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Annual Report of the Treasury for the Year Ended 30 June 2013

Intermediate Outcome: Improved Business Environment

New Zealand's business environment needs to strongly outperform other countries to overcome the disadvantages of size and distance. 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.

Our Business Environment

New Zealand maintained its ranking of third out of 185 countries in the World Bank's Ease of Doing Business 2013 rankings.

New Zealand was 26th in 2008 on the OECD Product Market Regulation Barriers to Entrepreneurship indicator (this indicator is only updated every five years).

  • Zealand has:
  • the most comprehensive (least distorting) Goods and Services Tax (GST) or VAT in the OECD
  • amongst the lowest tax wedges on labour income in the OECD
  • amongst the easiest tax systems in the OECD to comply with, and
  • a relatively high share of taxes collected from capital income compared with other OECD countries.

New Zealand ranked 47th out of 144 countries in the 2012/13 World Economic Forum Global Competitiveness report on its perceived infrastructure quality, a small improvement on our 2011/12 ranking.

Over the year we provided advice to Ministers, alongside the Ministry of Economic Development (MED) and subsequently MBIE, on implementation, coordination and next steps in the Government's business growth agenda. We commenced work on refreshing our medium-term economic strategy thinking, which sets out what the Treasury considers important to achieve economic growth. This has seen us engaging with other public sector agencies along with the private sector and non-government sector to garner their perspectives. We also provided support to MBIE during its establishment and supported the establishment of Callaghan Innovation.

We have continued to work with the Inland Revenue Department (IRD) to deliver the Government's tax policy work programme. This helped the Government to make decisions in a range of areas, including improving the tax settings for mixed-use assets, salary trade-offs, foreign superannuation and specified mineral mining, and in making changes to the thin capitalisation rules. These changes help to achieve the Government's revenue strategy, which supports a broad-base, low-rate tax system that raises revenue as efficiently and fairly as possible.

The Treasury published the 2012 National State of Infrastructure Report which provides an update on progress and challenges in the infrastructure sector. Broadly positive ministerial and stakeholder feedback on the National Infrastructure Plan indicates solid progress and emerging clarity on the way forward.

Through our role in assessing major Regulatory Impact Statements and by helping to build agency capability, we aim to increase the proportion of significant Regulatory Impact Statements meeting most or all of Cabinet's regulatory impact analysis (RIA) requirements. We set a target of 90% by 2013 although in 2012/13 only 71% of departments' Regulatory Impact Statements achieved this. In addition, we introduced disclosure requirements for legislation and regulation produced by the Government, and Regulatory Stewardship Expectations for departments.

We provided advice to ensure that policy settings maximise the value of New Zealand's significant natural resource endowment. We worked with the Ministry for the Environment (MfE) on a package of Resource Management Act 1991 (RMA) reforms that, if implemented well, should significantly improve planning outcomes in the medium to long term, leading to increased value derived from natural and physical resources and reduced costs, delays and complexity between regional and local council plans. We also worked with MfE on the 2013 freshwater reforms aimed to improve the effectiveness of water management.

The Treasury continued to support the recovery of the Canterbury region. This included supporting a greater whole-of-government approach to dealing with issues in Christchurch, the central-city rebuild and the formalisation of a cost sharing agreement between the Crown and Christchurch City.

During the year the Government announced a comprehensive programme to improve housing affordability which is being jointly led by the Treasury and MBIE. The Treasury's advice helped the Government to develop this work programme. Subsequently, our work on this work programme helped the Government to deliver the Housing Accords and Special Housing Bill which was introduced on Budget night.

For more detail on our policy outputs in this area, see pages 40 and 44.

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