KEY POINTS:
John Key, leader of the opposition
Perhaps the biggest hoax perpetrated in this Budget was on businesses, which on the one hand get tax cuts but on the other are forced to match their employees' Kiwisaver contribution in a cruel world.
In fact, Aucklanders get a tax increase through regional petrol taxes. Adding insult to injury, Labour has also axed the paltry 'chewing gum' tax threshold changes due next year.
The inconvenient turth about Labour's economic management has been laid bare in this Budget. Helen Clark said in 1999 that Labour would take NZ up the OECD ladder - but we have fallen behind the rest of the developed world.
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Alasdair Thompson, chief executive of the Employers & Manufacturers Association (Northern)
The Budget's 3 cents reduction in the company tax rate to 30 cents in the dollar is welcome but not bold or imaginative enough.
In fact, making employer contributions compulsory to KiwiSaver will cost companies more than the 3 cents tax rate cut they are getting.
As National's John Key said, Cullen has taken $2 billion off business [for KiwiSaver] and given back $1 billion, most of it in the form of increased Government spending.
The tax rate cut just regains a bit of lost competitiveness with Australia who got theirs (30 per cent) five years ago.......
Aucklanders find themselves effectively taxed more with up to 10c/litre petrol and diesel tax to fund transport projects.
The Budget has delivered $600 million over six years for the electrification of Auckland and Wellington rail.
EMA believes electrification makes long term economic sense.
It is what Aucklanders have been waiting for and we will welcome it for its long term value even though the return on investment in the short term is not so great.
The regional fuel tax is efficient compared with tolling at this point in time.
EMA welcomes the increased spending on export market development, and help for exporters in those markets.
The extra capital funding for spending on Industry Training Organisations, and for increased participation in industry training as part of the business tax package is welcome too.
But this is not an imaginative, business or New Zealand success-promoting Budget. Finance Minister Dr Michael Cullen's vision is limited to that of a hoarder rather than an investor in growth.
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Stephen Selwood, CEO, NZ Council for Infrastructure Development
Applied across the whole of New Zealand, the proposed regional fuel tax will make much needed investment in transport infrastructure possible. The tax will allow debt servicing for vital projects previously far beyond our funding reach.
This will drive productivity growth, advance safer roads and contribute to sustainability goals through improved public transport.
Increased fuel taxes leave a bad taste in many people's mouths, but the reality is that this much needed investment will improve transport services and all New Zealanders will benefit.
Pleasingly, the government is also investigating the dedication of all of the monies raised through petrol tax being committed to the transport system. This has previously not been the case.
Increased fuel tax alone will be insufficient to advance all of the major projects in New Zealand. But permanent allocation of all of the petrol tax combined with tolls on some new roads will provide the necessary revenue to support borrowing to fund the major projects.
Today's budget announcement is a much needed and postive step forward for transport, the economy and the environment.
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Charles Finny, Wellington Regional Chamber of Commerce
Today's budget was a mixed bag for business with some positives but there are several negatives.
The reduction in the company rate is very welcome. However a reduction of 3 cents in the dollar is not enough if we are to fully transform New Zealand's economy and greater reductions are necessary.
The Chamber has been calling for a lower company tax rate than Australia's rather than the matching of Australia's rate. Moreover, many businesses won't benefit directly from the company tax reduction. Around 40 per cent of businesses were, as at this morning, unincorporated – for example as sole traders or partnerships, but the gap between the top personal and company tax rates provides an incentive for tax planning.
Government must take steps to reduce personal income tax as well as company tax. An announcement is needed before next year's budget. We are disappointed that the 2005 decision to inflation-adjust income thresholds has been abandoned.
Tax cuts are not inflationary if they are accompanied by a reduction in government expenditure yet, under this budget, the ratio of Government spending to GDP continues to grow.
We are disappointed that more effort has not been made to eliminate waste in non-productive government expenditure. We encourage the government to focus on the quality of its expenditure over the next year and on raising productivity in the public sector.
We are supportive of KiwiSaver as a means of addressing New Zealanders' relatively low personal savings rate and providing an increased supply of capital which business and the economy can to tap into. However, compulsory employer contributions combined with partially offsetting tax credits will be a concern to many employers. Not only will this penalise employers, it is an opaque and cumbersome money-go-round which will add to businesses' compliance costs. We would have preferred personal tax cuts so that people have the choice to put money into KiwiSaver.
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Dick Hubbard, mayor of Auckland
I'm delighted at the government's Budget announcement that a regional fuel tax will help fund a world-class transport network for Auckland.
The regional fuel tax (of up to 10 cents a litre), in conjunction with direct government funds, will give the green light to the desperately needed electrification of Auckland's train network, along with the completion of major road projects, particularly State Highway 20.
Today is the culmination of three years' hard work. I've been fighting tooth and nail to get this across the line.
Electrification will mean faster, more efficient and more environmentally friendly travel. More people will choose to travel by train, it will free up our roads for cars and other road users, and air quality will be better.
It also means we can start planning for an inner-city underground loop, an essential part of any world-class city.
Congestion costs the region $1 billion a year and Aucklanders know too well the frustrations of getting around the city.
The fuel money will be specifically ring-fenced for essential transport projects that aren't covered by government funding. I can assure you it won't be swallowed up in the system.
Aucklanders will have a say in how the money is spent. Ultimately, the use of the fuel tax is up to the people.
Our dirty, tired, clapped-out old diesel trains will be a thing of the past. It's no more Thomas the Tank Engine for Auckland.
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Phil O'Reilly, Chief Executive, Business NZ
What we would hope now is that Government gives a clear indication they will actively review the company tax rate on an ongoing basis, with a view to reducing it significantly over the next few years.
More funding for export links in Asia and expansion of NZTE assistance for New Zealand companies in overseas markets is positive for exporters.
Changes in the controlled foreign companies tax regime will also be welcomed – this aligns us with the rest of the world. Government commitment to improving private sector investment in R&D is also welcome but we are not certain that the tax credit scheme that has been announced will be the simplest and most effective way of achieving positive change.
We would recommend that the Government keep this situation under review and that the effectiveness of the tax credit be reviewed not later than two years from its introduction to see whether it has achieved the benefits planned.
There are several big negatives in the Budget though. The Government's overall dominance of the economy is not abating, making tax reductions less effective, and squeezing out some of the benefits companies might otherwise have enjoyed. This means we are likely to see continued pressure on inflation and the NZ dollar.
The proposals to make compulsory matching employer contributions for KiwiSaver, even with the tax credit for reimbursements, will load costs on employers that are not needed at this difficult time.
Compulsory costs imposed on employers without their agreement or buy-in is not helpful given the significant negative elements in the current business environment.
And we are concerned the Government's spending on industry training is not keeping pace with demand – an issue because skills are of profound importance for economic growth.
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Jeanette Fitzsimons, Green Party co-leader
The Labour Government's 2007 Budget smacks of 'greenwash', with the only concessions to carbon neutrality and sustainability stemming from the Greens' pressure.
This Budget will make us just a teensy-weensy bit more sustainable in a few years, with carbon emissions growing only slightly slower than they are now. This is very far from reaching the Prime Minister's aspirational goal of a carbon neutral New Zealand.
Without pressure from the Green Party, genuine changes such as the electrification of the Auckland Rail system, improvements to Wellington rail, an energy efficient homes package, serious biodiversity protection in three wetland areas and a solar water heating initiative would have been absent from today's Budget.
However, the Government has all but ignored the Stern report and other warnings that the dangers of ignoring climate change will be hugely costly.
If the Prime Minister's aspiration is serious we might have expected a price on carbon this year, linked to the world price, and a fairly rapid transition to polluters taking responsibility for their carbon emissions. But that is not there.
If the Government was truly committed to sustainability, we would have seen the much lauded business tax cuts given to those who invested in reducing their carbon footprint.
Instead, these are being indiscriminately handed out to polluters and conservers, fossil and renewable energy suppliers and users, organic and highly chemical farmers, good employers and bad, innovators and laggards in technology. They will produce no change in behaviour and serve no public goal except lining a few pockets.
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Jim Anderton, Progressive Party leader
I am proud because this Budget completes the decisive turn away from the disastrous policies of the eighties and nineties to which the National Party Opposition would drag us back.
Budget initiatives in my primary sector portfolios support the strongly pro-business approach of this Budget. we are investing in order to future-proof them for the challenges they face.
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Michael Barnett, Chief Executive of the Auckland Chamber of Commerce
Today's Budget is an honest attempt to fix NZ's long term economy, but lacking a sense of urgency.
I see lots of positives in the Budget for long term macro settings to lift productivity and growth.
The package for business includes good measures, but to my mind our problems are urgent; we need to get beyond gradualism. If we are going to be an exceptional country and transform our economy, we need to do exceptional things that are transformational.
Given our deeply ingrained skills shortage and litany of companies heading offshore, a more radical Budget with more immediate impact and urgency would seem to have been called for.
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Mike Noon, Automobile Association
The AA is delighted the Government has announced that all money collected through petrol taxes will be spent on transport. For many years the AA has been asking for exactly this on behalf of New Zealand's motorists
We also welcome the Budget's additional $145 million for roads. This money honours the Government's promise to offset rising costs and keep the Transit 10-Year State Highway Forecast road construction programme on track.
The Government has also provided New Zealand's regions with the ability to advance their local transport projects by introducing a regional fuel tax.
We welcome the requirement that councils must consult with motorists and the local community on both the amount of any proposed regional fuel tax and what it will be spent on.
The AA supports the government's intention that any Auckland regional fuel tax spending will be balanced between public transport and roading - both need more investment. We also endorse the Government's intention to borrow money to invest in Auckland transport and use regional petrol tax revenue to service the debt.
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Andrew Campbell, Campaigns Director, Finsec bank workers' union
Overseas shareholders in Australian-owned banks will benefit hugely from the corporate tax handouts announced in today's budget.
Finsec estimates the business tax cut could see the profits of Australian-owned banks increase by up to $124 million or a staggering 18 per cent of the total tax cuts being given.
Finsec urged the government to exempt Australian-owned banks from any tax cuts in its submission on the Business Tax Review.
This tax cut will disproportionately benefit the already profitable Australian owned banks. Bank workers are calling on the banks to exercise their corporate social responsibility and invest this tax windfall in their New Zealand business, rather than sending it to overseas shareholders.
It is unfair that banks get two bites of the cherry. Bank profits are at record highs as a result of the booming housing market and now they get a tax handout too.
Improving customer service through increasing staffing levels, training and improvements to staff wages and savings schemes are better uses of the tax windfall than handing it over to shareholders.
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Winston Peters on 'savings'
The initiatives announced in this year's Budget represent a substantial leap forward. While New Zealand First believes that businesses could play a greater role in compulsory savings, today's announcements nonetheless represent good progress.
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Peter Dunne on the Business Tax Reform package
In down-to-earth human terms, these reforms will help make NZ a better place to live, work and raise a family.
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Rodney Hide
There's no plan, or direction, in the Budget to give any New Zealander confidence in the NZ economy. The only thing this Budget guarantees is increased government spending, high interest rates, and paltry economic growth.
