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Budget an 'exercise in juggling the figures'

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Latest Political News | Friday May 25 2012 6:11

Budget an 'exercise in juggling the figures'

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Bill English's Budget is being described as an exercise in juggling the figures.

Newstalk ZB's political editor Barry Soper says the Finance Minister has taken with one hand and given with the other.

There's $4.4 billion worth of spending, but Mr English achieves that essentially without dipping his hand into the taxpayer's pocket.

$3 billion of the spend comes from switching money between government departments.

The rest is from new revenue, through things like tobacco tax and closing loopholes.

Budget 2012: The Facts

Mr English was asked what it's like being a Finance Minister without money.

"It means we actually get to talk about the real issues: is the money we're spending used effectively, are we actually getting more kids learning, are we actually getting people off welfare and into work.

"When there's plenty of money, the system just spends its time just getting more money and waving it around."

The Government's confident its extra investment in tax compliance will reap dividends.

Almost $80 million is to be spent over four years to bolster Inland Revenue's tax compliance work.

Revenue Minister Peter Dunne says the move's expected to gain over $340 million in revenue.

He says previous work in the area backs this up.

"What we gain from the investment we made in 2009 and 2010, we're getting $6 or $7 back for every dollar invested. That's really why we've made the additional investment because it has been proved to be worthwhile, has proved to be successful."

Newstalk ZB's business correspondent Roger Kerr says the Budget is being called drab and dull.

"But I think those people that are calling it that are only really demonstrating that they don't understand the economy, the Government's financial position and the role the Government plays in the economy. I mean, the Government does not determine how the economy performs."

Mr Kerr told Mike Hosking the continued investment in science is important for research and development, and the private sector needs to get on board to help out.

And people are enrolling themselves in KiwiSaver in increasing numbers.

The Government's plans for auto-enrolment in the scheme by 2014 have been put off indefinitely.

It comes just a year after Finance Minister Bill English promised auto-enrolment was on the cards, if and when the country got back into surplus.

The deferral could save the Government more than $500 million over four years.

KiwiSaver author Mary Holm says auto-enrolment isn't really a big deal these days.

"More and more are joining it voluntarily anyway, or when they get into a new job they're getting auto-enrolled anyway. Overall I think auto-enrolment is good but I'm not that worried if it gets deferred for a year or two."

Ms Holm is welcoming new disclosure rules so investors can now compare the performance and fees of various schemes.

Labour's finance spokesman David Parker says fewer people will join the KiwiSaver system.

"The Australians having a compulsory saving scheme where they're moving the rate of compulsory workplace saving for everyone from nine percent to 12 percent and the New Zealand Government is effectively going back on their attempts to improve KiwiSaver."

Labour says the removal of tax credits just leaves those already struggling worse off.

Mr Parker says removing the tax credits for those who really need the money doesn't make sense.

"Under this government the major income tax breaks have gone to those who already earn the most and this is another example of where they're trying to plug the gap by taking a bit more tax off the people who earn less."

Westpac chief economist Dominick Stephens says getting to surplus relies on a lot of things, like a huge increase in GST revenues.

"They're forecasting 30 and 40 percent increases in construction activity, reasonably bigger increases in consumption, so private household spending and that's going to, in the Treasury's opinion, yield more GST revenue."

However Mr Stephens says the Government may have more work cut out for it in order to achieve the surplus.

Green Party co-leader Russel Norman believes returning to surplus seems to be the one thing the Government has to hold up to taxpayers to show it knows what it's doing.

"If we have to destroy the entire economy in order to meet it, if we have to make middle and lower income earners suffer in order to meet it, at least we can say that one thing."

Analysts are questioning just how realistic a return to surplus by 2015 will be as forecasts show average annual growth of three percent, creating 154,000 new jobs over the next four years.

PricewaterhouseCoopers economics team director Chris Money says that result is possible but not likely.

"To get that average growth we would have to kind of go back to the kind of growth that we were getting in the early 2000s on the back of some very, very strong dairy payouts so I think a lot of things would have to come together for us to achieve that."

Mr Money believes the Government's struck a right balance between saving and spending.

Political commentator David Slack says the Government seems to have forgotten that some debt can be good for the economy.

"The money you might borrow to put into R and D, education, and improving schools and technologies. There's no way we're not going to be in this position we're in now in 10 years time, unless we can transform our economy."

Mr Slack says there's not enough spending, even on good debt, to stimulate the economy.

He says ordinary New Zealanders gauge the country's performance on their own lot.

"And they get a sense of how things are by talking to their friends and if you talk to your friends today, I would say most people would say they're hearing less optimistic words than they were a year ago."

Mr Slack says people's own circumstances will also determine how the Government fares from this Budget, and the books remain in a very precarious position.

New Zealand First Leader Winston Peters says it's a flimsy assumption to make that the Christchurch rebuild will account for half the growth, and the remainder of the country the rest.

"Then you've got a $193 million surplus, well I've seen such a surplus prediction turn into a $3.2 billion deficit overnight. I think the assumptions are illusory, and I think they're deceptive."

And while tobacco products face an annual 10 percent tax hike for the next four years, Associate Health Minister Tariana Turia was after much more.

"A big increase this time would have been better, a 50 percent rise, but the Government agreed to 10."

She says she tried for 50 percent.

Maori Party co-leader Pita Sharples says research done by Otago University suggests smokers won't be too bothered about the excise rates.

"Smokers generally agree with the higher prices and measures taken, including packaging, so it's sort of like they want to stop, don't know how."

Meanwhile rental accommodation site Book a Bach is expecting more business now it's harder to claim for tax on a bach.

The Government's announced its closing a loophole which will stop owners being able to claim back on their bach even if they rent it out for just a few days a year.

The move's expected to save $109 million over four years. Book a Bach CEO Peter Miles says until now, owners could even claim for the time the bach may have been advertised for.

"We actually see it as a positive move but I mean that's owners and managers are more keen to rent their properties out because when you're looking to maximise the amount of rental time and occupancy on those properties."

Mr Miles says the change will also weed out the minority who simply market their holiday homes for show.

Parliament is sitting under urgency today to pass Budget related legislation.

The bill to close tax loopholes and remove some tax credits, such as those for people who earn less than $9880 a year, passed this morning.

The legislation that will increase tax excise on cigarettes is expected to get its first reading this afternoon.

Photo: Katie Bradford-Crozier

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