MARK LISTER: I’D FORGO A TAX CUT FOR SPENDING ON TRANSPORT AND HOUSING
Mark Lister, 26 May 2016
There isn’t likely to be much in the Budget to drive any big moves in shares, the currency or interest rate markets.
Those days seem to be gone, under Bill English, who favours “no surprises” affairs. It may be different in an election year, when the people need reminding why to vote the current lot back in, but that’s next year, not this week.
Tax cuts seem off the table for now, and I think they should stay that way. I’m certainly no supporter of increasing taxes, especially for wage and salary earners who already pay more than their fair share, but I don’t think the time is right for cutting.
If there is a need for some tweaking, move the brackets a little to give low-to-middle earners something.
There will be a few spending initiatives, probably focused on health and education, both deserving recipients. But overall, debt reduction will get a lot of focus, which is also commendable.
When we have such a problem with high household debt, it makes sense to keep Government debt in check.
But, at the same time, we run the risk of being a little too conservative. At under 30 per cent of GDP, our Government debt is already much lower than other countries. The rest of the developed world is averaging more than 100 per cent.
Against that backdrop, and bearing in mind that borrowing costs are the lowest they’ve ever been, a bit of spending wouldn’t go astray. I don’t mean frivolous spending, but sensible spending on long-term assets and infrastructure.
Auckland is a good example. Our biggest city seems to be firing on all cylinders when it comes to the economy and jobs market, but it’s a complete basket-case if you need to travel anywhere or find somewhere to live.
Plenty of other regions deserve attention too, so how about some Budget initiatives on the housing, transport and infrastructure front? I’d give up a 2017 tax cut and settle for debt at 30 per cent instead of 20 if someone could sort those things out.
This article was originally published in the New Zealand Herald on 26 May 2016