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Press Release

Budget 2014: A need to focus on the bullseye

In a game of darts, predicting the outcome can be difficult, but if a player has a good technique and aim, the chances of winning are considerably improved.

In the lead up to this year's budget, a number of political darts will need to be thrown by the Government on various fiscal and economic matters, in the hope that they will hit the bullseye – or at least land somewhere close by.

Given the backdrop of a MMP voting landscape later this year, the Government will want to prevent any long-term politically damaging consequences from darts that stray from the board.

Top of mind for the Government will be achieving the long stated commitment to return to surplus in 2014/15 and coupled with this, bringing net core Crown debt down to no more than 20% of GDP by 2020.

These objectives will be closely followed by the Government’s wish to:

  • maintain economic growth between 2% and 3% over the next 3 years
  • keep anticipated wage growth closely in line with the country’s economic growth rates over this same period
  • ensure that when interest rates do rise, they rise steadily, and hopefully by not a great deal more than 2% between now and 2017

Continuing to freeze the Government’s contributions to the superannuation fund until 2020 will also be a top priority in light of the budget decision last year to fund a $1.6 billion increase on health before 2017 and a further $2.1 billion to assist Canterbury with its earthquake recovery.

During his state of the nation address in January the Prime Minister proudly announced that the Government will be investing an extra $359 million into teaching and school leadership over the next four years. Given the recognised importance of education to New Zealand’s future prosperity, the unanswered question is, what else might we expect to be spent in this area?

As there is a huge amount of money involved, one can also be quietly confident that further action will be taken to not only collect the $8.3 billion (yes, that’s billion) of outstanding student debt, but also to support Inland Revenue in collecting all the overdue taxes.

And in light of ACC’s exceptionally strong financial result last year, vigorous debates around further reductions to last year’s 40% decrease in levy rates for households and businesses are in the frame, together with costs associated with extended maternity leave, baby bonuses and further business incentives in the form of R&D credits, energy savings and the like.

It will be fascinating to see how many Budget decisions actually hit the bullseye, and when the aim is off, how the New Zealand business community will react.

Further enquiries, please contact:

Mark Hucklesby
Grant Thornton New Zealand Partner and National Technical Director, Audit
T +64 (0)9 308 2534

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