Richard Forgan
Comparing New Zealand Budget announced on May 15 with that of Australia issued on May 13 makes an interesting contrast
Both governments focused on expanding the economic capacity of the nations with support for Innovation, Science, R&D and Defence.
But the similarities end there.
New Zealand has a surplus, Australia a deficit.
New Zealand has expanded welfare a little, Australia has cut it back.
New Zealand is increasing free GP visits for children up to 13 years of age; Australia introduced a co-charge of $7 for GP visits.
Australia increased tax and medicare levies, New Zealand cut ACC levies teased us with hints of tax cuts.
New Zealand signalled more investment in health and education, Australia signalled cuts in the Federal support the states in these areas.
These contrasts demonstrate the benefit of four or five years of sensible fiscal balance between debt, spending and managing an economy through the Global Financial Crisis.
Richard Forgan is Partner at PricewaterhouseCoopers New Zealand.
Good for business
The firm’s Corporate Tax Leader Geof Nightingale had the following comments:
Budget 2014 delivers a range of good news for New Zealand business.
The return to surplus and the forecast reduction in debt relative to GDP delivers a stable fiscal platform that will give business the confidence to invest.
Business investment will drive economic growth and employment.
Keeping Government expenditure increases to a rate lower than economic growth will reduce the pressure on rising interest rates and inflation, leading to less pressure on our exchange rate.
Business will welcome specific measures such as additional funding for Science and Innovation and to expand and support our access to markets in China, South America and the Middle East.
Infrastructure investment in Transport, Health and Education will all support the business climate in New Zealand.
Reductions in ACC levies of $480 million in 2016 will further lower costs for employers, making New Zealand business more competitive.
We welcome moves to assist R&D intensive businesses by providing tax credits for loss-making start up R&D and allowing tax deductions for previously non-deductible black hole R&D expenditure.
By showing prudent fiscal management with some targeted additional spending, Budget 2014 should be well received by New Zealand business as providing the right economic settings to pursue business growth.
