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Bill English - Source: NZPA / Ross Setford -
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Finance Bill English says his second budget to be delivered on May 20 could deliver tax reform to boost the economy as the government grapples with lingering unemployment.
English believes that unemployment is reaching its forecast peak of around 7%, but it is unlikely to drop quickly.
This is because employees are working fewer hours since the recession hit and employers will start increasing those hours before they begin hiring new people, he says.
The budget will try to create broad-based recovery and "incentives for hard-working Kiwis to get ahead" as well as increasing savings and investment, English says.
While there are signs the economy is recovering and confidence improving, this is not across the board, he says.
"Some sectors will pick up faster than others, some businesses will do better than others, some people are going to be carrying the cost of the recession some time yet as they look for jobs and try to get their incomes up," English says.
He says his second budget will focus on improving the economy, getting the government's books back in shape and could also address changes to the tax system.
English says Prime Minister John Key will outline the government's thinking on tax reform when he opens the parliamentary year on Tuesday.
English and Key have constantly refused to rule in or out options put forward by the Tax Working Group last month.
It recommended a package of changes including a land tax, changes to the treatment of rental properties, increasing GST and lowering tax rates.
"The prime minister will give some indications of direction next week... You do not get too many opportunities to reshape the tax system and right now with the economic challenges we face, tax is a potentially important lever to get our economy focused on earning more than we spend," English says.
He has repeated his concern that by the end of the decade the average income will be at the top tax rate.
Asked if the government could consider setting a new high tax bracket in the plus $100,000 mark, English said he is open to suggestions. "At this stage anything is possible."
Another possibility would be a mix of cutting rates, lifting thresholds they cut in at, indexing thresholds and introducing a tax-free level of income, he says.
English says the package would have to be politically sustainable, "but keeping everybody happy is not our main objective. Our main objective is to take the kind of action that is going to be significant enough to get a shift in our economy."
