Budget 2012 lived up to expectations of being a no surprises affair with little new spending and no major policy changes.
Although pitched as a 'Zero Budget', Government spending is still forecast to increase over 2011/12 and there are no
cuts to social spending, health, or education. It was hard for anyone to credibly claim the Budget was anything like the
austerity that is being forced upon governments in Europe.
The Budget's spending and policy initiatives are relatively modest and, other than increased funding for research
and innovation, there is little 'transformational' content which would quickly address New Zealand's economic imbalances.
As a result we will continue to see a long, slow grind as the economy recovers and rebalances. The benefits to the people on the street will take time to be realised.
That said, Federated Farmers is pleased with the Budget's projected path back to surplus in the 2014/15 year, although we know there is plenty of downside risks with the forecasts and global events could throw us off the path.
We have long called for Government spending to be capped and reduced over time to below 30 per cent of Gross Domestic Product (GDP). This is forecast to be achieved around 2015/16.
However, it will only be possible if fiscal discipline is maintained. History has taught us that there is no guarantee
it will endure. It is great the Government has committed to amending the Public Finance Act to cap future growth in
Government spending to the rate of inflation and population growth.
If only this provision had been in place in the 2000s it would have stopped the doubling in spending, much of it
wasteful, that took place in that decade. New Zealand would have been in a much stronger position to weather the impact of the global financial upheavals and the Canterbury earthquakes. All the Federation can say is, ''about time''.
One of the Budget's features were the changes to Livestock Tax. Making the Herd Scheme election irrevocable was
well-signalled. Federated Farmers accepts the need to change the rules to prevent farmers and their advisors from
inappropriately using the rules to receive unintended tax breaks.
Having no change was estimated to cost the Government $184 million over four years and we accept this simply is not tenable in the current environment. So, overall Federated Farmers gives Budget 2012 a pass mark.