Crisis Budget Walks Tightrope

Support for business is light in a 2022 Budget that walks a tight rope between addressing short term cost-of-living pressures, and longer-term inflation, climate change and health challenges, says Chartered Accountants ANZ NZ Country Head Peter Vial FCA.

CA ANZ rated the Budget against six measures – boldness, agility, vision, certainty, outcomes focus and quality spend - giving five a mixed score, and boldness a fail.

“There are important wellbeing elements in this Budget but overall this strikes us as a crisis Budget, with a focus on the big challenges: climate change, health reform and the spiralling cost of living.

“We wouldn’t call it a bold Budget – the investments in health and emissions reduction initiatives are significant, but they have been well signalled and are overdue. The Government is demonstrating agility in responding to the cost of living challenges but overall the Finance Minister has been cautious rather than bold.

“Investment in business and education needs more heft to make a significant difference to our productivity – a fundamental issue that New Zealand must address.

“The $600 million opex package to support business growth will be spread thinly across New Zealand’s 530,000 SMEs.

“We all talk about being a high wage, low emissions economy, but then you’ve got a pre-Budget announcement of $20 million for the $7.4 billion digital technologies sector – which is just the industry to help us achieve our lofty goals.

“Unsurprisingly, the Government has responded to the immediate challenge of high inflation and rapid increases in the cost of living, through a $1.2 billion dollar response for the squeezed low and middle income earners.

“However, we question what will happen when these measures are withdrawn, and the cost of fuel and living are still being pumped up by inflation.

“A big announcement for business is the Business Growth Fund. Both the UK and Canadian equivalents, which the Budget cites as models, have made modest differences in their respective SME sectors – in Canada across 25 companies, the Fund created 1,510 jobs. There is likely to be fierce competition to access New Zealand’s Government backed Growth Fund.

“It is not surprising that tax hasn’t featured in this Budget. The Government has made some changes to tax over the last year, and any further changes need proper consultation, following the Generic Tax Policy Process. We’ve seen what happens when we change tax on the hoof, and it’s not good.”

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