Budget 2011: Business reacts

Reaction from the world of business and economics to today's Budget:

File photo / Bay of Plenty Times
File photo / Bay of Plenty Times

Philip Borkin - Goldman Sachs NZ:

"Given the starting point and the heightened sensitivity to fiscal positions globally, we view today's commitment by the government to fiscal repair as commendable. In saying this, it will still be a tough ask given that it largely comes through expenditure restraint.

"Our estimates suggest this is the most aggressive period of fiscal repair since at least 1972."

"With little in the way of surprises or election year sweeteners, the government may be taking some political risk with this budget. There is also the possibility of some negative reaction to the changes to KiwiSaver and the SOE mixed asset ownership structure."

"At this stage, we feel the projected process of fiscal repair will be enough to avert a credit rating downgrade, and so this may remove one source of downside risk for the NZ$."

Helen Kelly - Council of Trade Unions:

Today's Budget should have been about jobs and the future. Instead it was about cuts to family incomes, privatisation and cutting government services, The Council of Trade Unions said.

CTU president Helen Kelly said: "we need to look to the future with a Budget that focuses on creating good jobs to slash our high unemployment rate. We needed a Budget that supports people who have lost their jobs. We needed a Budget that invests in developing skills and education levels and funding for projects that build necessary public facilities.

"Instead it has cut KiwiSaver and Working for Families for families."

There were no initiatives in the budget to stimulate the economy, which presented a real risk of continuing high unemployment and a return to recession, Kelly said.

Khoon Goh - ANZ Bank economist:

"The Budget today contained no new surprises. A record underlying operating deficit of 8.4 per cent of GDP is expected for 2010/11. But a return to surplus of 0.5 per cent of GDP is forecast by 2014/15, which comes entirely from expenditure restraint. Tax revenues are forecast to be lower throughout the forecast horizon, despite a stronger rebound in growth from 2011/12."

"On the face of it, a tighter Budget would mean that fiscal policy will be contractionary. However, due to the Government meeting the cost of the earthquake rebuilding, the fiscal stance only turns contractionary from 2012/13, a year later than previously forecast."

Phil O'Reilly - Business NZ chief executive:

BusinessNZ has characterised Budget 2011 as cautious and safe, with most announcements generally pointing in the right direction of reducing government expenditure and debt.

However BusinessNZ chief executive Phil O'Reilly said the Budget lacked signposts towards future reforms and other than the extensions to the mixed ownership model, more could have been done to produce structural change.

"The Budget is heavily dependent on the Treasury's predictions for growth being realised."


Andrew Little - National Secretary, Engineering. Printing and Manufacturing Union:

"Working families looking for relief from rapidly rising prices and other costs will be sorely disappointed with today's Budget which will put even greater pressure on households already stretched to breaking point."

'This Budget was a chance for this government to show it understands the very real pressure working people are under. They could have offered some help and hope in tough times.'

'What was most needed was investment in job creation and growth. The Government has missed the opportunity to do either. This Budget does nothing for working families.'

"The Government has spent $14 billion on tax cuts when it couldn't afford to,' says Little. 'The Government is basically filling a hole it created for itself.'"

Greg Haddon - Deloitte tax partner:

"The compliance costs for businesses of administering KiwiSaver contributions continue to mount with each change to the scheme."

Haddon says there have now effectively been so many different versions of KiwiSaver since the scheme was introduced and it risks becoming the political football that gets a kick-around every election year Budget.

"The continual tinkering will make it more and more confusing for both employers and employees, and potentially act as a disincentive to join the scheme," he says.

While the changes are unavoidable from an economic perspective, with nearly half of all KiwiSaver funds currently coming from the Government through subsidies and tax breaks, businesses need to have some certainly about the future of the scheme.

Alasdair Thompson - Employers & Manufacturers Association:

Today's Budget is designed to save New Zealand's credit rating and lift our national savings rate with KiwiSaver, the Employers & Manufacturers Association says.

"If this Budget's deficit was not reduced sufficiently, New Zealand would face a credit rating downgrade resulting in a huge increase in interest rates to everybody, with borrowers the first to suffer," said Alasdair Thompson, EMA's chief executive.

"And increasing the KiwiSaver contributions from April 2013 is a much better option than raising taxes.

"The Budget could have cut deeper, but it's not easy to do with the country in or near recession.

"Given the experience of the PM and the Finance Minister it's fairly certain the cuts will be sufficient to ward off downgrades by the credit agencies. If not this Budget will have failed in its primary purpose."


Roger Kerr - Business Roundtable director:

"There were some commendable moves but overall the Government was treading water rather than addressing the big issues,
"We are still lacking the serious coherent economic plan which would alleviate the external vulnerabilities and improve the longer run growth performance," said Kerr.

He praised the move to a budget operating surplus a year earlier than previously forecast but said the path of government spending was still higher as a proportion of gross domestic product than it was in the first half of the last decade.

The budget deficit next year of more than $9 billion was more than all the proceeds of partial privatisations of state assets signalled over three to five years.

No account had been taken of the gathering risks in the world economy or of the "demographic time bombs we are all aware of".

There was no discussion about how to reign in the cost of New Zealand superannuation or health costs.

"It is clear that even through another parliamentary term the gap with Australia will widen rather than narrow," he said.

Craig Macalister - New Zealand Institute of Chartered Accountants:

This year's budget is in stark contrast to budget 2010, but shouldn't come as a surprise given the Government's priority is to constrain expenditure and look at ways of minimising revenue leakage, says the New Zealand Institute of Chartered Accountants (NZICA).

"In addition to the key proposals relating to KiwiSaver and Working for Families tax credits, a small number of tax system adjustments were also signalled that endeavour to bolster the tax base integrity and squeeze a few more dollars from the taxpaying public."

While the Government had lowered the member contribution to KiwiSaver, NZICA said it remained wary of savings policies that relied on tax benefits.

Meanwhile trying to pare back spending in the area of Working for Families was fraught with difficulties - not the least is that people receiving the credits come to rely on them for support, the NZICA said.

- NZ HERALD ONLINE/NZPA

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