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Editorial by Selwyn Manning. Notes:

Selwyn Manning, editor –

EDITORIAL BUDGET 2015: New Zealand’s finance minister Bill English has delivered a third-way styled budget that commits significant increases to beneficiary and low income family entitlements but fails to address the causes of poverty.

The Government has also failed to deliver a Budget surplus, revealing a $684 million deficit, despite the Prime Minister John Key campaigning in the 2014 general election that New Zealand was on the cusp of an economic boom.

That prediction, along with the promise of a surplus, was all hot air.

Comparatively, New Zealand’s so-called rockstar economy resembles a wannabe performer that missed the conviviality and dived straight into the hangover.

What New Zealanders were seeking from the Finance Minister was a plan, blue-sky thinking, recreating the wheel styled economics designed to turn New Zealand’s challenges into opportunity. Instead, National delivered a pedestrian effort. National’s reputation as being the party of fiscal prudence and good economic governance is now tarnished.

Its promises of better times have proven false. The backstory is relevant but it must be noted that National has delivered deficits since being elected to Government in 2008.

Pointing the finger of blame at the previous Labour-led Government, as Bill English did on reading his Budget, simply does not cut it. Granted, there is significant increased spending for public health, hospitals, and schools.

Nurses, like teachers, will be relieved. For example, the New Zealand Nurses Organisation (NZNO) is currently seeking ratification from Auckland District Health Board nursing staff to agree to a five percent incremental increase to their gross wages and salaries over the next three years. It looks likely to pass.

If the Government had not targeted an extra $1.76 billion for health over the next four years, nurses knew health services would have been cut. Likewise, the Government announced a targeted increase to special needs teaching. But the backstory here is important too.

The Government is currently facing legal action from lawyers representing clients who assert the rights of special needs children are being denied them due to Government policy and lack of provision.

It appears the top up increase by the Government is designed to mitigate this legal challenge. Defence spending is up slightly, as is the budget for New Zealand’s police and intelligence agencies.

But the big losers are thousands and thousands of small to medium sized New Zealand businesses and share farmers. The Budget indicated that Gross Domestic Product (GDP) is down on Treasury projections as is the tax take.

This demonstrates a need for New Zealand’s small and medium-sized businesses to be set free of a business-to-government liability and to be rewarded for specialist research and development initiatives. We are not talking handouts here. Rather, businesses that get ahead divert considerable time to developing innovation and value-added product.

The time spent on such tasks is time taken out of the day to day running of enterprise. Small and medium sized businesses should be issued tax credits for this effort.

R&D is not only an investment in a business, it is an investment into the country’s domestic economy, it is an investment into job creation and export potential.

But National has refused to aide the diversification of New Zealand enterprise via tax credits and as such has marginalised the biggest cumulative sector of New Zealand’s productive economy.

National’s approach is for Government to select recipients of research and development grants. It is a methodology open to allegations of cronyism.

These grants are largely contested by businesses that have a proven record of development and have grown into enterprises of significance. The small operators miss out.

In short, the Government has maintained its desire to reward through R&D grants those who it favours rather than provide R&D tax credits to the cumulative mass of small and medium sized companies that are seeking to develop value added product and services. And that is an opportunity wasted.

If harnessed, New Zealand would likely witness an explosion of innovative and highly prized market-leading product.


Absent from this Budget is a clever mechanism to address the under capitalisation of New Zealand, nor address the domestic economy’s vulnerabilities and over reliance on foreign capital, lenders, and investment. We see the symptoms of this economic illness most obviously in Auckland’s over-cooked housing market.

New Zealand remains exposed to global fluctuations responding to the fortunes (or otherwise) of overseas lenders. We remain under capitalised, too reliant on foreign capital, foreign lenders, and foreign investment.

Budgets are all about signals, and the Government’s decision to ditch the KiwiSaver Kickstart enticement misses another opportunity.

The KiwiSaver fund could be developed into a resource designed to strengthen New Zealand’s current account, it could be used to cool the economy through variable compulsory contributions (instead of relying on the 1990s tool of increasing the OCR rate and hiking up mortgage interest rates).

KiwiSaver potentially could also be used to fund investment projects – industry, product and service aligned businesses, job creation initiatives, when empowered with affordable investment, could bring the provinces and regions into alignment with the opportunities presenting to those who live in the cities.

Sadly, regional development was not even mentioned in the Budget despite New Zealanders from those areas crying out for some innovative thinking from the National-led Government. This, was a third way budget, a budget that fell flat. What a shame.



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