In this edition of Focus on Finance, I talk about the April first changes that will boost businesses and superannuitants, building better frontline services, earthquake tax relief and the significance of the latest GDP figures.
APRIL 1 CHANGES BOOST BUSINESSES AND SUPERANNUITANTS
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On 1 April businesses got a boost from the Government cutting the company tax rate to 28c in the dollar, down from 30c. This will make New Zealand more competitive and increase incentives for businesses to reinvest earnings into growth and jobs. A number of other 1 April tax changes will encourage sound investment decisions, increase fairness and ensure the tax changes are broadly fiscally neutral. You can read more in my media statement.
Another major 1 April change was the annual increase in benefits and NZ Super. For superannuitants the news is particularly good. Tax cuts, alongside the normal adjustment, have pushed the married rate of NZ Super 6.8 per cent higher than a year ago, easily beating inflation of 4 per cent. Three rounds of tax cuts have resulted in the married rate of NZ Super increasing by about 19 per cent since October 2008. For more information you can read the Social Development Minister Paula Bennett's media release.
BUILDING BETTER FRONTLINE PUBLIC SERVICES
The public service has made good progress in delivering better value for money in the past two years. However last week, in a speech to senior public servants, I outlined my view that change needs to pick up momentum to meet our goals of high-quality public services for little extra money.
The longer we are in office the more it is clear the costs of running government are too high, there is too much duplication and the organisation is too cluttered. We are confident that over time we can continue to improve services and get better value for money in the public sector. This will help us get on top of debt and rebalance our economy towards greater savings and exports. You can read my media statement summing up my speech or view State Services Minister Tony Ryall's media release for more about increases in frontline public service job numbers.
EARTHQUAKE TAX RELIEF
Last week Revenue Minister Peter Dunne and I announced several tax relief measures to help Christchurch residents and businesses get back on their feet after the February earthquake. These measures, which you can read more about in my media statement, will make it easier for Christchurch businesses to comply with their tax obligations, recognising the disruption caused by the earthquakes. It is one of several initiatives to help Christchurch businesses and employees including the extended earthquake assistance package and an initial economic recovery package.
RECOVERY TO PICK UP PACE LATER THIS YEAR
The latest GDP figures - showing growth of 0.2 per cent for the three months to December 31 - confirm the economy was subdued in the second half of 2010, as New Zealanders paid down debt and the economy took a hit from the first Canterbury earthquake. The second earthquake is expected to have a significant impact on growth in the early part of this year.
However looking ahead, I'm optimistic about our economic outlook. New Zealand's commodity export prices are around record levels, interest rates and inflation are relatively low, the rebuilding of Christchurch will provide a boost to the economy, and the Rugby World Cup will attract tens of thousands of visitors. The Reserve Bank is forecasting these factors to lift growth to over 5 per cent next year as the economy picks up momentum. You can read more in my media statement.
Lifting New Zealand's productivity, both in the public and private sectors, is critical to lifting New Zealand's long-term economic growth, so I was pleased to see the new Productivity Commission begin work on 1 April. It has been given a wide-ranging brief to inquire into productivity-related matters. Its first two topics will be housing affordability and international freight transport services. Both these issues are important to our economic performance and housing affordability also has strong social implications. You can read more about these inquiries in my media statement.
THINGS TO LOOK OUT FOR
- 12 April, speech to the Wellington Employers' Chamber of Commerce.
- 18 April, Statistics New Zealand will issue Consumer Price Index (CPI) figures for the three months to March 31.
- 28 April, the Reserve Bank will issue its latest decision on the Official Cash Rate.
Hon Bill English
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