2013 - 14 Budget Brief
The Finance Minister Hon Bill English says New Zealanders want to know if the country is on the right road. Do we deserve the optimism he says we do?
Hear what EY's Oceania CEO Rob McLeod had to say first thing on Budget Day, and where we stand compared to Australia.
Budget 2013 reflects the current Government’s belief that Budgets are about “careful stewardship of public money, and investing wisely in programmes to improve people’s lives and help grow the economy” rather than about announcing novelties and illusory promises.
The theme of Budget 2013 is Building Momentum, based on GDP growth forecast to continue at between 2% and 3% and the Government’s four key priorities:
- Responsible management of Government finances
- Building a more productive and competitive economy
- Delivering better public services within tight fiscal constraints
- Supporting the Christchurch rebuild, which is expected to drive economic growth
Budget 2013 shows the Government should return to surplus in 2014/15 and start to reduce government debt while spending some $5.1 billion on new initiatives over the 2012/13 and 2016/17 years (partly funded by reprioritising existing spending). The forecast 2014/15 surplus does not depend on the Mighty River power sale but is expected to result from increasing tax collections and restrictions on Government spending. Forecasts include the impact of the recent drought (an expected 0.7 percentage point reduction) and are based on low interest rates, increased activity from the Christchurch rebuild, strong commodity export prices, increasing consumer demand across the Asia Pacific region, improved outlooks for jobs and wage growth. Household disposable income is forecast to rise by almost 20% over the next four years.
Over 75% of core Crown revenue in 2013/14 is expected to come from individual and corporate income tax and GST.
For all that we did not expect major tax announcements in this year’s Budget, a number of tax measures have been announced which should benefit business – relief for various types of “black hole” expenditure and start-up research and development losses. In terms of maintaining and extending the revenue base, the Budget follows up the January 2013 announcements of proposed changes to the thin capitalisation rules for inbound investment and provides additional funding for Inland Revenue to pursue tax compliance on property transactions. In terms of business costs, signals that ACC levies should be reduced are welcome news for businesse.