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John Key and Bill English walk into parliament before the Budget reading - Source: Getty Images -
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The 2011 Budget lacks the snappy nickname given to previous finance ministers' efforts, such as the "block of cheese Budget" and the "chewing gum Budget", but experts are still doing their best to give it an easily digestible feel.
ANZ Bank's chief economist Cameron Bagrie called Bill English's third Budget "solid" and warned against looking for a "magic potion".
"The real big risk at times like these is that we tend to go looking for the magic bullet that is going to deliver economic nirvana. New Zealand is in a bit of a pickle; we do have huge net external debt and getting out of that is going to be a long journey," he told TVNZ today.
But leading commentator Brian Gaynor, of Milford Asset Management, criticised it as a 4/10 result that lacked vision and delivers no real economic plan.
"(National) seem to be relying almost totally on the Rugby World Cup and the Canterbury rebuild for a re-generation of the economy.
"They've got very optimistic growth forecasts but you come to a full-stop after the RWC and Canterbury," Gaynor said.
Updated economic forecasts published in the Budget say inflation-adjusted economic growth will peak at 4% in 2013 before dropping back to 2.7% in 2015.
The figures also predict gross domestic product will grow in real terms by just 1% in the year to June, 1.6% in the June 2012 year, and then 4% in the June 2013 year before dropping back to 2.7% in 2015.
Gaynor says those long-term projections are very questionable.
"There's nothing in the document to justify how they can get to those figures," he told AMP Business today.
Bagrie disagreed with Gaynor and said Treasury's predictions were on the money, at least for the next 18 months.
"The New Zealand economy is notorious for having three gears: Fifth, neutral and reverse. I think we'll change gear in the second-half of this year.
But he does agree that Treasury's long-term figures - which assume around 3% average growth over the next six to seven years - are "a bit optimistic".
Bagrie says the country still needs a fundamental economic shift but he thinks it can happen.
"Saving your way to growth is just not too much fun; we need to get more on the growth accelerator side of the economic cycle," the economist said.
Differing projections
Gaynor points out that Treasury's projections - including the increased tax take and economic growth - all hang on creating 170,000 new jobs over four years and he's sceptical of that ability.
"I find it very hard to perceive that's going to occur. We've only created 82,000 new jobs in the last six years," he said.
BusinessDesk says the Budget forecasts do reveal a substantial difference in view between the Treasury and the Inland Revenue Department on the tax take over the next four years.
The IRD is estimating $1.5 billion less tax than the Treasury expects.
This is a "larger difference than is usually the case", the Budget documents say.
And just a 1% drop from the forecast rate of nominal GDP growth would, by 2015, strip $3.38 billion from annual revenue expectations, with the exact timing of the Christchurch rebuilding phase being a key uncertainty.
The ratings agencies kept New Zealand's credit rating intact after yesterday's Budget but have kept it on a negative outlook, indicating there are still concerns.
- With BusinessDesk
Add a Comment:
Post new commentchrisinus said on 2011-06-06 @ 10:28 NZDT: Report abusive post
Most of the students who are overseas are there because they're having problems living in NZ with low salaries and very high taxes but rip-off costs of living. If you want to keep them here, NZ needs to increase salaries and taxes to match those in Australia and UK. Then they would continue to pay their loans and new laws wouldn't be necessary. KEEP UP WITH THE WORLD, NZ!!!
JayKay22 said on 2011-05-21 @ 21:12 NZDT: Report abusive post
Why take away all course related costs for part-time students - why not simply halve it instead - make the entitlement $500 instead of $1000. That makes far more sense.
pioneer said on 2011-05-20 @ 12:04 NZDT: Report abusive post
TO MANY FAMILIES WANT HAND OUTS. THE FAMILY ON TELEVISION LAST NIGHT HAD 5 CHILDREN AND A DOG THE CHILDREN WERE OLD ENOUGH FOR THE MOTHER TO GET A JOB PLUS SHE HAD SPENT MONEY ON A STUPID TATTOO IF YOU CAN'T AFFORD CHILDREN DON'T BREED AND EXPECT THE COUNTRY TO BORROW FROM CHINA AND jAPAN FOR THEM. WE HAD 3 CHILDREN I WORKED AT NIGHT AND IN THE WEEKEND WHILE THEY WERE BABIES UNTIL THEY WENT TO SCHOOL THEN WORKED PARTIME 1 IS A SOLICITOR,2 A CEO IN AUS,3 BUSINESS MANAGER
big2al said on 2011-05-20 @ 09:06 NZDT: Report abusive post
As usual with a Nat govt, the only ideas they can come up with are selling the family jewels (SOE's) which we already know is only a short term gain & a long term loss (NZ Rail) and cutting public services. A billion dollars lol, where do they think the money is coming from? Essential services & jobs will be cut, which will lead to more spending pressure on WINZ as more unemployment benefits are paid. No matter how this Govt cleans it up, it is the poor & middle income earners who suffer.
smithy said on 2011-05-20 @ 07:48 NZDT: Report abusive post
It may lack flair and inspiration but I think it is a very sensible budget given the economic climate. I dread to think where we would be with Labour in charge who have not yet made a valid argument on any subject