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Budget 2016 Home Page Budget Speech - Budget 2016

Building a productive and competitive economy

Mr Speaker,

A priority for this Government is to build a more productive and competitive economy that supports jobs and higher incomes.

New Zealand has a proud history of innovation.

Our national prosperity hinges on businesses, large and small, investing in new products and markets.

We are already seeing that happening.

Business investment has increased from $31 billion in 2010 to $40 billion last year, and is expected to grow to $50 billion by 2020.

Our export sectors are taking advantage of free trade agreements, and selling more New Zealand products to growing markets around the world.

The economy is diversifying, with the ICT sector, for example, more than doubling its exports over the past eight years.

This Budget looks to the future, and includes measures to further support business and regional innovation.

The largest is the $761 million Innovative New Zealand package to encourage entrepreneurship, skills and economic growth.

This package will support more jobs, higher wages and a stronger, more diversified economy.

The package has three parts.

First, investment in science and innovation will increase by $411 million over the next four years.

A number of different science and research funding streams have been boosted, including those that have a strong potential impact on New Zealand's economy, environment and society.

The Marsden Fund - which supports excellence in research - will be expanded, as will funding for the Health Research Council.

In total, increased funding will take cross-government investment in science and innovation to $1.6 billion a year by 2019/20.

Second, to support skills and employment, we are investing $257 million in more tertiary education and apprenticeship programmes, particularly in the areas of science, engineering and agriculture.

Tuition subsidies will be increased in a number of subject areas and the Government will fund 5,500 more apprentices by 2020.

Funding will be provided to help second-chance learners gain basic skills and to strengthen workplace literacy and numeracy programmes.

Finally, to support regional economic development, we are introducing a series of initiatives worth $94 million that will unlock business opportunities and benefit regional communities.

Additional funding will be provided for the Government's Regional Growth Programme and to develop more regional research institutes across New Zealand.

As a package, Innovative New Zealand provides significant and targeted support to help New Zealanders and businesses across the country meet the demands of a changing modern economy.

Mr Speaker,

Further support for businesses - particularly small enterprises - comes through a $187 million SME-friendly tax package, which the Prime Minister announced last month.

This provides a better balance of incentives to encourage taxpayers to pay the right amount of tax.

Provisional tax will be reformed, with a new pay-as-you-go option allowing small businesses to pay tax as they earn income.

Use-of-money interest will be eliminated or reduced for the vast majority of taxpayers.

Contractors will be able to choose a withholding tax rate that suits their own circumstances.

And the ongoing 1 per cent monthly late-payment penalty will be scrapped from 1 April 2017 for new debt - although immediate penalties and interest charges will continue.

Mr Speaker,

The Government remains committed to ensuring that everyone pays their share of tax according to the rules.

We have a strong tax system in New Zealand and we are making further changes targeted at multi-national companies.

New Zealand recently signed an international agreement that will make it harder for multi-nationals to artificially lower their tax liabilities.

We will soon introduce legislation to increase the amount of tax compliance information shared between our treaty partners.

We have commissioned an independent review of the disclosure requirements for foreign trusts, which is due by 30 June.

And we will continue to work with the OECD to address tax avoidance.

These changes will help ensure that our tax base and disclosure rules remain robust into the future.

Mr Speaker,

The tax changes previously announced are part of a wider business transformation programme that embraces new technology to make it easier and less complicated to pay tax.

The Budget includes $857 million for Inland Revenue's new tax administration system, replacing one that is a quarter of a century old.

This funding is just one part of a significant Budget infrastructure investment package totalling $2.1 billion.

The package provides $115 million for roading projects in Gisborne, Marlborough and Taranaki, under the Government's previously announced Accelerated Regional Roading Programme.

KiwiRail will receive $190million for the operation of the national rail network. The Government has a strong expectation that KiwiRail will continue to improve its performance to reduce the level of Crown support required in the future.

Nine new schools and 480 new classrooms are included in a package of schooling investments that total $883 million.

The package provides for growth in student numbers as well as for the Christchurch schools rebuild programme.

Tourism infrastructure is also being upgraded.

Mr Speaker,

As well as investing in infrastructure, the Budget also includes funding to free up more land and increase housing supply in Auckland.

Housing development on surplus Crown land in Auckland receives a $100 million boost in capital funding.

This follows the $52 million set aside in Budget 2015 that has so far resulted in agreements for 20 parcels of land.

The Government's longstanding view is that obstacles to the supply of land and housing are the main issues facing the housing market.

It is essential these obstacles are removed.

As well as our work on reforming the Resource Management Act, the Government will soon issue a National Policy Statement on Urban Development.

This will direct councils to allow more housing development where necessary and to measure the impact of their decisions on house prices.

Mr Speaker,

The Budget includes significant extra funding to ensure more people in need have access to social housing.

$200 million is provided over four years for at least 750 more places for those with the most pressing housing needs, and to meet the rising cost of social housing rents.

Another $41 million will support around 3,000 emergency housing places a year and establish a new emergency housing Special Needs Grant.

This is part of the Government's wide-ranging reforms focused on ensuring that New Zealanders in need have access to appropriate housing.

Mr Speaker,

The tourism sector is experiencing rapid growth and Budget 2016 provides a $45 million package of support over four years.

This includes a new $12 million fund to help communities with smaller-scale infrastructure projects, like restrooms and carparks, to deal with growing numbers of tourists.

Tourism New Zealand will receive $8 million to target key growth markets and increase the record number of tourists arriving here.

$25 million is being provided to upgrade and extend the New Zealand Cycle Trail and ensure it continues to offer a world-class visitor experience.

And we are also starting a two-year trial to streamline border processing for low-risk travellers to make it easier for them to visit New Zealand.

Mr Speaker,

The Government is committed to protecting our natural environment and to playing our part in addressing global climate change.

The Government will phase out a subsidy in the Emissions Trading Scheme that was introduced as a temporary measure during the global financial crisis.

This has allowed some businesses to pay one emissions unit for every two tonnes of pollution they emit.

We believe it is time businesses move towards paying the market price for their emissions.

Removing the subsidy will positively impact the operating balance by $356 million over the next four years, based on a New Zealand Unit price of $12.

The Budget also establishes a $100 million fund to help clean up New Zealand's rivers, lakes and aquifers over the next decade.

The Freshwater Improvement Fund will contribute to projects that help communities improve water quality. Priority will be given to projects involving the private sector or philanthropic funds.

An additional $16 million is being provided to control wilding pines in the highest priority areas.

And the Battle for Our Birds programme - New Zealand's largest pest control operation - will receive $21 million this year. This will help fight an expected pest population boom caused by a heavy forest seeding.

$70 million over four years is being provided to tackle bovine tuberculosis.

This new funding will help achieve our goals of eradicating TB from cattle and deer by 2026, and from infected wildlife by 2055.

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