Engine Room Blog

• Budget deficit of $16.7bn or 8.4% of GDP, as expected, and surplus forecast for2015, a year earlier than forecast last year
• Net debt to peak at 29.6% of GDP in 2015 (below market expectations of peak around 33% of GDP), and decline thereafter and be repaid in full by 2024
•  Should placate rating agencies
• Investors to see four new equity offerings (subject to re-election), an Earthquake bond and inflation bonds, and the local government funding agency to start this year
• Kiwisaver Member Tax Credit to be halved and Member and Employer minimum contributions to be raised from 2% to 3%
• Government to review taxation on investments (Minister of Finance indicated this in his lock-up speech)
• Treasury is forecasting short and long-term interest rates to remain largely unchanged from current levels over coming years, and for the NZD to steadily decline by a cumulative 18% over the next four years.
• An impressive budget that provides confidence for maintaining portfolioallocations to NZ assets
• In terms of addressing NZ’s long-term economic performance, while not delivering any major policy initiatives, the tone of the Budget appeared to reiterate a solid commitment to improving productivity and incomes in NZ. It needs to - page 3 of the Budget document had a chart that shows per capita real GDP in NZ has not grown since 2004, and noted that if average growth over the past six years had been the same as that of the preceding 15 years, per capita income would be 11% higher now.

This summary was supplied by Craigs Investment Partners

• Working for Families Abatement rises from 20% to 25%
• Kiwi SaverTax Credit reduces by 50%, employer and employee miniumu contributions increase to 3%
• Opportunities to invest in NZ Assets through partial privatisation of for state owned energy companies
• Changes to student loan scheme
• Increased IRD audit and prosecution of tax evasion - particularly the property sector, seasonal workers and the hospitality industry
• Students over 55 may only borrow for fees and course costs.