Building a more productive and competitive economy

Mr Speaker,

I now want to turn to the second of the Government's priorities, which is to build a more productive and competitive economy that supports higher incomes and more jobs.

The Government's plan for building a more productive economy is set out in the Business Growth Agenda.

This focuses on six key elements that businesses need to grow: access to export markets, innovation, infrastructure, skilled and safe workplaces, natural resources, and capital markets.

Each of these areas involves government investment and regulation, and with regard to the second of these I acknowledge, in particular, the contribution of Regulatory Reform Minister, and ACT Party leader, John Banks.

The Budget adds a number of new initiatives to the Government's existing agenda.

In particular, the Budget contains a $100 million-a-year internationally-focused growth package.

This growth package acknowledges New Zealand's need to pay its way in the world through increased trade and investment, which in turn creates jobs and opportunities for New Zealanders.

The largest part of the package is a $200 million boost in funding, over four years, for science, innovation and research.

This extra funding will be invested in expanding current business R&D grants, as well as establishing a new repayable grant for start-up businesses to assist them to become investment-ready. There is also new funding for the National Science Challenges and the Marsden Fund.

The internationally-focused growth package also provides a significant boost for tourism, as the Prime Minister recently announced.

The Government will invest $158 million over four years to attract more visitors to New Zealand, particularly high-spending visitors. This includes funding to attract high-end visitors from emerging markets and funding to attract international business events to New Zealand.

The growth package also includes additional funding of $40 million over four years to market and promote New Zealand's international education sector, which already contributes more than $2 billion to our economy each year.

Mr Speaker,

When the Government took office in 2008, we were confronted with significant financial problems at ACC and we took action to rebuild its long-term sustainability.

The Government is now satisfied there is scope for significant and sustainable reductions in ACC levies.

We have therefore made an allowance for levy reductions of around $300 million in 2014/15. Final figures will be determined after ACC consults on levies later this year.

ACC's improved performance, and an on-going review of its funding policy, mean the Government has also allowed for levy reductions to increase to around $1 billion in 2015/16.

When combined with the $630 million reduction in levies in 2012/13, these proposed changes amount to around 40 per cent lower ACC levy rates for households and businesses.

Mr Speaker,

The Budget also confirms a number of revenue measures, and I want to thank Revenue Minister, and United Future leader, Peter Dunne for his work in this area.

These measures include proposals to let loss-making start-up businesses claim tax losses on R&D expenditure, together with proposals allowing tax deductibility for certain types of ‘black hole' expenditure.

Changes to thin capitalisation rules will help to ensure that multinational companies investing in New Zealand contribute their fair share of tax.

And Inland Revenue will receive additional funding of $7 million a year so it can better pursue tax compliance in the area of property investments. This is expected to return about $45 million a year in additional tax revenue.

Mr Speaker,

Proceeds from the Government's share offer programme - including from the Mighty River Power float last week - are being placed in the Future Investment Fund, and will be used to pay for new public assets.

The Budget confirms another $1.5 billion of investment from the Fund.

$426 million will be invested in redeveloping Christchurch and Burwood Hospitals which, as previously announced, will be the biggest building project in the history of New Zealand's public health system.

Contingencies totalling over $700 million have been set aside for key projects that include new, modern schools, Christchurch's justice and emergency services precinct, and Canterbury tertiary education institutes.

The rest of the $1.5 billion investment includes $50 million for school network upgrades, $94 million for the fourth year of KiwiRail's turnaround plan, and $80 million for irrigation infrastructure.

Overall, across multiple Budgets, the Government intends to spend a total of $1 billion from the Future Investment Fund on 21st Century schools and classrooms, and $1 billion on priority health investments.

Mr Speaker,

Investing in hospitals, schools and other public assets depends on money coming into the Future Investment Fund through further share offers.

Today I can announce that Meridian Energy will be the next company to be prepared for a partial share offer in the second half of 2013.

As with Mighty River Power, New Zealanders will be at the front of the queue for shares in Meridian and we will be targeting widespread New Zealand ownership.

The Government's share offer programme remains important for the Government's books and for the economy.

As well as raising money to invest in new public assets, it benefits the companies themselves through greater market discipline. In addition, the share offer programme gives New Zealand savers the opportunity to invest in large, New Zealand businesses.

Mr Speaker,

Housing can be made more affordable in New Zealand by focusing on the key areas that actually make a difference: land supply, consent processes, provision of infrastructure, and productivity in the construction sector.

The Government is working with councils on these issues, because the decisions they make about housing affect the entire economy. High housing costs affect financial stability and create an increased demand for housing assistance.

Today we are introducing legislation to speed up the provision of new housing in areas where the pressure is greatest and housing is least affordable.

Special housing areas will be designated under accords between the Government and councils. Council approvals for new housing in those areas can then be managed under a streamlined process.

This legislation, which will apply for three years, is an immediate response to housing pressures in areas facing severe affordability problems.

It gives time for the Government's resource management changes to bear fruit, and address land and housing supply issues in the longer term.

Mr Speaker,

Alongside the Budget, the Government is confirming measures to help ensure New Zealand's financial stability.

Earlier this week, the Reserve Bank Governor and I signed a memorandum of understanding that gives the Reserve Bank the ability to require banks to:

• hold additional capital on their balance sheet as a buffer during an economy-wide credit boom;
• hold additional capital against loans in specific sectors if risks emerge in those sectors;
• use more stable sources of funding to avoid short-term funding shortages; and
• restrict high loan-to-value ratio lending in the housing sector.

These measures will be available - if required - to help protect the economy and the financial system from boom and bust cycles.