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Thread: Budget 2006

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    Default Budget 2006

    Budget 2006: At a glance
    2.45pm Thursday May 18, 2006
    By Simon Collins

    Key points from today's Budget

    True to its word, the Labour Government has poured money into roading and the elderly rather than cut taxes in its seventh Budget today.

    Spending on land transport - mainly new roads - will rise by almost half, from around 0.9 per cent to around 1.3 per cent of the national income, in the next three years.

    Residential care and home-based support for the elderly will get $126 million extra over the next four years.

    Other main points of the Budget are:

    * The budget surplus, after allowing for accounting changes, will shrink from $7 billion in 2005-06 to $5.8 billion in the coming year, bottoming at $3.6 billion in 2008-09. That's a drop from 4.5 per cent of the national income to 3.6 per cent and 2 per cent.

    * Tax rates are unchanged.

    * Economic growth is forecast to slow to 1.5 per cent both this year and next year, before recovering to 3.7 per cent in 2007-08.

    * Jobs will shrink by 0.2 per cent in the coming year and unemployment will rise to 4.7 per cent.

    * Money will be poured into areas aimed at "transforming" the economy from commodities to high-value products, with big boosts for science, export marketing and the Venture Investment Fund, as well as roading.

    * Modern apprentice numbers will increase to 14,000 by the end of 2008.

    * The Budget implements Labour's $1 billion election promise to scrap interest on student loans, and raises the parental income threshold for the full student allowance from $35,000 a year to $39,270.

    * The Government will spend $76 million over the next four years on a campaign for healthy eating to stem obesity.

    * Promised "school-ready" health checks for four-year-olds, improved school dental services and newborn hearing tests are implemented.

    * A 10-year buildup in defence spending announced last year will continue with a $73 million increase this year.
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    Default Budget 2006

    Thanks for the info, MB. A budget surplus, eh? We (the US) haven't had one of those for a while.
    If men had wings and bore black feathers, few of them would be clever enough to be crows.
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    Default Budget 2006

    Budget 2006: Roads, roads, roads
    Friday May 19, 2006
    By Audrey Young

    Michael Cullen's seventh Budget commits funding to the biggest roading programme in New Zealand's history, benefiting Auckland and the Waikato in particular. Roading projects that might otherwise have languished on the old 10-year plan, or were making slow progress, have been given a funding injection, certainty and a five-year deadline.

    The first details will be announced today when Waikato projects valued at about $200 million will be announced. But although northern business and transport interests are delighted with the funding, National has dubbed it the 'Bondi Budget', seizing on its failure to signal tax cuts as an incentive for New Zealanders to head to Australia.

    Finance spokesman John Key called it the Pavlova Budget - 'cream on top and nothing underneath'. National leader Don Brash will launch a campaign today in a bid to contrast New Zealand with Australia's $45 billion tax-cuts package last week. 'If he thinks it's so hot over there, go and live there,' Prime Minister Helen Clark taunted yesterday.

    Roading became the centre-piece of Dr Cullen's Budget by default after a leak forced the early release of the telecommunications package - legislation forcing Telecom to open its network to competitors. Together they were to have formed a high-impact package under the Government's "economic transformation" strategy.

    As well as the $200 million for Waikato roads, the Government yesterday committed an extra $1.3 billion over five years to the state highway building programme and to speed up work on other projects. That will take the total being spent over the five years to $13.4 billion. But planting the pedal on roading has not been universally embraced.

    Greens leader Jeanette Fitzsimons said it was 'a mad, petrol-headed, road-building, vote-seeking Budget'. The Budget commits $2.2 billion to new operating spending and $1.3 billion to new capital spending. Some of the details had already been announced, such as the $360 million this year for the expansion of its Working for Families package and $1.845 billion over the next four years.

    The new spending of $750 million in health takes its total expenditure to $10.6 billion, and forecasts the same amount of new spending for the next three Budgets. That is down on the $956 million increase in health spending last year, but not a surprise because Dr Cullen has repeatedly warned that the rate of increases would not be sustained. Several times yesterday he returned to the theme of tax cuts and his justification for not including them. 'The fool who spends on the upturn will find himself broke on the downturn. There is no point in having tax cuts if the result is reducing the quality of roads, a poorer health system and a poorer education system.'

    The extra $3 billion in health funding in the next four years was the result of a 'balanced approach to fiscal policy that large tax cuts would clearly threaten'. Dr Cullen presented his seventh successive operating surplus yesterday - $8.46 billion for the year ended June 30 and much higher than the $5.55 billion forecast in December. The average operating surplus for the next four years is $4.77 billion. But he prefers to use the lower cash position - the amount available to spend after contributions to the Superannuation Fund and capital expenditure such as on hospitals have been taken off.

    This financial year finishes with a $1.75 billion cash surplus, but Treasury forecasts an average cash deficit over the next four years of $1.8 billion, some of which will be funded through borrowing. The GDP growth forecasts reflect the economic downturn with 2.1 per cent in the year to March 2006 (compared with 3.7 in the previous year).

    Treasury is expecting it to bottom out by next March, forecasting only 1 per cent but then to average 3.3 per cent in the following three years. But Dr Cullen warned that certain Treasury revenue forecasts were significantly lower than those of Inland Revenue in the coming four years. 'The Government is placing its emotional bets on Revenue,' he told reporters, 'but it has to place its forecasting bets on Treasury because that is what the law requires.'
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    Default Budget 2006

    Budget 2006: Kiwis look across Ditch for tax relief
    Friday May 19, 2006
    By Simon Collins

    Skilled glass factory worker Steve Patterson came home a couple of years ago after five years in Melbourne. After last night's Budget he 'can't wait to go back'. He's not impressed with the 'minuscule' extra money in the Budget to fix Auckland's 'joke' of a transport system, and says middle-income earners have nothing to keep them here. 'They are looking at Aussie and saying 'shit, they are getting good tax cuts, they have a health system that works and their standard of living is better,' ' he said. 'Why shouldn't you go?'

    Some Herald readers who sent in emails last night agreed.'Thanks Labour (for nothing). Australia looks more attractive every day' wrote Hamilton microbiologist Owen Shrubb. But others disagreed. Rachel Wike, who runs a worldwide translation business with her husband Andreas Ernst from Henderson, said she would rather have New Zealand's extra spending on roads and health than the tax cuts announced in Australian Treasurer Peter Costello's Budget last week.

    Mr Costello cut the top tax rate from 47 per cent to 45 per cent, and raised the threshold where the top tax rate cuts in to A$150,000 ($183,500). Increases in tax thresholds across the board gave some tax cuts to everyone earning over A$21,600 ($26,400). New Zealand has higher tax rates on low incomes up to A$25,000 ($30,600). It has a lower top tax rate of only 39 per cent, but it cuts in at an income of just $60,000.

    'Quite frankly, if you give me a tax cut I'm probably going to have another nice brunch at a cafe,' Rachel Wike added. 'If you make some improvements to health and roading, that is absolutely needed. I don't think you can really trust people to spend that money wisely and invest it and put it into super.'

    Australian construction entrepreneur Leli Coluccio, who brought his family here seven years ago, agreed. 'New Zealand needs the roads and health much more so than tax cuts.' He said Australians paid capital gains tax and land tax and lived in a rat race. 'Currently the construction industry there is almost dead. Builders are falling over like flies. Interest rates have just gone up and people can't afford to buy homes.'

    In contrast, another entrepreneur, who gave his name as Alan, wrote in an email that he no longer had the stamina to fund state spending with no tax relief or retirement security. 'There is now a real advantage for Australia to arbitrage its higher salaries and lower tax rates to finally convince me to reluctantly turn my back on my desire to live here, and relent to pressure to let my company move me and my role over the Tasman,' he wrote.

    Ardijah musician Betty-Anne Monga said many of her friends in the music industry had already moved to Australia in the past three years. But she and husband Ryan Monga brought their children home after five years in Australia. 'Yes, I'd like to have tax cuts, who wouldn't?' she said. 'But I suppose it's where are they giving those tax cuts, when you have a 10-year plan and you have a family and it's like it's nice that the Government isn't always taking, taking, so that we can build as a country. Myself and Ryan do our thing. We just love Aotearoa. We just love that we can do almost anything here and work on an international scale and still be based here.'
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    Default Budget 2006

    It would be nice if some of the roads projects went to widening and/or straightening Highway 1 into the Northland, and some other narrow & windy highways. Quite frightening, with the way many folks drive, to have nowhere to go when they're coming head-on in your lane. Of course, traffic enforcement would also be nice. Maybe if we can convince all the unsafe drivers to move to OZ, NZ wouldn't need it.
    If men had wings and bore black feathers, few of them would be clever enough to be crows.
    - Rev. Henry Ward Beecher, mid-1800s

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