Click here for full coverage and analysis, and reaction to the 2010 Budget
Labour leader Phil Goff has denounced today's Budget as a "swindle".
"John Key called his increase in GST and tax cut package a 'tax switch', but for middle and low income earners it's a tax swindle," he said in a statement.
"National has no idea how to create jobs and the future we need. They have increased tax on everything Kiwis buy and have added a raft of other taxes. This won't help close the gap with Australia."
CTU economist Dr Bill Rosenberg describes today's budget as "fundamentally unfair".
"Someone on the minimum wage of $26,520 gets an extra $4.13 a week but someone on four times the minimum wage or $106,080 gets an extra $43.08 a week," he said. "Their tax cut is 10 times more than the worker on the minimum wage."
"Even worse, someone on ten times the minimum wage gets a tax cut of $153.92 a week, which is around $150 more a week than the person trying to get by on the minimum wage."
The Green Party says cuts to the budget for improving and buying state houses - from $120m to $18m - will hurt New Zealand's "most vulnerable people".
"There are over 10,000 people on Housing New Zealand waiting lists, and John Key, who grew up in a state house, has decided that they do not matter," said co-leader Metiria Turei.
Budget tax revisions designed to take distortions out of the rental property market are not expected to have a significant long term effect on house prices or rents, says Real Estate Institute of New Zealand president Peter McDonald.
"REINZ supports the government's moves to make the taxation system fairer and close the loopholes that enabled some people and businesses in all sectors to rort the system," he said, adding that "other property investors will replace those who were primarily attracted by the tax breaks,"
Employers and Manufacturers Association chief executive Alasdair Thompson describes the Budget as the fairest in more than a decade. "Business will welcome the tax rebalancing being put in place in the budget as it will be much fairer," he said.
The Researched Medicines Industry Association (RMI) has welcomed a medicine funding increase of $80 million over the next four years, with the Government contributing an additional $40 million of that funding.
Andrew Casidy of bank workers' union Finsec has described today's tax cuts as "simply unfair."
"The wealthiest New Zealanders will benefit the most from today's tax cuts," he said, "the very people who can best afford to contribute more to a fairer society.'
Children will be the big losers in today's budget, says New Zealand Kindergartens. Clare Wells, chief executive of the national group representing 29 of the 33 kindergarten associations across New Zealand, said members were deeply shocked at the Government's decision to cut funding to early childhood education services, saying the Budget will strip over $12m per year from kindergarten budgets.
Labour Party early childhood education spokeswoman Sue Moroney said 108,000 children would be affected by a policy change in ECE to cut funding to centres that have more than 80 per cent qualified staff. Affected centres would be reluctant to fire their qualified staff and would likely pass on extra costs to parents, Ms Moroney said.
Three of five children in ECE centres would be affected, she said.
Business owner structuring income to claim for Working for Families - $153.03c per week worse off.
Labour Party health spokeswoman Ruth Dyson said the level of health spending would leave a "huge hole" and force DHBs to make cuts in services.
"This isn't enough for the health sector to stand still," Ms Dyson said.
Costs would increase due to the GST rise and the money allocated was hundreds of millions of dollars short of what had been estimated as necessary to maintain services, she said.
Food and Grocery Council chief executive Katherine Rich says today's Budget is a significant step forward. "Changes to the GST system have a direct impact on the grocery sector, but these were signalled well in advance by the Government back in February. This has given the sector a head start in thinking about and preparing for the required changes," she said.
Wellington Regional Chamber of Commerce CEO Charles Finny says the Budget will provide a solid platform for economic growth. "The rebalancing of the tax system away from income tax is a sound move that will improve New Zealand's economic performance by increasing incentives to work, save and invest," he said.
The Government intends to issue $12.5 billion of bonds in the year to June 30, 2011, which is $2b less than signalled in the December half-year update.
nzherald.co.nz poll shows mostly positive reaction to today's Budget, with 70% voting it a 'winner'.
Community Gaming Association chairman John Burke says GST increase to 15% will mean less money for community groups from proceeds of gambling. He notes that, on top of GST, the Government already takes 20% of net revenue as a Gaming Duty, more than 1.5% as a Problem Gambling Levy and about another 1%-2% as fees for monitoring, licensing and compliance activities by the Department of Internal Affairs.
Business New Zealand says the Budget will be viewed by companies as a positive move toward a more competitive, higher-earning economy. Chief executive Phil O'Reilly said the tax provisions were pointing in the right direction and the consistency of 28 percent for company and PIE taxes would make the system fairer.
Standard & Poor's said that its views on New Zealand's sovereign creditworthiness was not immediately affected by today's budget. It has New Zealand on an AA plus long-term rating. "Although the deficit in 2011 is large, we note that the outlook has improved since the last budget and there remains an achievable and believable path to return the operating position to surplus,' credit analyst Kyran Curry said.
An extra $26.6 million funding over four years will help Inland Revenue to increase property transaction audits and compliance activity to ensure people who trade in property comply with law and pay tax on trading gains, said Peter Dunne.
An email poll of key Auckland retailers by Newmarket Business Assn shows 82 percent of respondents believe the timing of the Government's GST increase is "bad'.
The Government will provide $2 million in new funding in 2010/11 so the Department of Labour can provide "more robust ACC policy advice" says ACC Minister Nick Smith says.
Budget tax changes" won't stop anyone leaving for Australia," says CTU's Bill Rosenberg. "Treasury calculates the net benefit will be 0.7 percent for those on high and low incomes, and 0.4 percent for middle income New Zealanders" and that "these figures are hardly enough to bridge the 20-30 percent income gap with Australia."
Deloitte tax partner Allan Bullot says businesses will need to prepare quickly for October 1 GST rises (12.5% to 15%). "Many businesses, particularly small to medium-sized ones, weren't around when GST was last increased in 1989 and possibly haven't considered all the practical implications of an increase."
Greens slam Budget, with co-leader Dr Russel Norman saying: "The Government is borrowing to pay for poor quality spending on tax cuts that heavily favour the wealthy, more motorways for more congestion, and subsidies for the worst climate polluters." Party labels Budget "of fiscal, social and environmental deficits when smarter options were available"
Maritime Union says Budget is an attack on working class new Zealanders. GST increase was taking money from the pockets of workers to pay for tax cuts for wealthy says general secretary Joe Fleetwood.
There has been no move to change the 20-hours' early childcare subsidy as some had predicted.
Budget includes an extra $93 million for disability support services over the next four years - "This Government is spending more than has ever been spent on disability support services," says Health Minister Tony Ryall.
Disability Issues Minister Tariana Turia says $6.8m to be invested over next three years - $1.5m to help promote design standards for homes; $2.34 million to help promote, protect and monitor the rights of people with disabilities in line UN convention; $3m for public awareness campaign
NZ sharemarket response to Budget muted - benchmark NZX-50 index improved only slightly to 3120.472 from 3118.837.
The New Zealand dollar responded positively to today's Budget, rising against those of our main trading partners. It was worth an even US68c at 2pm and then rose to US68.27c, and against the Australian dollar, up to A80.89c, from A80.63c
Social Development Minister Paula Bennett says a $26.7m investment in Job Ops programme will double placements of un- or under-qualified 16-24 year olds in programme to 12,000.
An extra $1.4 billion is allocated to education over four years and increases operational funding for schools by 4 per cent, well above the rate of inflation.
New personal tax thresholds rates are - $0-$14,000 will drop from 12.5 percent to 10.5 percent; $14,001-$48,000, 21 percent to 17.5 percent; $48,001-$70,000, 33 percent to 30 percent; over $70,000, 38 percent to 33 percent.
Associate Corrections Minister Pita Sharples says Budget funding for two reintegration units for prisoners will help to reduce re-offending and re-imprisonment rates. Budget allocates $19.8 million over four years for building and operating two new 16-bed units by 2011/12.
Health will get $1.95 billion in operating costs over the next four years. Of this, $186m was re-prioritised from within vote health, mostly coming from admin services cuts.
Owners of both commercial buildings and rental houses will no longer be able to claim depreciation on them.
Business Roundtable executive director Roger Kerr rates the Budget 6.5 out of 10 - "There is not much we would be critical of," he said, "The budget reveals sound steps but not step changes."
Communications and Information Technology Minister Steven Joyce says a further $248m will be provided for broadband initiatives as part of $1.5bn fibre investment. A further $200m allocated towards Crown Fibre Holdings broadband infrastructure for 2010/11.
Defence to get an extra $35 million a year to fund increased costs and new equipment for the New Zealand Defence Force.
Prisons get $69.3m over four years - $24m towards new Wiri prison, South Auckland; $45.3m for 245 beds at Mt Eden Prison; $11.2m for literacy, numeracy and work-based training for prisoners.
An extra $93 million for disability support services over the next four years, Health Minister Tony Ryall and Disabilities Issues Minister Tariana Turia say.
Bill English says across the board personal tax cuts, and other changes will leave average wage earners about $15 a week better off, and average family about $25 per week better off.
"Last year's Budget was focused on getting New Zealand through the worst global crisis in living memory," says Finance Minister Bill English.
"This Budget is about our long-term objective of lifting New Zealand's growth rate and New Zealanders living standards."
14.00: BUDGET QUICK POINTS
- GST increases from 12.5pc to 15pc
- Company tax rates fall from 30pc to 28pc
- All income tax brackets fall, with the top rate levied on income over $70,000 per year coming down from 38pc to 33pc.
- Landlords and businesses will no longer be able to claim depreciation on buildings that are expected to increase in value.
- Rules around 'loss attributing qualifying companies' often used by property investors to reduce their tax payments are being tightened.
- All benefits including NZ Super and working for families will increase by 2.02pc to compensate for the increase in GST.
- An extra $2.1bn is being spent on health over the next four years, which includes $1.7bn of new operating funding.
- Funding for schools is going up by $1.4bn over the next four years, which includes $350m in new operating and capital funding for school property.
- NZ HERALD STAFF