Cullen blasts gloomy business

By PAM GRAHAM

Finance Minister Michael Cullen has increased his tax take from a business sector he clipped around the ear for housing extreme ideologues.

His Budget speech attack yesterday on those in "permanent Cassandra-like mode," and "near permanent war on the hopes and aspirations of most New Zealanders" was taken on the chin by members of the business community.

The corporate tax take is forecast to rise to $7.7 billion in 2008 from $6.9 billion in 2004.

But Cullen vowed there would be no cut in the corporate tax rate.

The corporate tax take has risen from $5.14 billion in 2002 and in the current year was $126 million more than forecast in December.

Business wants a cut in the corporate tax rate from 33 per cent to 30 per cent, which would cost about $420 million in lost revenue, and align that tax rate with Australia's.

Some business people canvassed by the Business Herald saw Cullen's fifth Budget as a Budget of bits and pieces, a Budget that built bureaucracy, and most of all a lost opportunity to help wealth creators.

Others just want to get the dialogue going, the problems sorted and were not expecting solutions to problems with resource consents and energy supply.

"I don't think we should biff him," Peter Springford, chief executive of Carter Holt Harvey, said. "What we're trying to do is encourage them to make the world more business friendly."

It did not take long to write up what was in the Budget for business because of 25 decisions highlighted as supporting economic growth 19 were pre-announced. Cullen's "big Budget" was, as signalled, for 300,000 families on low and middle incomes.

The Labour Party academic most au fait with numbers argued he got more bang for bucks by putting $1.1 billion a year in the pockets of families by 2007 than through a flat tax.

Two-thirds of the money goes to families in employment, which, Cullen said, was a subsidy to employers, reducing wages pressure.

"I hope it will increase labour force participation," he said, effectively helping the skills shortage, which also benefits from a big education spend.

The Budget will also stimulate the economy, though by less than tax cuts in 1997 did.

Retailers are expected to benefit the most from families spending the money in the Working for Families package.

Cullen delivered his social dividend, while maintaining surpluses between $5 billion and $6 billion, putting aside around $2 billion a year for future superannuation and unveiling a promise to reduce gross Government debt to 20 per cent of the economy's annual output by 2015.

He was able to do this because the economy has expanded faster than predicted and because he waited five years to make sure he had the money.

He is still in surplus in the least optimistic economic forecasts in yesterday's documents, though in cash terms he is in deficit next year by $808 million.

His biggest risk was seen as managing expectations of the spend-up and voter preoccupation with non-economic issues.

The list of things that would help the economy, and therefore business, included money for New Zealand Trade & Enterprise, a new market development assistance scheme to help exporters, a Forestry Industry Framework Agreement, as well as funding for trade deals, apprenticeships and export clearances.

Business has been annoyed the Government will not pick up the full costs of increased security on exports, which it sees as a public good.

The $500 million Growth and Innovation Package over four years included $12 million a year for a new Major Events Fund.

There was also $10 million over four years for the Maori Business Facilitation Service and $212 million over four years for research, science and technology.

But the business community wants secure electricity supply, roads unblocked, a flexible labour market and 44 Government departments to back off.

"Business wanted hand-ups, not handouts," said Port of Tauranga chief executive Jon Mayson. He wants more infrastructure spending in the export heartland.

Ports of Auckland's Geoff Vazey said the Government had to invest more in infrastructure in Auckland if the country's largest city was to compete with others in the region.

Forestry companies called to Wellington just before the Budget to be told what they were getting after two years of negotiations are still mulling a response to the Forestry Industry Framework Agreement.

"It is a notably parsimonious proposal," said Nic Seymour of the Farm Forestry Association.

"As it stands, farm foresters are likely to greet it with a mixture of disappointment and disdain."

Carter Holt Harvey has served notice it is reconsidering significant investment in this country.

Cullen said the matters of concern will be dealt with in other legislation.

On Budget matters, he said business was "fixated" with tax rates.

Mainfreight's Don Braid said lower taxes freed business to grow. "I disagree with Cullen."

Said Springford: "It would be great if the tax was changed but we have to be realistic.

"It is coming up to an election year, you have to expect him to do something for his electorate."

New spending totalled $2.4 billion in 2004/05, rising to $3.8 billion in 2007/08, up from the $2.1 billion rising to $3.3 billion in the December economic and fiscal update.