A point-by-point breakdown of today's Budget announcements
KEY POINTS:
5.19pm: The Engineering, Printing and Manufacturing Union has welcomed the Government's step to help working New Zealanders by cutting taxes but says higher wages are the real answer to rising cost pressures.
"Although everybody is talking about the tax cuts, it is important to recognise the money that is going into areas like training and research is the money that will help us prosper in the long run," said EPMU national secretary Andrew Little.
"We've seen significant wage growth in the last eight years but we need to see more and it is clear that while tax cuts will provide some help for many working New Zealanders facing cost pressures, it is investment in growth that will bring real rewards in the medium to long term."
5.02pm: The decision to raise the student loan living cost borrowing component from $150 per week to $155 per week from 1 January 2009 has drawn derision from the Auckland University Students' Association.
"This $5 increase is a bad joke - that's equal to two pies a week," AUSA president David Do said in a statement.
"This essentially does nothing for students who are struggling right now to make ends meet while balancing full time study and long hours of part time work. It's a tokenistic insult to sudents who are forced to borrow to live because they are under 25 and their parents are deemed 'too rich'," Mr Do said.
4.45pm: The Council of Trade Unions has welcomed the tax cuts announced in today's Budget but says lower taxes cannot make up for low wages and the acid is now on employers to pay their employees more.
"The wage gap with Australia cannot be closed with tax cuts. It requires ongoing wage rises for New Zealand workers and it does not help workers or the economy if employers try to avoid decent pay rises because take-home pay has gone up through lower tax," said the council's vice president Richard Wagstaff.
4.36pm: New Zealand First's Maori Affairs spokesperson Pita Paraone said he was delighted that $2.3 million of funding for capacity and capability had been given to Maori Wardens in Budget 2008.
"I am thrilled that the hard work of Maori Wardens across New Zealand this year in supporting their communities has been recognised and this funding will help to ensure that they continue their important work, particularly in projects targeting Maori youth," he said.
4.28pm: Prime Minister Helen Clark said today's Budget brought tax relief for individuals and families who were doing their best to manage the cost of living pressures "at the petrol pump, the supermarket checkout, and in the rent or mortgage".
"The Budget enhances public investment in education, health care, social agencies, and other important services...
"Budget 2008 is a budget which addresses both the pressures of today, and the needs of future years," Helen Clark said.
4.15pm: New Zealand First leader Winston Peters said Budget 2008 had some good aspects but was also some missing elements.
He claimed his party's confidence and supply deal with Labour was behind policies such as improvements for older people, including cheaper hearing aids.
National leader John Key responded to the tax cuts announced in today's Budget by indicating his party would do better if elected this year.
"Under National, New Zealanders will be better off. Under National, personal tax cuts are a priority," he said.
4.00pm: Green co-leader Jeanette Fitzsimons said Budget 2008 had guaranteed $10.26 million over four years for the Community Organisations Grant Scheme, which provides essential financial support to non-profit voluntary and community organisations.
"The Green Party initiatives target the much-neglected community sector, that vital third sector of the economy where civil society organises in non-for-profit organisations to work for the common good."
However Ms Fitzsimons said the Government had ignored the 61 per cent of New Zealanders who, just last month, said they would rather not have tax cuts if it meant cuts to social spending like health, benefits and education.
"The budget is yet again short-sighted. It all but ignores the environment, does little to prepare New Zealanders for the end of cheap oil, ignores the needs of students and fails to tackkle some of the biggest issues that we as a nation are facing," Ms Fitzsimons said.
3.25pm: The national orchestra and museum were among arts and culture organisations that benefited from Budget 2008.
Key announcements were:
* Additional baseline funding of $12 million over four years for Te Papa
* $7.7 million more over four years to the New Zealand Historic Places Trust. One-off additional capital funding of $500,000 for upgrades to IT systems in 2008/09
* $4.4 million extra baseline funding over four years for the New Zealand Symphony Orchestra
* $27.8 million more over four years goes to the New Zealand Film Commission
* extra baseline funding of $4.8 million over four years for the NZ Music Commission
* $2 million extra over four years goes to the New Zealand Authors' Fund to compensate authors for loss of royalty income on books lent by public libraries
* $10.9 million extra over four years for Radio New Zealand to maintain its core services.
3.11pm: Changes to simplify the area of business tax thresholds are announced by Mr Cullen. These changes include:
* Increasing the PAYE once a month filing and payment threshold from $100,000 to $250,000
* Increasing the Fringe Benefit Tax annual return filing threshold from $100,000 to $250,000
* Increasing the provisional tax use-of-money interest safe harbour threshold from $35,000 to $50,000
* Increasing the low value trading stock threshold from $5000 to $10,000
* Increasing the GST registration threshold from $40,000 to $50,000
* Increasing the GST six-monthly return filing threshold from $250,000 to $500,000
* Allowing non-individuals, subject to certain thresholds, to return income tax for financial arrangements on a cash accounting basis, and
* Increasing the threshold for allowing financial arrangements to be accounted for on a straight line basis from $1.5 million to $1.85 million (based on the total level of financial arrangements).
3.04pm: Following the success of Kiwisaver enrollments, Mr Cullen said the Government was moving to strengthen the financial sector on other fronts.
"The Government will spend $9 million for the implementation of new laws to improve the supervision of financial advisers and institutions. Additional costs will be paid for by industry.
"Together, the funding will allow financial service providers to be registered and set up dispute resolution schemes, and will enable the Securities Commission to undertake a role in the licensing of financial advisers."
2.55pm: Telecommunications is raised as an industry where performance has been "mediocre" following the privatisation of Telecom.
"Recent regulatory changes and subsequent agreements between the Government and Telecom provide a basis for shifting to a much higher level of performance, especially with respect to high speed broadband."
However, Mr Cullen said it was important that any further Government intervention in that sector was carried out bearing in mind four criteria:
* To ensure that the priority is on the extension of such services to the business and the farm, so as to underpin increasing productivity
* To ensure a stronger competitive environment is encourages
* To lever the maximum private sector investment in relation to any taxpayer investment or subsidy
* To ensure the programme does not lock us into particular technological solutions.
Mr Cullen said a new Broadband Investment Fund - part of a total package of $500 million over five years - would be used to accelerate broadband investment in three critical areas:
* Facilitating high speed broadband to businesses and local authorities, universities, schools and hospitals in urban centres
* Extending the reach of broadband into underserved regions, and
* Improving the resilience of New Zealand's international connections.
2.44pm: Mr Cullen singles out investment in infrastructure - particularly transport - as of vital importance to the nation.
He said $33 million had been set aside for the first stages of a transport plan for Canterbury as well as $30 million over three years to improve regional development in Northland and Tairawhiti.
"Significant expenditure will be needed to invest in new rolling stock as well as further uipgrades of the track, stations and other infrastructure.
"Rail has made a big comeback as a preferred mode of trasnport in many developed countries over recent years. New Zealand now has the chance to catch up with the trend.
"Nowhere is this truer than in Auckland.If a slowly phased in regional petrol tax is available then the current plans for electrification can proceed.
"Beyond that there is a need for longer term vision stretching out over the next twenty years to the Britomart loop line, to connect rail to the airport and to consider dedicated rail tunnels to cross the Harbour so as to create a true electrified rail network which can then link to other transport modes."
2.42pm: Funding for police to meet the target of 1000 new sworn staff and 250 other staff in this electoral term is announced. Also announced is:
* $6.3 million over two years to streamline Auckland courts
* $4.7 million more over four years for the Police Conduct Authority
* $5.8 million over four years for a Sentencing Council to produce sentencing and parole guidelines in 2008-2009
* $10 million over four years to enhance the security of police data
* $11.2 million in operating funding over the next year for legal aid remuneration with an accompanying review of the system.
2.40pm: A commitment is made by Mr Cullen to improve our early childhood, primary, and secondary education systems.
"A total of $215.5 million will be dedicated to implementing our promise to reduce class sizes for new entrants to one teacher per 15 students.
"Schools' operating funding is increased by 5 per cent, or $171.6 million, including $65.3 million for information and communication technology."
Mr Cullen said operating funding for the early childhood sector would be increased by $63.6 million to increase funding rates to reflect cost increases.
Major enhancements to the SuperGold Card were also announced.
These include: $72 million to fund free off-peak travel on all forms of public transport for cardholders, a further $18 million over the next four years to boost the subsidy for hearing aids and an electricity rebate for cardholders.
2.30pm: Mr Cullen announces that the floor of New Zealand Superannuation has been raised.
"With the changes to tax rates on 1 October a married couple will be getting $57 a week more than would have been the case under policies we inherited."
Mr Cullen said New Zealand now had thousands more doctors, nurses, teachers and social workers, and that tens of thousands of children had been lifted out of poverty under Labour.
Budget 2008 contains major new investments to further social services in New Zealand. This includes $750 million extra per annum for the health sector (or $3 billion over four years).
The health investment initiatives are broken down into:
* $2 billion for District Health Boards to cover the increased cost of goods and services
* $172.3 million to improve the efficiency of DHB services and make progress towards their Health Targets
* $160 million to boost elective surgery and reduce waiting lists
* $164.2 million over five years for Human Papillomavirus vaccine to protect against cervical cancer
* $60 million to build a better health workforce
* $79 million to improve child and adolescent oral health services
* $30 million to create healthier living environments.
2.22pm: The tax cut will also benefit families with children, including beneficiary families, with the bringing forward of the Working for Families adjustment to be included in legislation to be passed and introduced later today.
A second round of adjustments to Working for Families is forecast to occur at 1 April 2011.
2.16pm: Mr Cullen announces tax cuts for New Zealanders:
"The Government has been delivering a significant programme of tax reductions since 2004. The combination of Working for Families tax credits, business tax cuts, and cuts to taxes on savings will total some $4.6 billion a year excluding indexation...
"Budget 2008 builds on that growth dividend with a substantial programme of personal and family tax cuts beginning on 1 October this year, with second and third stages occurring on 1 April 2010 and 1 April 2011.
"This programme consists of a combination of a cut in the bottom rate of income tax, threshold changes, a simplification of the structure of the income tax system, a bringing forward of indexation of Working for families and a forecast second round of such indexation.
"In theory the current personal tax system has three rates: 19.5 per cent up to $38,000, 33 per cent from $38,001 to $60,000, and 39 per cent above $60,000 a year.
"In practice, the operation of the Low Income Rebate for earned income creates an effective four-step scale with the bottom step split into two: 15 per cent up to $9500 a year and 21 per cent from $9501 to $38,000.
"This rebate penalises investment income where it is not the sole source of income. In addition, the bottom threshold of $9500 has not moved since 1988.
"At the completion of the Budget 2008 tax-cut programme the rates will be 12.5 per cent on the first $20,000 of income, 21 per cent from $20,001 to $42,500, 33 per cent from $42,501 to $80,000, and 39 per cent above $80,000.
"A full implementation of this will mean for individuals on a full-time income tax cuts of between $1130 and $2870 a year, or roughly $22 to $55 a week.
"The intermediate stages will see the new rate of 12.5 per cent on income up to $14,000 from 1 October this year with the threshold lifting to $17,500 on 1 October 2010. The threshold for the 33 per cent will increase to $40,000 a year from 1 October. The top threshold will increase to $70,000 on 1 October and then to $75,000 from 1 April 2010...
"A single income family on one income of $40,000 with two young children will be better off by $1603 a year from 1 October rising to $2967 a year from 1 April 2011."
2.10pm: Mr Cullen has spoken of an economic background he describes as "the most challenging New Zealand has faced in over a decade".
These include sky-rocketing fuel prices as well as increases in the prices of some foodstuffs and a tightening monetary policy.
He said Budget 2008 needed to balance five imperatives:
* responding to the needs of families for some early relief from price pressures
* a longer term tax reduction programme which reflects a fair deal for all
* the maintenance of social services
* sensible fiscal management to avoid worsening current pressures on the household budget and which is sustainable over the longterm, and
* an integrated programme to continue to build a stronger, sustainable economy.
1.50pm: Finance Minister Michael Cullen is about to begin delivering his 2008 Budget. The main talk pre-Budget has been of tax cuts but no official announcement on what form these will take has yet been made.
However we do know some of what to expect today. Budget announcements already made include:
* $621 million over five years to extend New Zealand's diplomatic presence overseas.
* $4m for superbug surveillance;
* $2.4m to improve monitoring and testing of imported food;
* $18.5m to rebuild Porirua College;
* $46m over four years to increase payments from ACC to people providing support for injured family members or friends;
* $700m contribution to set up a joint agricultural research fund with the private sector;
* Extensions to the SuperGold discount card for senior citizens (not costed);
* $53.4m over five years to insulate state housing;
* $33.5m in transport infrastructure funding over four years for the Canterbury region;
* $164.2m over five years for an immunisation programme to fight cervical cancer;
* $9m over three years to boost prize money in the racing industry;
* $35m on a two-year shared equity pilot to assist up to 700 households into starter homes;
* $690m to purchase the rail and ferry assets of Toll;
* $216m to replace Mt Eden Prison;
* $171.6m over four years to increase schools' operational funding including $65.3m to help schools meet the costs of Information Communication Technology
* $36m over the next four years to help the development of coastal shipping;
* $12m for conservation projects;
* $7m to set up a new business reporting system;
* $8.8m developing and maintaining a national electronic medicines reference list.
- NZ HERALD STAFF, NZPA
