I was delighted with the Budget as my only forecast proved to be spot on. What was it? Simply that any tax cuts would apply before the election.
The media has been full of Budget reports and all vested interests have expressed their approvals or concerns. That always happens so is nothing new. I believe it will be excellent for the printing industry as many millions of dollars will be spent over the next six months explaining the benefits buried in the small print.
There will be pamphlets and brochures from government departments letting us all know how the proposals will be introduced and what the personal benefits will be. A lot of printing will be for the Dis-trict Health Boards as they work through the detail involved for their extra spen-ding. Much is to be conditional and ex-plaining what does and does not qualify is going to take many reams of paper. Family support and superannuation increases will not be straightforward either so there will be a lot of detail to distribute dealing with the limitations.
Current opposition political parties will also have a lot of information to get out to the public. I would expect some duplication so that not everything has to comply with the Electoral Finance Act limitations. That too will be a boost for printers. It will be your job to make sure you get your share of this extra business.
There were a couple of matters either missing from the budget or deemed unimportant by the media.
The first deals with productivity. There has been a lot of comment in recent months about the low productivity of businesses in New Zealand. We have dropped well down the international tables and all report cards say we need to do better. I presume of course that the figures are correct.
If we are to improve productivity then we have to increase the skill levels of the workforce and invest in more productive plant and equipment. The research and development provisions announced last year are great for accountants but not all that good for the producers as they try to work out what does and does not qualify.
A better way of dealing with the problem would be to have a major increase in depreciation rates. At present they are based on the expected useful life and for some items are calculated down to two decimal places. A massive increase in depreciation rates would make it easier for firms to invest in the latest technology. It would reduce their tax bills but make it easier to fund the new investments. It is therefore a matter of priority.
Does the Government want to maintain the tax take or improve productivity?
Now would be an excellent time for such an incentive as imported technology will increase in cost once the New Zealand dollar stops defying gravity. That will happen when the USA political scene is sorted out along with their economic policies. The best guess is that that might happen towards the end of the year.
The second matter was how to deal with inflation.
The chance was lost to make some changes so that a move was made away from having just one shot in the locker. Concentration on interest rates on their own does have an effect on inflation but creates a lot of unnecessary damage and is in many ways self-defeating.
Our high interest rates attract funds from overseas investors and that puts up the value of our dollar. Exporters suffer and that flows right through the economy. Imports are cheaper so we are flooded with consumer goods which increase spending and make saving a second preference.
Local producers of all sorts make losses, their tax payments drop or stop and unemployment increases along with declining productivity. It is not a good scene and one which will not improve our international rankings in the performance tables. Keeping interest rates high makes it harder for firm to fund their capital expenditure.
What all this confirms is that there is no one solution to the problem of inflation. The sooner that is recognised then the sooner our people and our country will improve.
One last lesson from the Budget deals with superannuation. Consider the publicised plight of pensioners in recent months. They have had a tough time of it. Help is on the way but not for another five months. If you are not doing anything to provide for your retirement then you should reconsider your position. A bit more saved now will make a major difference to your enjoyment of life later.
