20 May 2005

The Government has released its 2005 budget. The budget has been highly criticised due to the fact that it does not deliver any real benefits to the tax payer until 2008. In an election year, one must wonder at the government's 2005 proposal, which leaves a blank canvas for other parties to paint their budget policies on.

What is clear in this is that there is very little provision for Maori in the 2005 budget.

Implementation will be the Key

Despite its downfalls the budget provides for significant investments in science and technology, sustainable business, health, education, police and defence.

The actual direct benefits to the taxpayer will not be available for another three years. For example, the KiwiSaver scheme is not going to be available to savers until 2008, with the first-home buying scheme even further away at 2012.

The major features of the 2005 budget are:

• The creation of KiwiSaver, a new work-based savings scheme
• Major changes to taxation, in particular tax cuts to encourage investment and savings and to assist small business, in part paid for by the new carbon charge
• Significant additional spending to promote increased opportunities, particularly through education
• Large increases in spending to enhance security, through health spending, additional Police staff, a long-term defence spending plan, funding for Working for Families and the Rates Rebates scheme and
• Further increases in spending to support economic growth.

Click on Budget 2005 for further information.

The tax cuts for business are significant but due to the fact they are partially funded by the carbon tax as was suspected by many will see many rasied eyebrows at the generosity. It is estimated that the carbon tax will generate around $720 million over the forecast period ending 30 June 2009. The business tax proposals the government is putting in place are expected to cost almost twice that amount at $1.42 billion.

What is very exciting are the growth and innovation investments, which will provide New Zealand with more opportunities. The government has dealt with some important issues such as apprentice and industry training and a national digital upgrade. In summary the technology and innovation package offers, over the forecasted period, the following:

• $31 million to increase the gains from international economic partnerships
• $49 million to implement the government's digital strategy
• $72 million to increase support for business research and development
• $118 million to further increase capability in the public science system
• $24 million to strengthen the regulatory environment by providing additional funding to the Commerce Commission, Securities Commission and the Takeovers Panel
• $9 million to boost New Zealand as a tourist destination and
• $45 million to expand Modern Apprenticeships and Industry Training and provide foundation learning, specifically literacy and numeracy through the Industry Training Fund.

Other significant numbers projected in the budget is the big spending promised over the next four years on health (at $4.09 billion), education (at $1.4 billion), defence (at $4.6 billion) and an extra cash injection into police funding.