SMELLIE BRIEFLY SNIFFS: An unusually successful Budget
Comment by Pattrick Smellie
May 20 (BusinessWire) - Teflon Johnny might just have done it again.
Just when he was up to his neck in a Tuhoe cooking pot, the Prime Minister's Budget has changed the political
conversation, drawing words like "bold" and "radical" from, gasp, the business community, which keeps harping on about
the whole "boldness" thing.
Even Business Roundtable executive director Roger Kerr, a man whose job description might include being disappointed by
Budgets, gave it six out of 10. High praise, indeed.
Granted, the most excitable comment has come from accountants, who have spent many a boring three hours in the Budget
lock-up with no tax policy to speak of and are now suddenly in the thick of it.
Which is not to say they are wrong. Tax is a scary, sometimes boring matter. But no one disagrees that it matters like
hell when that assessment notice comes in from the IRD.
And in the constrained world of MMP politics, it must just about count as radical to manage a return to a corporate tax
rate of 28%, which was last seen at the end of the First Age of Rogernomia in 1989, and the top tax rate only went above
33% in 2001.
What makes the Budget particularly strong is the extraordinary state of the Crown accounts. If net Crown debt is to peak
at less than 30% of GDP after the most wrenching debt crisis ever to hit the developed world, then we're looking in
reasonable shape.
If it weren't for the fact that the Budget economic forecasts still have current account deficits at around 7% of GDP
for the foreseeable future, there would be an argument that English could borrow a bit more and get the place really
going.
But with total private and public foreign debt standing at closer to 140% of GDP, that luxury is not available.
Instead, we hang onto the recovery and hope like hell that Spain, and Portugal, and Italy, and the US, Japan and all the
other big debtor nations can keep it together in the meantime.
(BusinessWire)