KEY POINTS:
Prime Minister Helen Clark and her deputy stepped firmly into the den of business yesterday to sell their latest Budget and walked away with few, if any, scratches.
The pair made traditional post-Budget lunchtime speeches to chambers of commerce - Helen Clark in Auckland and Finance Minister Michael Cullen in Wellington - in which they argued that the cost of the employer contributions to KiwiSaver will not be high.
Business groups have said the savings move will load unneeded additional costs on to companies.
But when Helen Clark was tackled on that issue after her speech, she made it clear the Beehive believed the impact of the costs should not be exaggerated.
Igo Portugal, who runs a small telecommunications company in Karangahape Rd with seven staff, raised the prospect that the KiwiSaver changes could have a fatal impact on businesses.
"KiwiSaver has the capacity to put us out of business," he said.
Later, he said this was a "figure of speech" but noted that a 1 per cent contribution on top of the company's wages bill would have tipped a tiny first-year profit into a loss.
Helen Clark said if a 1 per cent increase in wages was going to send a company down there was a problem, particularly against the background of what was in the Budget for business.
Exporting companies received more funding assistance and there was substantial tax credit support for research and development.
"I think you have to look at the overall package, not just focus on one thing," Helen Clark said.
In Wellington, Dr Cullen faced criticism from local chamber of commerce chief executive Charles Finny over the compulsory KiwiSaver employer contribution, as well as the Budget's lack of personal tax cuts. Mr Finny said the Government must take steps to reduce personal income tax as well as company tax and "an announcement is needed before next year's Budget".
Dr Cullen, though, was more focused on selling the virtues of what he had done rather than what he hadn't done.
He said the cost of the KiwiSaver contributions "will not be a significant burden for most companies".
A new report from Treasury yesterday appeared to back Dr Cullen's push for saving and he drew attention to it.
The report states that in light of data, evidence and analysis "on balance we think that further or stronger pro-saving action is now justified".
Dr Cullen said this was a significant turnaround in the Treasury's position: "You can see the urgency of our growing savings problem in the way serious analysis has changed in a relatively short time."
Auckland Chamber of Commerce chief executive Michael Barnett had three questions for Helen Clark: Did the Government consider dropping the corporate tax rate further to 25 per cent, cutting personal taxes and indexing tax rates to inflation?
Helen Clark said officials and Dr Cullen and Revenue Minister Peter Dunne might have discussed further work on business tax rates but, by the time the issue came to Cabinet, the focus was on matching the business rate in Australia.
On personal tax cuts: "Yes, of course it was looked at but the issue is this level of imbalance in the economy and being particularly allergic to the prospect of a boost in personal spending triggering the Reserve Bank to increase interest rates and the flow-on effects for the dollar, making people worse off, not better off."
When the Government proposed indexing tax rates it was "widely scoffed at".
