Budget 2010: The reaction

Minutes after Finance Minister Bill English presented the government's second budget to the country, the first reactions began pouring in:

* BusinessNZ said the budget was a positive move towards a more competitive, higher-earning economy, with chief executive Phil O’Reilly adding that the consistency of 28% for company and PIE taxes will make the system fairer.

* The Business Roundtable also greeted the budget fairly warmly. Executive director Roger Kerr said there was not much to be critical of – “The budget reveals sound steps but not step changes."

* But the Maritime Union has slammed the 2.5% increase in GST, saying today’s budget was “an attack on working class New Zealanders” and a “wealth transfer from low to middle income earners to the wealthy”.

* The CTU claims the tax changes won’t stop anyone leaving for Australia and said the government could be spending more to help people on lower incomes and to improve public services, especially with the improved economic outlook and government deficits disappearing even earlier than forecast in the last budget.

* Food and Grocery Council head Katherine Rich welcomed the budget as a “significant step forward in terms of realigning the economy in favour of our productive sectors”. She said that while changes to the GST system have a direct impact on the grocery sector, these were signalled well in advance by the Government and this had given the sector a head start in thinking about and preparing for the required changes.

* On the other hand, Deloitte tax partner Allan Bullot raised some concern over the speed of the tax increase, saying that while it “should surprise no one”, four months was not long for companies to prepare for it.

* Also at Deloitte, chief executive Murray jack said the budget was "the most radical in years" and represented a "big bet on delivery of the required impetus for the government’s growth strategy".

* Tait Radio Communications were one of the first companies to show their support for the budget, especially the the provision of a $234 million boost for applied research and development, which it said was “definitely the right approach for wealth creation in New Zealand”.

* A Federated Farmers insider believes Agriculture Minister David Carter’s announcement following the release of the budget today is miserly. The budget provides additional capital funding of about $5 million a year.“With $24 billion worth of exports each year, is $5 million really enough?”

* The Maori Party was unsurprisingly pleased with the $286 million it had specifically secured bin the budget and said it was “just the beginning of the work: it was doing to bring about change. Co-leader Tariana Turia said the circumstances of Maori had nopt happened overnight – “They are intergenerational and will not go away in one term so we are definitely here for the long-haul.”

* Milestone Homes had welcomed the clarity on the way property investment will be taxed after “months of insecurity”. General manager Stephen Murray said this would help the industry “get on with building the homes New Zealand so desperately needs”.

* Auckland Chamber of Commerce chief executive Michael Barnett said dropping the company tax rate to 28% gave New Zealand business the “opportunity to invest in themselves, grow and employ” and was a “small but welcome edge” over Australia.

* Further south, the Wellington Chamber of Commerce has given the budget a similar welcome, saying the tax reforms will provide a “solid platform” for economic growth. Chief executive Charles Finny said the rebalancing of the tax system away from income tax was a “sound move that will improve New Zealand’s economic performance by increasing incentives to work, save and invest”.

* The effectiveness of the government’s tax changes will be “severely undermined” by the disincentives to take on additional work caused by Working for Families, according to Infometrics managing director Gareth Kiernan. “Despite the government’s claim that 73% of New Zealanders will now face a top marginal tax rate of 17.5%, interaction between the tax and welfare system means effective tax rates are often much higher.”

*  The ACT Party are not happy to see an increase in GSt, labelling it as “totally unnecessary” and a “reckless revenue grab”. Finance spokesman Sir Roger Douglas said it was laudable that the government was intent on delivering tax cuts, “but tax cuts delivered by tax increases elsewhere are not the way to go. We need to cut taxes by reducing Government expenditure”.

* The Community Gaming Association have also expressed concern at the rise in GST, saying it will mean there is less money for community groups from the proceeds of gambling.

* Meanwhile, the Newmarket Business Association have already carried out a poll of its retailers that found that 82% of respondents belive the timing of the rise is bad.

* The Employers and Manufacturers Association said it was “the fairest budget in years”, but said there was still a “need for ongoing effort in the public service to increase efficiency and productivity”.

* KPMG chief executive Jan Dawson said the tax initiatives were the “most wide reaching in the last 20 years” and the National Government had taken a “smart but bold approach” to bringing in the changes in those areas that can build the recovery of the New Zealand economy.

* International property and construction consultants Davis Langdon said the outlook for the New Zealand construction industry remains “subdued” following the release of the budget. It said with annual GDP growth forecast at around a steady rate of 3% through 2010 and 2011, together with restrained government spending initiatives, a strong revival in both residential and non-residential construction appeared some way off.

* Chapman Tripp’s Casey Plunket said the budget had the capacity to “finally wean New Zealanders off their propensity to over-invest in property” and would be remembered for stealing a march on Australia. “The Australians plan to reduce their company tax rate to 28% on 1 July 2014. We’ll be there on 1 April next year. Not enough to cause companies to cross the Tasman, perhaps, but a sign that the Government is serious about trying to close the growth gap between the two economies.”

* The New Zealand Institute of Chartered Accountants has described today’s announcement as “the most radical tax budget we have seen for some time”. Tax director Craig Macalister said it signalled a positive direction for business and the economy, and was a return to the past of lower rates and a simpler tax system.

* Progressive Party head Jim Anderton said the budget would widen the gap between rich and poor and that the National-led government had shown its “true colours”. “The CEO of Telecom who reportedly earned $7 million last year, will now get an extra $6608 per week. Those on $600,000 will take home about an extra $500.”

* The Green Party was equally scathing, saying it was a budget of “fiscal, social and environmental deficits” when “smarter options” were available. “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,” co-leader Dr Russel Norman said.

* A similar reaction came from Greenpeace, which said it confirmed the Government had “completely failed to understand that New Zealand’s economic future was intrinsically tied to our environment”. Political advisor Geoff Keey said it had not only ignored the global realities of climate change, but also the global green revolution “It has officially positioned itself to miss the green wave completely.”

* The budget was a “mixed bag” from the point of view of the New Zealand Medical Association. It said it was concerned at the negative effects of reduced health funding which will lead to some patients missing out on essential health services, although it was pleased to see the funding shortfall was “not as dramatic” as anticipated.

* The budget will do nothing to enhance the innovation, learning and research going on in tertiary education institutions around the country, according to Tertiary Education Union national president Dr Tom Ryan. "New Zealand has a world class tertiary education system, with world class people staffing it, and is a crucial driver of a healthy, productive economy. But it can't do that effectively when the government keeps shrinking the pool of public money to fund the sector."

* Bank workers union Finsec said the country “needed a Robin Hood budget, but got a Sheriff of Nottingham instead”. The union said that with international calls growing for a small extra tax on banks and an “urgent need” to help ordinary Kiwis who are suffering as a result of the recession, the government had got this budget “badly wrong,”