Lobby groups call for lower tax, interest cuts

Economic lobby groups have given the Budget a generally lukewarm reaction, welcoming its fiscal prudence but expressing disappointment at the absence of progress on most areas dear to business hearts.

* Business NZ executive director Anne Knowles welcomed the "fiscally prudent, no surprises Budget approach".

The reduction in public debt since 1999 from 36.8 per cent of GDP to 28.6 per cent of GDP was also applauded.

"Unfortunately, surpluses over coming years will not help continue this prudent reduction, but will instead be channelled primarily into the Government's superannuation scheme, thereby inhibiting New Zealand's economic growth."

Government spending as a proportion of GDP, at 33 per cent, was still too high, locking the country into corporate tax rates that made us uncompetitive with investment rivals in the region.

Knowles said it was pleasing that the Government had made significant commitments to industry training, better school-to-work links and improved adult literacy.

* Michael Barnett, Auckland Chamber of Commerce chief executive, said the Budget "sent a clear and unambiguous message that cutting taxes is not the route to achieving a sustainable growth economy".

He said the Budget got high marks for acknowledging that stronger growth was urgently needed.

"If there is a concern with the Budget, it would be that this year's surplus comes off two years of a low dollar and good prices at the farm gate. The assumption seems to be that this environment will continue, so the question has to be, what is the back-up if it does not?"

* Business Roundtable executive director Roger Kerr said it was pleasing that the Government had kept within its fiscal limits, which had helped to sustain business and financial market confidence.

But the decision to maintain total Government spending - including local government - at around 40 per cent of gross domestic product "was far too high to be consistent with goals for rapid growth".

Kerr said it was also disappointing that the Government had rejected the growth-oriented tax proposals of the McLeod tax review, in particular moves towards a lower and flatter income-tax structure.

The Business Roundtable had also hoped for more progress on international tax policy in the Budget.

"The mediocre economic outlook confirms business-sector arguments that, despite some positive elements, the Government's overall programme has been anti-growth, and that problems of high unemployment and welfare dependency are not being adequately addressed."

* Federated Farmers policy manager John Pask said there was no reason to celebrate the Budget, which offered little in the way of reducing compliance costs and "the regulatory burden that farmers endure".

Initiatives that supported biosecurity and the roll-out of broadband technology to rural areas was welcomed, but the Government had targeted the community rather than individual businesses.

"There is nothing in the Budget which gives farmers confidence that the economy will grow at the 3 per cent predicted and provide the kind of revenue necessary to fund the Government's expenditure."

* Council of Trade Unions president Ross Wilson said the Budget showed that workers had a clear choice: an "investment for all New Zealanders or tax cuts for the rich".

The CTU particularly welcomed the Budget announcements on more modern apprenticeships, greater health spending, more state housing and an upgrade of existing stock, energy-efficiency spending and spending on adult literacy programmes.

Wilson said the commitment to "integrated funding" in tertiary education was also welcomed.

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