Mini-Budget becomes point of pressure

Press, 26 November 1987, Page 3

Mini-Budget becomes point of pressure

By

BRENDON BURNS,

political reporter

The Government’s suggested mini-Budget is becoming a big pressure point, with mounting opposition and support for some of its likely contents.

Yesterday, the Business Roundtable, representing 26 large companies, said that hard decisions had to be taken by the Government to reverse rising unemployment.

Labour had a strong electoral mandate to continue its economic reforms, said the Roundtable.

“But its apparent inertia has created uncertainty at a time when a clear sense of direction and leadership is badly needed.”

Privatising more State assets, spending cuts and reduced taxes were suggested to boost business and job creation. A different call is likely to be put to today’s Government Caucus meeting.

M.P.s such as Mr Jim Anderton (Lab., Sydenham) are signalling that they would oppose such suggested measures as reducing personal and company tax rates, and increasing GST to 12.5 per cent or even 15 per cent.

Similar views were expressed yesterday by the trade union movement. The Federation of Labour and Combined State Unions tax research project said that any plan to cut taxes for high in-come-earners and companies should be avoided.

A tax researcher, Ms Vivienne Nelson, said that big economic and budget problems were created in the United States by lower tax rates.

“We already have one of the lowest top personal income tax rates in the world and there is no

need to risk even higher deficits on this theory,” she said. More resources for Inland Revenue to collect tax were needed. The Minister of Finance, Mr Douglas, has in recent months been saying that New Zealand’s tax rates are too high in comparison with overseas and have to be lowered to retain skills and investment.

Yesterday’s four-page statement by the Business Roundtable mentioned the tax burden as a factor needing to be addressed. But its special concerns were the lack of adequate progress in reducing the fiscal deficit, cutting spending and deregulating the labour market. “These failures are now having the effect of eroding the position of many of our efficient export and import-competing industries to the point where they are no longer competitive,” said the Roundtable’s acting chairman, Mr Douglas Myers.

“A continuation of the present difficulties of even retaining jobs in these sectors would spell a bleak future for all New Zealanders.”

He said that the high exchange rate and an over-all lack of export competitiveness were causing widespread retrenchment and unwarranted relocation of business activity overseas. A special meeting of the Business Roundtable 10 days ago found a strong consensus in favour of the Government’s gen-

eral policy thrust. Members did not want to return to protectionism. However, the recent sharemarket fall had accentuated the serious nature of New Zealand’s continuing economic difficulties.

“It also highlighted the extent of the excessive confidence in New Zealand’s economic situation and of misinvestment in activities of dubious economic benefit.”

Mr Myers said that the likelihood of a weaker international and domestic economy was a sharp reminder of the vulnerability of New Zealand's economy, with high debt, inadequate flexibility and weak competitive position. He criticised Government spending, which had continued to absorb 40 per cent of all resources in spite of plans to reduce it. "The firm view of the Business Roundtable is that the time has come for the Government to take hard decisions to put its own house in order so as to release resources for private sector investment and job creation.”

Additional privatisation of State assets, improved efficiencies in State spending and more labour market flexibility were urged to allow New Zealand to compete internationally. The Business Roundtable is seeking meetings with the Government and the Opposition in the next few days to press its case for more structural change to the economy.