Liam Dann: Budget's strong message unheard by panicking markets

New Zealand drops company tax rate" would have been a nice headline for financial markets around the world to absorb yesterday.

Unfortunately while we've been busily previewing, digesting and reviewing the Budget, the rest of the world has plunged back in to panic mode.

The only thing international bankers were doing Thursday night was watching their trading screens as Wall St had its biggest sell-off in 12 months. It's a safe bet the New Zealand Budget story hasn't been a big conversation starter yet.

The European Sovereign debt crisis continues to put the dip in the W-shaped recovery and things look set to be volatile for some time yet.

So coming as it does in such turbulent times the Budget should look all the bolder to observers in Europe or the US if and when they finally hear about it.

Using tax cuts as a stimulatory measure is a luxury that many of the world's debt-laden nations simply can't afford.

Whether New Zealand can remains to be seen. There are risks, as critics have pointed out, such as the the possibility that the stimulatory effect of the tax cuts is wiped by the inflationary impact.

But while that debate will only be resolved in time there is no doubt that market forces, from the IMF to the big investment banks, are believers in the low-tax model. That means yesterday's Budget has the potential to buy us plenty of international good will.

And that kind of good will is a very powerful thing right now. Just ask the Greeks - they haven't got any and it shows. Many of the underlying numbers in New Zealand's economic status are very ugly too (nobody mention private debt please) but we remain in a brutal world where market perception is as good as reality.

The perception that New Zealand is busily transforming its economic structure even in these turbulent times has the potential to greatly assist local companies as they seek to raise capital for expansion - or should they need emergency cash, as was the case for at least three listed companies in 2009.

There is no reason to assume the current market woes will rival those heady days.

In fact, standing back and looking at it in the shadow of the wider financial crisis, the kind of market volatility we are seeing is entirely consistent with predictions.

This was always going to be multi-year roller coaster ride. With the exception of the already beleaguered Telecom, the NZX remains relatively resilient.

Things will settle down and in the lulls and troughs of the panic, talk will return to investment opportunities and expansion.

It is John Key's job is to grab that opportunity to sell his message internationally. That's a challenge he is well qualified for and one he should relish.

Whatever the ultimate legacy of this Budget is, it is a Budget that tells a story and that, given the low expectations many had, is something.