Singing in the rain - why the Budget produced a mixed business forecast
Business leaders, for the most part, seem cautiously confident they will do about the same this year...
Contrary to business leaders’ expectations, this year’s Budget carries no new tax increases and many new measures are well in line with key business priorities.
“Ultimately the Budget has been fiscally conservative, and aligns pleasingly well with business priorities,” says Kaison Chang, director of Business Advisory Services at Baker Tilly Staples Rodway.
“Instead of a “wellbeing” Budget, I would call it a “responsible” Budget. While only time will tell how our overall wellbeing is affected by the packages announced today, I think on the whole business leaders will be pleasantly surprised.”
In Baker Tilly Staples Rodway’s Business Confidence Survey, conducted prior to the Budget announcement, more than 500 business leaders indicated that infrastructure, simpler taxation and research and development investment were the top items on their wishlist. A significant $1 billion investment in rail infrastructure across the country, further funding for the City Rail Link in Auckland, $300 million allocated for business start-ups, and a $157 million R&D fund for new technologies and product development, indicate the Budget is well aligned with these priorities.
There are other positive elements. Although 63 per cent of those surveyed expected further tax increases in the next 12 months, no additional taxes were announced in the Budget. A sustainable land use package aimed at helping farmers transition to more carbon-neutral models will also be welcome in the provinces, alongside $95 million for research into low-emissions technology.
The announcements will come as a surprise to many business leaders, whose pre-Budget sentiment showed a marked distrust towards the government’s economic management and predicted a negative impact on them personally. While spending will increase in the short term, the government is still showing a surplus and forecasting average growth of 2.6 per cent over the next five years, less than it has been in the past but still within debt rules.
Business leaders were supportive of wellbeing factors being measured alongside GDP, but predicted wellbeing would decline in the next 12 months. The Budget answers this with an additional $1.9 billion for mental health services, $320.2 million over the next four years to index benefits to wage increases as well as $1.1 billion to address child poverty. This includes a respite for parents of children at decile 1-7 schools, who will no longer have to pay school donations, and NCEA fees have also been removed. By contrast, just $190 million has been allocated to reduce District Health Board capital deficits on top of the $1.7 billion DHB million operating budget.