Executive Summary (continued)

A Business Environment that Encourages Enterprise and Investment

Shift taxes from bases that are internationally mobile and lower growth (labour and capital) to tax bases that are less mobile and less damaging to productivity growth (consumption and land) over time.
Equalise rates of tax on different forms of investment, including capital gains, to improve savings and investment.
Ensure average tax rates on corporate income don’t get too far out of alignment with other countries and so encourage businesses to locate and invest in New Zealand.
Strengthen systems to ensure the quality of new regulation and support effective executive and parliamentary decision-making and review of regulations.
As the first step in an ongoing programme, review the impact of: (i) the Resource Management Act 1991; (ii) Hazardous Substances and New Organisms Act 1996; (iii) labour market regulations.

Improve decision-making on public investment across infrastructure priorities and maintain a stable environment for investment.
Re-orientate the innovation system to be more firm-facing and reduce fragmentation of policy and programmes.
Continue to support KiwiSaver with some changes to improve its cost-effectiveness.

Improve participation in quality early childhood education for children from disadvantaged backgrounds.
Shift spending in compulsory education from investment with low returns (such as lower student-teacher ratios) to high returns (such as improved accountability for student achievement and development of teaching practice).
Shift tertiary sector investment towards courses with better labour market outcomes and above average completion rates.
Encourage participation in the labour market by skilled older workers and parents.

Negotiate an equitable international climate change commitment for New Zealand that recognises our unique emissions profile and adopt domestic policies that meet this target at least cost.
The Emissions Trading Scheme (ETS) is sound, but improvements would include revenue neutrality, allowing the use of all Kyoto-compliant emissions units and removing other mitigation policies now superseded by the ETS.
Develop mechanisms for allocating water rights and usage to their most efficient use.

Ensure government priorities drive the public service through clear communication and accountability.
Strengthen mechanisms for assessing performance, such as the quality of performance information, and ex-post monitoring and accountability.
Adapt successful processes undertaken overseas to review areas of government spending that require particular attention.
In the short term, make fiscal saving in order to manage within spending set out in the current fiscal strategy and pursue new priorities.

Signal in advance how policy may need to adjust to ensure fiscal expenditure remains sustainable and allows individuals time to adjust.
Maintain a level of government savings which over time keeps gross debt at around 20% and provides for contributions to the New Zealand Superannuation Fund.
Moderate expenditure growth in key spending areas, such as health and justice, which will require better performance and productivity in large expenditure areas.
Long-term changes in the tax structure identified above will help ensure the sustainability of tax base.

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