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Annual Report of the Treasury for the Year Ended 30 June 2012

Intermediate Outcome: Improved Business Environment

New Zealand's business environment needs to strongly outperform other countries to overcome the disadvantages of size and distance. Our business investment as a percentage of GDP remains below the OECD average (for the five years ending 2010 the New Zealand average was 10.4% compared to an OECD average of 11.2%), while our business expenditure on research and development (R&D) has been growing faster than the OECD mean but from a much lower base. It increased from 0.47% of GDP in 2006 to 0.54% in 2010 while the OECD average in 2008 was 1.63%.

The Government impacts on the business environment particularly through its policies relating to education, welfare, tax, savings incentives, regulation, science and innovation, infrastructure and the management of natural resources. The Treasury has provided policy advice in all of these areas, with a particular emphasis on tax, regulatory quality, savings and infrastructure; along with providing advice on priorities for medium-term economic growth strategy.

We have worked in a collaborativeway with a number of other government agencies to create a shared view across State sector economic agencies on economic strategy (the Internationally Focused Growth Strategy). This assisted the Government to develop its Business Growth Agenda and 120-action plan. We undertook research on taxation which improved the evidence base around the impact of potential changes to the taxation of savings and investment.

The National Infrastructure Plan was well received by the business sector, which saw it as a good assessment of the issues in the sector and demonstration of government focus on this area. We engaged with various sector groups to test its thinking and these groups have provided cooperation and advice about progress on the implementation plan. The National State of Infrastructure Report has now been linked to the Government's Business Growth Agenda Infrastructure Report, with both now scheduled for publication in September 2012 - we have been testing the content of both reports with business and local government representatives.

Through our role in assessing major Regulatory Impact Statements and by helping to build agency capability, we have seen the proportion of significant Regulatory Impact Statements meeting most or all of Cabinet's regulatory impact analysis requirements rise from 60% in 2009/10 to 75% in 2011/12.

We provided advice to ensure that policy settings maximise the value of New Zealand's significant natural resource endowment. We informed government decisions to maintain the transition settings for the Emissions Trading Scheme, which will reduce business costs by an estimated $255 million between 2013 and 2015. We have been instrumental in initiating a water reform programme to provide central government direction to regional councils in giving effect to the National Policy Statement on Freshwater Management 2011, which requires that regions establish and manage to freshwater objectives and freshwater quality limits.

For more detail on our policy outputs in this area, see pages 37 and 41.

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