It’s not all about the silver lining however. External and internal risks could still throw the New Zealand economic story off its track. Externally, the global economy is still frail and an Australian economy coming off the boil will be of concern. Internally, New Zealand households’ still high levels of indebtedness, and the impact on interest and exchange rates has been a persistent worry.
Budget 2014 represents a turning point for the National-led Government with a surplus of $372 million forecast for next year, with increasing surpluses in the following years. Gone are days of the “Zero Budgets” as the Government’s focus has moved from managing the country out of recession to managing a growing economy, and creating a sustainable growth.
Accident Compensation Corporation
Budget 2014 indicates ACC is on track to provide further levy cuts of around $480 million in 2015/16. These cuts will be for motor vehicle levies, along with the possibility of a levy reduction for employers and the self-employed. The Government will make its final decision after ACC’s public consultation. Depending on the outcome of the consultation, the average levy for a private motor vehicle could reduce by about $130 a year from 1 July 2015.
Budget 2014 will boost NZTE’s trade presence in China, South America and the Middle East to help more New Zealand firms break into these growing markets.
Cheque duty to be abolished
The five cent duty on cheques will be abolished from 1 July 2014. This duty currently raises about $4 million a year. Repealing the tax will benefit those who still use cheques, and it will also reduce compliance costs for banks and printers of cheques.
Suspension of import duties on certain construction materials
Anti-dumping duties on plasterboard, wire nails and reinforcing steel bar will be suspending temporarily for three years.
Zero concessionary tariff on residential construction materials
A zero concessionary tariff will be introduced on residential construction materials.
This will cover approximately 90 per cent of the materials in a new home and is expected to save around $3,500 on the construction of a standard home.
Allocation of $132 million to assist Inland Revenue’s tax compliance activities
Inland Revenue will receive $132 million over the next five years to assist with its tax compliance activities and chasing taxpayers’ unfiled tax returns. This allocation will consist of $48.6 million in cash, and the remaining $84 million to cover tax being written off where Inland Revenue is unlikely to recover payment from taxpayers.
It is estimated that $295.7 million will be generated in gross revenue for the Crown over the next five years as a result of the new funding.
$375 million to accelerate Auckland transport projects
Budget 2014 provides $375 million of new capital funding for the New Zealand Transport Agency (NZTA) to accelerate $815 million worth of Auckland transport projects which include:
$800 million for projects on the Northern Corridor, Southern Corridor and State Highway 20A.
$10 million to further investigate the East-West Link over 2014/15.
$5 million for the Panmure to Pakuranga phase of the Auckland Manukau Eastern Transport Initiative.
The $375 million will be transferred to NZTA as an interest-free loan, to be repaid to the Crown by funding currently allocated to these projects in the National Land Transport Fund up to 2026/27.
Canterbury Earthquake Recovery
Budget 2014 provides an additional $50 million to the Canterbury Earthquake Recovery Authority. This brings the Government’s total spending and commitments to rebuilding greater Christchurch to $15.4 billion.This package confirms multi-year commitments of $313.8 million operating funding over the next four years and $150 million in capital funding to continue land acquisitions in the CBD and to deliver the anchor projects outlined in the Christchurch central-city recovery plan.
$20m for freshwater and environment initiatives
The Budget 2014 will invest in environmental initiatives to help the management of New Zealand’s natural environment. This will improve the quality of fresh water and lead to the productive and sustainable use of freshwater resources.
The Budget 2014 provides:
$12 million to help councils and communities improve the way they plan and make decisions about managing their local freshwater resources.
$5 million to the Te Mana o te Wai Fund, in partnership with the Māori Party to restore local freshwater bodies over the next two years.
$3 million to implement Resource Management Act reforms
Summary of Budget
For our part, BDS believes that New Zealand’s economic and social policy settings are heading in the right direction. The Government has taken the lead in paying down debt and living within its means. On the social policy front, core services have largely been maintained, with a focus on helping the most vulnerable in our society.
For the Government, today’s Budget is about consolidating the gains from its policies to date, as well as maximising the opportunities from a growing economy. The challenges ahead will be in navigating the ups and downs of this path, balancing external and internal risk that could throw New Zealand’s economic story off its track.