Joyce signals low and middle earners' top rates target for tax cuts
Finance Minister Steven Joyce has signalled that cutting the top tax rate paid by lower and middle income earners is his top priority for tax cuts.
In a speech to the Auckland Chamber of Commerce on Thursday he said it was still too early to be sure that a surplus will be achieved in the current financial year, particularly given the costs associated with the Kaikoura earthquakes.
Treasury revealed on Thursday that the books were in surplus by a narrow $9 million in the first six months of the current financial year - almost $700m ahead of forecast.
Surpluses are predicted to rise to $5.4 billion by 2018/19 and, provided they come to pass, that provided options, Joyce said in his fist major speech as finance minister.
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He was concentrating on four key areas for his first Budget on May 25.
They were better public services for a growing country, building the infrastructure a growing modern economy needed, paying down debt "as a percentage of gross domestic product" and reducing the tax burden "and in particular the impact of marginal tax rates on lower and middle income earners, when we have the room to do so".
He said the country was seeing the biggest infrastructure programme for many decades, with the Government's capital spending reaching about $7b, up from $3b or $4b a year in recent times.
In Auckland the level of work on the transport network was unprecedented, and disruption from that was one of the reasons commuter travel times were longer.
The Government was looking at demand management tools including electronic road tolling in the medium to long term.
"But to be clear, we see this as a way to make the roading system work better – and not as a revenue raising exercise."
The Government's position was that any road pricing initiative on existing motorways and highways would be as a replacement for petrol taxes and road user charges not in addition to them.
Also it was not interested in introducing a regional fuel tax, Joyce said.
He and Transport Minister Simon Bridges had told the Auckland Council on Thursday "we do not see regional fuel taxes as part of the Government's mix for transport in Auckland because they are administratively difficult, prone to leakage and cost-spreading, and blur the accountabilities between central and local government".
But it was keen for a more detailed discussion about demand management tools and to look at options for longer term funding for new infrastructure, including private finance for some projects, such as the Penlink route of Auckland.
Auckland Mayor Phil Goff said he was disappointed at the decision to rule out a regional fuel tax despite Auckland's worsening traffic congestion.
"While the Government has the power to rule out a fuel tax, it has a duty to the people of Auckland to come back to Council with alternative solutions. Aucklanders are fed up with sitting in their cars on the motorway for hours at a time. It's lost time for them and lost productivity for the city," he said.
"People want the Government to work with Council to find an agreed solution. In my view a regional fuel tax is a fair, effective and efficient way of helping close the current $400m a year gap in transport funding."
Putting the burden of resolving the transport funding deficit onto ratepayers would push up rates by about 16 per cent next year.
"I don't intend to do that. Ratepayers have been shouldering the burden for too long. We must find new revenue streams to fund our much-needed housing and transport infrastructure rather than continuing to load the cost of growth on ratepayers."
Joyce said at a time when many parts of the world face significant political and economic risks, the outlook for New Zealand was positive.
"Treasury is forecasting 3.5 per cent growth for each of the next two years – averaging 3 per cent over the total five years. We are in the unfamiliar position of being one of the fastest growing countries in the developed world. New Zealand currently has the fourth fastest growth rate in the OECD."
Both the Reserve Bank and Treasury had highlighted the current risks to continued economic expansion were almost exclusively international.
He reiterated the country was in its biggest ever construction boom, and housing growth was a big part of that.
The Government has put $1 billion to help pay for infrastructure for housing developments that could potentially support about 50,000 new dwellings.
"At this stage however only a small number of the 17 proposals received through the expressions of interest phase would result in projects being advanced earlier than previously planned by the councils."
The Government wanted to see more ambitious projects to boost housing supply over the next five years.
"We are also interested in looking at further financing options that bring in private sector capital alongside council and government capital. And we will continue to discuss those matters with our fastest-growing councils."