Thursday, 26th May, 2016
Beyond expectations that a budget surplus will be confirmed, business isn’t expecting any huge surprises in this year’s Budget, writes Michael Barnett.
With the exception of the dairy industry, this year’s Budget will be delivered against a backdrop of strong demand for New Zealand products and services, strong tourism and migration, a large pipeline of construction projects, low interest rates and relatively full employment.
I’m also certain that Finance Minister Bill English will point with deserved pride to our success as one of the healthiest and fastest growing economies in the OECD over the period he has been in charge. Relative to many other countries, we are enjoying good times.
So as I delve into the Budget detail, I will be looking for evidence of what many businesses do when they are performing well – they search out areas in which to invest that will prolong the good times.
Increased health and education expenditure have become an annual Budget expectation. But a strong case can be made for accelerated investment in tourism infrastructure, innovative areas of our agriculture sector, and other infrastructure – and doing so by targeting the regional economies, region-by-region.
In recent visits to a number of regions I have been struck by the high level of concern within both business and local government sectors that they must avoid getting caught in the Auckland trap of failing to invest in critical infrastructure needed to cope with the city’s fast growth. Every region is experiencing growth, but what they all need is a platform that ensures – and builds local confidence - they have the critical infrastructure needed to exploit their respective opportunities.
As a successful country relative to many others, I would like to see some measured investment risk ploughed into our regions – Northland, Waikato, East Coast, West Coast and other regions.
Every region has an area in their economy with enormous potential for growth. For some it is forestry, for others it is horticulture or aquaculture. Geothermal is a platform for innovation in the central North Island.
My point: To prolong New Zealand’s good times, the regional economies must be lifted to become full participants in the New Zealand growth success story.
Small-medium businesses (SMEs) are the backbone of our economy. Budget 2016 includes a tax package that makes paying taxes easier and more certain for SMEs while reducing the burden of interest and penalties.
We have also been given a strong signal that tax bracket creep will be addressed.
All these measures will be welcomed by business, as will the likely focus on the need for maintaining debt repayment.
The pre-Budget 2016 signs are that it will be a document that shows responsible and safe management of the country’s accounts.
That will go some way to reduce the burden of government, but is it enough to prolong the good times? As a country I suggest we are at a point where we need to take some risks aimed at lifting the performance of regions with growth potential.
That’s the ‘surprise’ business – especially SMEs in the regions - deserve to see in this year’s Budget.