liked to have seen more on tax, saying they will keep suffering fiscal drag.

Don't forget to check out our summary spending page. Here's our collation then of some of the comment.

Property

The recently announced Budget 2017 scores a 7/10 from Property Council, in recognition of improvements to both housing and infrastructure investment.

 “After years of underinvestment, we are particularly pleased to see Government attempting to beef up their funding and put in place some solid foundations for future growth,” says Connal Townsend, chief executive, Property Council New Zealand.

“As the largest economic sector, contributing 13 per cent of GDP, property is the foundation of the New Zealand economy.  It supports the rest of the economy because it is the infrastructure of business and the homes that shelter us all.

“A decade of nearly continuous economic growth, requires further investment to keep economic growth sustainable.  New Zealand simply cannot afford to get any further behind our already large housing and infrastructure deficit.”

Whilst the Budget 2017 investment is welcomed, Mr Townsend believes it is only the beginning as New Zealand plays considerable catch-up both in terms of funding and planning our cities.

“More money is needed for infrastructure and buildings, but we recognise the current need is greater than can be accommodated in any one budget or even five budgets. 

“Given the significant size of investment needed in bricks and mortar, money needs to go into new thinking and innovation around how we fund and deliver infrastructure.  We also need to reform the wider planning and building systems so they deliver more effectiveness and efficiency for the economy,” says Mr Townsend.

What the Property Council particularly likes in Budget 2017:

  • $2.23b four-year Crown-land programme turning 8,300 houses into 34,000 new residences for vulnerable families, first-home buyers and for the wider market.
  • $11b of new funding for infrastructure across New Zealand over the next four years.

 What Property Council would like to have seen (or has not yet found in the fine print):

  • Indications of investment in innovation and the built environment, infrastructure funding and construction.
  • Reform of the wider planning and building regulatory system.
  • More assistance, above what was given in last year’s budget, to local councils for housing infrastructure.

The Farmers

Federated Farmers  President William Rolleston says it’s hard to quibble on the Budget’s focus on spending on public services, social investment, and infrastructure. It’s also hard to take exception to tax and spending initiatives targeted at lower and middle income families.

However, , President Federated Farmers of New Zealand is disappointed there was no movement in the threshold for the top rate of income tax or for the company tax rate.

Too many taxpayers will continue suffering the effects of several years of fiscal drag and our company tax rate runs the risk of falling behind those overseas.

In terms of the primary industries, there is additional spending for MPI on biosecurity, irrigation, and trade facilitation. These are all important priorities for farmers.

We welcome an increase in science and innovation spending but would have preferred more emphasis on building our science capability across the country, particularly in biological and environmental sciences, rather than it going to companies for commercialisation.

MFAT gets more funding for trade negotiations and international presence. 

Federated Farmers is pleased to see there is also more funding for tourism infrastructure, transport and police - provided rural needs in these sectors are also looked after.

Looking ahead, surpluses are forecast to grow. As was the experience from 2005 to 2008 the temptation to spend more will grow in tandem.

Whoever wins the September election will inherit a healthy set of books but they could easily be squandered if there is a spending spree followed by a shock (as happened in 2008).

The temptation to spend up needs to be guarded against. Better perhaps for the Government to have moved more on taxes so reducing the headroom for even more lavish spending promises!

Business

BusinessNZ says the 2017 Budget does a good job of addressing Government priorities of maintaining surpluses, reducing debt and funding infrastructure and services, but fails to meaningfully improve tax settings

BusinessNZ Chief Executive Kirk Hope says every Budget offers a great opportunity to promote future economic growth by reducing taxes across the board, but this opportunity has not been completely grasped.

"Increasing the two bottom tax thresholds is a positive investment in family incomes for many. However, failing to adjust other thresholds and tax rates means a missed opportunity to stimulate the economy and create greater growth.

"Not changing the business tax rate is another missed opportunity to stimulate greater business investment and growth.

"Investment in infrastructure, innovation and trade in the 2017 Budget is positive.

"Business welcomes the spending on transport and tourism infrastructure, help for exporters and co-funding for greater research and development through Callaghan Innovation. This is judicious investment in high-growth areas of the economy.

"Overall, the Budget takes broad based approach to addressing economic constraints and dealing with social issues in a more coordinated way. We’d give Budget 2017 a pass mark of B+."

Manufacturing

EMA chief executive Kim Campbell said:

"The books are certainly in good order and this allows the government to deliver a budget aimed at building prosperity from both a social and a business perspective."

He said the EMA was pleased to see Auckland’s Central Rail Link receive $4.6b and have an independent company set up to oversee and manage the project, along with a wider investment of $9.17b in state highways.

"These projects are vital for our region and for enabling much needed economic growth and prosperity. We welcome the certainty today’s announcement brings.

"But we are looking for more direction on governance, sustainable funding and a sense of urgency to further rectify the infrastructure deficit we currently have.

"We are supportive of the signal of more to come around the use of initiatives such as public-private partnerships, joint ventures and private investment in large scale infrastructure programmes.

"We’ve long advocated for the need to find practical and proactive ways to enable this investment and to move beyond simply waiting for government handouts."

Retail

Retail NZ has welcomed the tax adjustments proposed in today’s Budget, but says they should kick in earlier.

Retail NZ’s General Manager for Public Affairs Greg Harford said:

“The changes announced today will mean consumers will be allowed to keep more of their own money,”  

“It’s a good thing if consumers have more money in their pockets, because they’ll be able to choose whether to go shopping, save up for something, or repay debt.  Overall though, the tax cuts announced in the Budget, although small, are likely to be good for the retail sector, which is facing a number of challenges at present.

“In Retail NZ’s Election Statement, published last month, we asked all political parties to commit to tax adjustments, so we are pleased to see the Government is doing so to some extent.  However, we are disappointed that the tax adjustments won’t be happening earlier than 1 April next year, because the sooner consumers have more of their own money, the sooner we will see positive economic impacts in terms of consumer behaviour.  

“Retail NZ is also disappointed that this year’s Budget has not included a commitment to require foreign retailers doing online business here to pay GST to the Government.  A cornerstone of the economy is that GST is universally applied to all goods and services consumed here in New Zealand.  While the Government moved last year to do this for digital services, it has failed so far to commit to action on physical goods.  This gives foreign websites a systemic price advantage compared to New Zealand retailers, and Kiwi firms are losing market share as a result.  More importantly, this is costing the Government around $235 million a year in lost revenue now, so dealing with this issue could nearly double the amount the Government is hoping to gain from its crackdown on multinational tax avoidance."

The taxpayer lobby group

Taxpayers' Union president Jordan Williams:

"In politics, the squeaky wheel gets the oil, and Budget 2017 is an enormous spend-up seeking to soothe all the political itches Mr Joyce can find.  Even worse, virtually none of the new spending initiatives appear to be funded by reprioritisation of funding.  In fact, the word 'reprioritisation' doesn’t even appear in the today’s budget documents.

"The changes in income tax thresholds are obviously welcome, but they do not fully compensate for fiscal drag for average wage growth for the typical income earner on $57,000 without children. Nor do they come into effect until 1 April 2018.

“We’ve heard this all before from National in election years.  Vote for us, and we’ll give you tax relief.  Unfortunately, this Government has cancelled more promised tax cuts than it has delivered.”

As far as business is concerned, Williams says with the exception of corporate welfare (which taxes all businesses more, to divert grants to favoured businesses and industries) the only business-friendly initiative which features in the Budget announcements is a single proposal to allow deductibility of capital investment 'viability expenditure'.  The Government has announced $372.8 million of new operating funding for ‘Innovative New Zealand’, including $74.6 million for Callaghan Innovation’s ‘Growth Grants’.

"Today’s Budget continues to grow the corporate welfare empire, so the likes of Oracle Racing and Rocket Lab USA are the winners with everyday Kiwi firms paying the price."

Responding to Minister of Revenue Judith Collins' announcement of a proposal to address blackhole expenditure, Williams says:

"This proposal relates to feasibility expenditure which is currently unable to be deducted, but also unable to be depreciated.  Businesses in project capital intensive industries will welcome this, but the fact it isn’t even costed yet suggest that it is a long way from being implemented."

The accountants/financial services providers

Chartered Accountants Australia and New Zealand says Budget 2017 was “more responsible than a pure lolly scramble”

New Zealand Country Head Peter Vial, said:

“It continues this Government’s focus on maintaining surpluses, reducing debt, growing the economy and supporting the most vulnerable in society via targeted ‘social investment’ spending.

“It certainly provides most working New Zealanders with a tax cut.  It also signals continued commitment to social investment and that is laudable, but does it have a real plan for reducing inequality and sharing prosperity?

“It lacks bold ideas. For example, out of the box thinking for enhancing our skill base, decongesting our urban road network, reducing our prison population and addressing widely acknowledged housing supply and affordability issues. 

“The Government has now ‘got’ the money and is expecting to do so for the foreseeable, so what is it spending it on?  Principally, tax reductions, debt repayment, and infrastructure (including roads, rail and housing) and of course education, health and welfare.” 

On the tax measures:

"The Government can’t be accused of ‘chewing gum’ tax reductions – these are meaningful reductions that will make a difference for many people."

But the fact that there are no changes to the top threshold of $70,000, or to the two top tax rates of 30% 33%, means that middle income New Zealanders such as many nurses, teachers and police officers (including those paying high housing costs in our cities) will continue to pay tax on some of their income at the top rate of 33%.

“This is inconsistent with the approach generally adopted internationally, whereby only high income earners pay tax at the top rate.”

On infrastructure:

"In a pre-Budget announcement Joyce confirmed an $11 billion boost for new capital infrastructure taking the spend to $32.5 billion over the next four years, with $4 billion being spent this year.

“This sounds like a lot of money...It is … but in reality we have decades of catching up to do. 

“The most critical projects are being funded. By all means the Government should fast track these key projects but it should also address basic infrastructure all around the country. 

“Anyone stuck in Auckland or Tauranga traffic every day or tourists trying to drive in Queenstown will not be short of suggestions for prioritisation of less ‘sexy’ but vital infrastructure.  Different funding options need to be regularly on the table.”

PwC Partner and Budget 2017 Leader Richard Forgan said Budget 2017 had brought something for everyone.

“Minister of Finance Stephen Joyce’s first Budget finally reaps the rewards of the Government’s fiscal patience. Strong economic performance with good growth, modest inflation and shrinking unemployment, gives the Government options that it did not have before.

"Underneath the headlines, the general thrust is the more of the same from previous years – economic growth supported by investment in trade relationships, infrastructure building and innovation funding; more social services targeted at the most vulnerable parts of society; investment in core public functions such as the health, education, the tax system, ACC, defence and the justice system."

And who gets left out?"Small businesses and the regions are mentioned in passing (particularly for tourism), but pale into insignificance against the investment in Auckland’s powerhouse.

"But the underlying themes show a high degree of continuity, with the Government investing in recovering from the Kaikoura earthquake and replenishing EQC’s funding model to prepare for any future shocks.” 

On the public transport spend-up, Forgan says: “Public transport has long been a pain point to keeping our cities moving".

"This investment will allow the capital and our largest city to keep up with population growth and demands on its road and rail networks."

On the tax moves, Forgan says the Government has reaped the benefit of ‘bracket creep’ for many years, "and it is good to see this somewhat rectified".

However, Budget 2017 "hasn’t offered a lot for small businesses".

"The challenge for the country’s businesses is to make the most of growing consumer spending if they also want to reap the benefits of this year’s Budget.”

Deloitte CEO Thomas Pippos says that Budget 2017 looks to cement the current Government even more firmly across middle and lower New Zealand.

"Compared to many other countries, most notably the United Kingdom, Australia and the United States, New Zealand is in an enviable position able to invest its initiatives around its Family Income Package, Infrastructure, Social Investment, Public Services, Growing Economy package, while reducing debt as a percentage of GDP.

“Today’s Budget is a marker in a journey rather than a destination in itself. The new team of English and Joyce has used it to start to re-set the agenda in a predicable way. Before Kiwis go to the polls in September, they have a further opportunity to restate the destination which they will inevitably take.”

Pippos saw the Budget as about crowding out others, looking to provide material cash and services dividends to the masses, with equally material social cohesion and economic resilience dividends to businesses and those further up the food chain.

“It’s about standing back and looking at the total picture. At a simplistic level, business nirvana may include lower corporate tax rates that mirror global trends, but social cohesion and resilience was the dividend they were offered today.

“There is no doubt however, that with the passage of time and assuming we don’t face future shocks, that all tax rates will be heading down under the current Government. It’s just maths."

Pippos said Budget 2017 bucked the global trend of chasing headline corporate tax rates down to attract and retain capital and labour.

“At a simplistic level, business nirvana may include lower corporate tax rates that mirror global trends, but social cohesion and resilience was the dividend they were offered today.

“There is no doubt however, that with the passage of time and assuming we don’t face future shocks, that all tax rates will be heading down under the current Government. It’s just maths."

In terms of wider business friendly initiatives in Budget 2017, Pippos said the ongoing issues around black hole expenditure and in particular feasibility expenditure were earmarked to be addressed.

“Probably more importantly, corporates and multi nationals were not vilified, nor were there any precipitous or populous measures sought to be introduced outside of pre-existing base erosion and profit shifting (BEPS) workstreams.”

The bankers

New Zealand Bankers’ Association chief executive Karen Scott-Howman says the Budget builds on the government’s prudent approach to managing its finances and "meeting our needs in a growing economy".

“The forecast economic growth and government surpluses are good news for New Zealand households and businesses. The projected surpluses will give the government more options and improve our overall resilience.

“Targeting relief for low to middle income households through changes to the tax thresholds, family tax credits and accommodation supplements makes sense, and will support economic growth.

“We’re also pleased to see increased investment in infrastructure and public services in areas of need. Of particular interest is the $10.2m being provided to improve young New Zealanders’ financial capability. The funding will allow the Commission for Financial Capability to scale up its Sorted Schools programme and its community-based programmes.

“We strongly support any initiatives to improve financial capability and knowledge in New Zealand. Financially capable people know how to manage their money and make better financial decisions. That ultimately improves personal, family and community well-being.”

The economists

ASB's economists said as the pre-Budget hints suggested, the focus of policy initiatives was very much on assisting low-income earners and low-income families.

"Standing back the picture is very healthy.  The nominal growth outlook has improved since 2016, boosted by the return of some long-absent inflation.  And the Government has outlined how it intends to share some of these gains with Kiwis and, in particular, families.

"However, could they do more?  We think so, particularly as there is scope to debate how far new debt needs to fall over the long term.  Will they do more?  Possibly. After all there is still four months until the election and these healthy books mean that the Government will still have options up its sleeve during the election campaign."

ANZ's economists said The 2017 Budget resembles an ABBA medley:

"I have a dream (delivering for New Zealanders); the name of the game (growth); money, money, money (rising surpluses); gimme, gimme, gimme (health primarily); and lay all your love on me (infrastructure and family income package). An SOS for savings initiatives."

The Budget ticks all the right boxes, though the missing bit is savings, the ANZ economists say.

"It’s not absent; you see semblances of it through the growth strategy, responsible fiscal management, resuming Super Fund contributions, and little microeconomic tweaks. We say ‘missing link’ because the economy is entering a juncture where funding a domestic savings shortfall to meet our investment needs via international capital is becoming more challenging. More domestic saving is required or investment needs to fall. A more proactive stance towards saving is needed in the future or interest rates will need to move up further than would otherwise be the case to do the job."

Westpac's acting chief economist Michael Gordon:

"Strengthening economic conditions are allowing the Government to have its cake and eat it too.

"In Budget 2017, the Government has introduced a Family Incomes Package to support those on lower and middle incomes. This includes an adjustment to tax thresholds, an increase in Working for Families, as well as increases in accommodation support.

"Spending is being increased in a range of areas, including public and social services, as well as much needed infrastructure investment.

"Firm economic conditions mean that the Government can make these changes while maintaining its focus on longer-term debt reduction and improving the economy’s financial resilience.

"The initiatives announced today are likely to support GDP growth over the coming years. However, we have some concerns that economic growth, and therefore the surpluses, are unlikely to be as healthy as the Government expects over the course of the next five years."

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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1 Comments

As usual it's the Governments books vs the private economies books and they win because they make the rules up as they go! So what's in here for the SME's who generate 90 to 95% of the tax take?

Maybe down the track post-election there will be another surprise LVR request from the RBNZ ......landlords maybe required to pay down more debt which will attract more taxes for the government coffers cos I sure as heck can't see any other increase in business activity that can generate the taxable income to pay for government spending.