Budget 2011: It could have gone further says business

Business is generally saying the budget goes only some of the way to addressing the challenges the country faces.

There were some commendable moves but overall the Government was treading water rather than addressing the big issues, Business Roundtable director Roger Kerr told NZPA.

"We are still lacking the serious coherent economic plan which would alleviate the external vulnerabilities and improve the longer run growth performance," he said.

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.

There was not a lot of rebalancing of the economy going on as export growth was predicted to be weak in the budget documents.

The changes to KiwiSaver would fall on employees as business would pass higher costs on, he said.

BusinessNZ said the budget was cautious and safe, with most announcements generally pointing in the right direction of reducing government expenditure and debt.

But 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," he said.

The Employers&Manufacturers Association (EMA) said the increasing of KiwiSaver contributions was better than raising taxes.

"The budget could have cut deeper, but it's not easy to do with the country in or near recession; making deeper cuts at this time would fly in the face of the lessons learnt from the days of the Great Depression," EMA chief executive Alasdair Thompson said.

"The principles behind the scheme remain intact. Keeping the $1000 start up incentive and the tax credit, albeit at the reduced level of $521 annually, means KiwiSaver remains a very attractive scheme.

"It also means the Government will not have to borrow so much, thereby lessening the risk of a credit rate downgrade," he said.

Business New Zealand said only a third of the announced $980 million public sector savings would come from efficiency improvements, with the bulk of the savings being generated by the removal of central funding for KiwiSaver and other government superannuation schemes.

"Student loans, the other major area of expenditure where significant change is called for, brought disappointment. Reversing the interest free status of student loans would have brought a much larger shift to financial health and would have helped bring better incentives in study choices and completion rates," Mr O'Reilly said.