Budget backs exporters, sets pace for ‘restructuring’

Press, 22 June 1979, Page 1

Budget backs exporters, sets pace for ‘restructuring’

A surprise devaluation, higher liquor taxes, and lower income taxes were among measures announced by the Minister of Finance (Mr Muldoon) last evening in a bid to encourage steady economic growth for the next year and beyond.

The main thrust of the Budget is to expand exports. The New Zealand dollar was devalued by 5 per cent from midnight last night under a new system to administer the exchange rate more flexibly. This will take account of the relative inflation movements of New Zealand against its trading partners. “If costs and prices in New Zealand rise faster than costs and prices in countries with which we trade, the value of the dollar will be adjusted to offset this movement,” said Mr Muldoon.

Liquor and cigarettes will be more expensive from today but workers earning between $4500 and $ll,OOO will have more money in their pockets because of tax reductions, which will apply from October.

Married pensioners and some unemployed persons will effectively receive smaller benefits. Superannuation for a married couple will be tied to 80

per cent of the net average ordinary-time wage instead of the present gross wage and the unemployment benefit for persons with no dependants will be taxable. Other features of the Budget include the replacement of the foreign-travel tax by a flat departure tax of $25 per person on all international tickets bought in New Zealand. Post Office charges will rise from October.

Energy measures include tax increases on oil-based fuels except petrol, which did not receive attention in the Budget. More incentive is given to alternative fuels, particularly to compressed natural gas. The predicted cuts in education spending did not eventuate and the standard tertiary bursary will be replaced next year by grants of up to $4O a week. The new policies announced last evening were a further step towards a restructuring that would take time to complete, Mr Muldoon said.

The Government had been offered a “great deal of advice” in recent months on how to restructure the economy, but Mr Muldoon rejected any proposal to insulate the New Zealand economy from the rest of the world, and at the same time said the economy could not be transformed overnight by a simple, radical programme.

“The problems besetting us are too deep-seated and complex. This is what many advisers ignore,” he said. “What they also forget is that we began the process of what is now called restructuring the day we took office in December, 1975.” Exports now had only 80 per cent of the purchasing power they enjoyed before the oil crisis in 1973, in spite of recent high prices for beef and wool. Mr Muldoon said that the policies he announced last evening would provide the basis for future growth in New Zealand’s export industries.

A new system of export incentives will be introduced from April 1, 1980, to replace the present schemes. An export performance taxation incentive will provide exporters and the tourist industry with a tax rebate or refund for each dollar of net foreign exchange earned and remitted to New Zealand.

Exporters, will have the option of moving to this scheme between April 1, 1980 and March 31, 1983, or of staying with the present increased exports taxation incentive.

The present 150 per cent export market development and tourist promotion taxation incentives will be replaced by a rebate, under an export market development taxation incentive.

An export programme grants scheme will be established from April 1, 1980, to encourage the preparation of well researched and co-ordinated programmes for marketing goods overseas. The new incentives will last for five years, and will be reviewed annually. Exporters will also be

encouraged by changes to the import-licensing system that will allow licences to be issued for materials and component where domestic materials are so priced as to jeopardise export performance.

Licences will also be issued where the prices of domestic raw materials, components, plant and equipment can be shown to be manifestly excessive, or their quality significantly deficient.

Licences will be issued for goods no longer produced in New Zealand because a manufacturer has stopped making them to channel his resources into exports. Mr Muldoon said that these changes should raise the level of competition within these industries.

The changes had to be limited but they should provide a clear signal to domestic industries that their costs had to be contained, he said.