Kirk Hope: Getting bang for our Budget surplus buck

Infrastructure and modernising tax are the two critical areas of spending of this year's Budget surplus, Kirk Hope says.
SUPPLIED

Infrastructure and modernising tax are the two critical areas of spending of this year's Budget surplus, Kirk Hope says.

OPINION: Being part of a growing economy means more options for New Zealanders.

Over the last few years as New Zealand's gross domestic product (GDP) has steadily grown it's become more possible to pay down debt and invest in things that make a difference for everyone.

Now at the beginning of a new year, our new political leadership is considering what's possible in the 2017 Budget.

The available surplus, after providing for extra spending required by the Kaikoura earthquakes, is not large – less than half a billion dollars – but could still be spent in a way that delivers good benefit.

READ MORE:
Joyce signals low and middle earners' top rates target for tax cuts
Kirk Hope: trade builds unity, so we should try to rescue the
TPPA

Business would suggest two critical spending items.

The first, already built into the Government's plans, is infrastructure. Capital spending of $3 billion in this year's Budget for infrastructure has already been signalled.

Roads of national significance like the Waikato Expressway will improve the links between upper North Island centres.
PETER DRURY/FAIRFAX NZ

Roads of national significance like the Waikato Expressway will improve the links between upper North Island centres.

This is prudent. Having modern, safe facilities - roads, bridges, airports, broadband and other communications networks, water storage, utilities, pipelines and so on – is critical for living and doing business well.

Recent infrastructure spending has been well placed.

Current projects – roads of national significance like the Auckland western ring route, Puhoi to Wellsford road, Waikato expressway, and Tauranga eastern corridor - will soon be making a big difference – linking the main centres of greater Auckland, opening up Northland's economy, and speeding up travel for Waikato and Bay of Plenty.

Investment in urban rail in Auckland and Wellington and national broadband structures is also strategically important.

What would be the best use of $3b earmarked for infrastructure this year? A good answer would be more infrastructure to serve the tourism industry, especially if delivered by public-private partnerships.

Tourism is likely to keep on growing and needs more investment, especially in the regions – roading, carparks, walkways, cycleways, toilets and other tourist facilities could all be developed and extended to better cater to the millions of overseas visitors coming here every year.

Finance Minister Steven Joyce has in the past suggested that indexing tax thresholds could be part of a 2017 tax package.
LAWRENCE SMITH/FAIRFAX NZ

Finance Minister Steven Joyce has in the past suggested that indexing tax thresholds could be part of a 2017 tax package.

As tourism is a key sector for export earnings, investment here will bring future gains.

A second item worthy of consideration in this year's Budget would be modernising tax.

A surplus of under half a billion dollars is probably not enough to deliver meaningful tax cuts, whether business or personal tax.

But it could be used to restructure the system in a way that would effectively leave more money in everyone's pockets - by adjusting tax brackets and indexing for inflation.

Ad Feedback

There's a fair amount of agreement that current tax thresholds are set a bit low, for example KPMG has suggested thresholds could be adjusted upwards by about 9 per cent.

Fairly moderate changes to the tax brackets could mean a lot to the average person.

For example the 10.5 per cent rate for incomes up to $14,000 could instead apply to those up to $20,000.

The 17.5 per cent rate for the next band of incomes up to $48,000 could instead apply to those up to $64,000.

The 30 per cent rate for the next band up to $70,000 could apply to those up to $80,000.

And the top 33 per cent rate for incomes over $70,000 could instead kick in at $80,000.

This sort of adjustment could be afforded within the modest surplus available in this year's Budget.

While not as stimulatory as a major tax cut, it would still have the effect of increasing real incomes, spending power and business growth.

It would also be fairer.

New Zealanders are already taxed quite steeply on modest incomes and subject to further tax because of bracket creep through inflation.

Finance Minister Steven Joyce has in the past suggested that indexing tax thresholds could be part of a 2017 tax package.

It would be good if this year's spending could include adjustments of this kind.

Investing in infrastructure and modernised tax would give us good bang for the buck from the budget surplus.

Kirk Hope is chief executive BusinessNZ, www.businessnz.org.nz

 - Stuff

Comments

Ad Feedback
special offers
Ad Feedback