Benefit for most but nothing for Small Businesses
Wellington, May 25, 2017
Finance Minister Steven Joyce presented his first Budget in Parliament a few minutes ago. This is his first Budget as Finance Minister and the Ninth for the National Party since occupying the Treasury benches in November 2008. We will bring updates continuously over the next few hours and conclude with our own exclusive analysis of the government’s Fiscal Policy later tonight.
-Editor
Budget 2017 has brought something for everyone, with wide-ranging spending for families and infrastructure two areas that are seeing the most investment, says Richard Forgan (Pictured), Partner and Budget Leader at PricewaterhouseCoopers, New Zealand.
In the following analysis, he speaks about the investment outlay, increased benefit for New Zealanders under ‘Working for Families.’
Reaping Rewards
Minister of Finance Steven Joyce’s first budget finally reaps the rewards of the Government’s fiscal patience. Strong economic performance with good growth, modest inflation and shrinking unemployment, gives the Government options that it did not have before. And the response has been to provide something for almost everyone.
There are welcome shifts to tax thresholds, long held at their current levels. Together with Working for Families, these will give the typical earning household between $1,000 and $2,000 more per year in disposable income. And those benefits will be most felt by low earners.
Infrastructure and house-building get a huge boost, most of it in Auckland; the innovation system gets more funding; the health sector is given some $4 billion more; defence, law and order, prisons, school building and vulnerable children all benefit.
Underneath the headlines, the general thrust is the more of the same from previous years – economic growth supported by investment in trade relationships, infrastructure building and innovation funding; more social services targeted at the most vulnerable parts of society; investment in core public functions such as the health, education, the tax system, ACC, defence and the justice system.
The losers
Small businesses and the regions are mentioned in passing (particularly for tourism), but pale into insignificance against the investment in Auckland’s powerhouse.
But the underlying themes show a high degree of continuity, with the Government investing in recovering from the Kaikoura earthquake and replenishing EQC’s funding model to prepare for any future shocks.
Family Income Package
The Government announced today a Family Incomes Package to support New Zealand families, giving families more after-tax income to spend on goods and services in the coming years.
Tax thresholds have been static for many years, but will now move sharply upwards. The lowest income tax threshold will move from $14,000 to $22,000, and the $48,000 threshold will shift up to $52,000.
“This will put between $1000 and $2000 a year back into most earning households.
The Government has reaped the benefit of ‘bracket creep’ for many years, and it is good to see this somewhat rectified.
While all tax-payers will benefit, combined with changes to Working for Families, the impact will be most felt by those on lower incomes. More generally, the flow-on of income into consumer spending will strongly support growth and businesses over the next few years.
Budget 2017 has not offered a lot for small businesses.
The challenge for the country’s businesses is to make the most of growing consumer spending if they also want to reap the benefits of this year’s Budget.
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Chart Source: The Treasury, Government of New Zealand
Picture of Richard Forgan: The National Business Review
