Mini-Budget delivers tax cuts and warning on wage claims

Press, 26 November 1980, Page 1

Mini-Budget delivers tax cuts and warning on wage claims

An average income-tax cut of 5.5 per cent, from February 1 next year, was announced by the Minister of Finance (Mr Muldoon) last evening, with a warning that this could affect subsequent wage increases.

The tax cuts were equivalent to a 3 per cent wage increase, and would reduce Government revenue bv $365 million by. the end of the 1981 financial year, Mr Muldoon said. The Arbitration Court would be asked to consider a general wage order application early next year, and the court would determine what, •if any, adjustment to. wages was necessary to compensate workers for past cost-of-living increases. Other measures included in the “mini-Budget” statement were: —A programme of accelerated public works, costing sloB' million by the end of the 1981 financial year. —The creation of 4000 extra - jobs, 4000 training opportunities, and help for up to 10,000 school pupils in job preparation, costing $43 million in the same period. Financial incentives aimed at improving employment and enterprise in small businesses were also announced. The total package would increase the Budget deficit by about $5O million this year, and by more than $450 million in 1981-1982, Mr Muldoon said. ' He said that the measures were designed to underpin the economy and employment through the next year, and to ease the transition to a recovery period beyond.

The moves were necessary because of the danger that economic activity and employment would slip, creating bottlenecks and pressure on prices when the economy began to expand. Earlier moves in the 1980 .Budget were aimed at improving the efficiency of the economy to provide jobs “for all those seeking work” and to meet community demands .for higher real incomes, Mr Muldoon said.

Restructuring policies applied in the export industries had been designed to expand employment and export production, and Mr Muldoon said that there was “clear evidence” of progress towards these goals. Export volumes had risen, on average, more than 6 per cent in the last two years, and were forecast to increase 7 per cent this year.

Additional improvement in the economy depended on the control of inflation

and on careful economic management over the next year. Inflation was being maintained at a “disappointingly high” level because of the strong links between costs , prices, and wages in the New Zealand economy. Mr Muldoon called for more progress to be made, particularly in achieving “better understandings on the sustainable rate of growth in wages.”

The approach to the Arbitration Court was decided last week by the Government, the Employers’ Federation, and the Federation of Labour to provide a generally accepted benchmark for wage levels. The Government was preparing enabling regulations for a court hearing, which would be held early next year. The Government had adopted a programme of tax measures, accelerated Government spending, on selected works, and direct employment schemes in the “mini-Budget” to support employment in the short term.

Unemployment was at historically high leve’s, but the number of jobs needed by the growing labour force could be created onlv by a growth in economic output.. The Government was giving close attention to a broad ranee of suggestions made recently by the Planning Council, Mr Muldoon said.