Business groups search in vain for Budget tax cuts

Business organisations have applauded the Budget's vision of lifting New Zealand's economic performance, but expressed disappointment at the paucity of steps to achieve it - especially the absence of any indication of a company tax cut.

On the whole, small business seems to view the document more favourably than big business, but the basic theme was the same - not enough was being done to get the economy going.

Auckland Regional Chamber of Commerce chief executive Michael Barnett said he listened enthusiastically when Finance Minister Michael Cullen proclaimed the aim of getting New Zealand back into the top half of OECD countries.

"Then I looked at the Budget to see if they had applied the available tool to achieving that and, in a prudent way, I feel they have started the process with some of the new policies for venture capital and economic development.

"It's not been done in a manner which will attract attention around the world but, with the resources available, they have made modest moves in the right direction."

But Mr Barnett felt that good start had been undermined by wrong moves on three key economic fronts.

Business's biggest disappointment, he said, would probably be at the absence of any long term signals on the lowering of company tax.

"Long term they're going to have to do something about it. As long as company tax in Australia is lower than ours we're going to be at a disadvantage. So why not cut off the criticism and signal their intentions?"

Another cause for concern was the decision to raise the spending cap to $6.1 billion.

"That was not a good signal."

Finally, the decision to put $600 million into the superannuation fund represented "an opportunity lost. With the constraints on funding, that money could well have been directed into helping achieve the goal of increasing growth."

The Employers and Manufacturers Association (Northern) also gave the Budget big ticks for investing in education and providing a source of venture capital.

But chief executive Alasdair Thompson said that if New Zealand was to "regain the standards of living we enjoyed in the past, and match those of most other countries in the OECD, even more emphasis has to go on wealth creation."

Mr Thompson's biggest disappointment was the lack of anything to promote investment. "There was no announcement about bettering Australia's company tax rate of 30 per cent," he said.

"There's no sense of urgency to retain investment in New Zealand, and this omission sits strangely at odds with the rhetoric elsewhere in support of enterprise development."

The Business Roundtable was the least enthusiastic of all, praising the Government's "acceptance of the need for economic growth and business-friendly policies," but lamenting the absence of a framework for achieving that.

Chairman Ralph Norris said the Budget's own forecasts "confirmed that such a framework is not in place, with annual economic growth forecast to average only 2.5 per cent over the next 10 years - well below the Government's goal of 4 per cent a year or more and, indeed, below the average of the 1990s."

Mr Norris said the Roundtable was particularly concerned at the breach of the $5.9 billion spending cap which, he said, "had in fact been its most business-friendly policy, given the importance of certainty for financial confidence."

It also urged that top priority be given to reducing spending and getting top personal and company tax rates to a common and lower level "in order to make New Zealand a more attractive place in which to work and invest."

The bottom line, he concluded, was that "the Budget has not put New Zealand on a path to higher growth and economic transformation, as its own projections show.

"A broader dialogue to devise a credible programme to lift New Zealand's performance is still badly needed,"Mr Norris said.

www.nzherald.co.nz/budget

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