A sustainable future for New Zealand

Sustainable growth is the hallmark of Budget 2007. It takes significant further steps to transform our economy and provide higher living standards for all families, Prime Minister Helen Clark said Thursday.

"New Zealanders are wealthier, more secure, and enjoying greater opportunity than ever before, thanks to consistent economic growth, rising wages, and one of the lowest rates of unemployment in the world. This has been reflected in HSBC's description of New Zealand as "the Miracle Economy" in the past week.

"The Labour-led government's eighth budget continues our progress in putting the country on a sustainable footing, with saving and investing as its centrepiece. This is critical to addressing the imbalances in the economy.

"The budget increases our investment in families to give all New Zealanders a stake in society, through strong public services, safer communities, and the creation of a better country in which to live and work, where the benefits of economic growth are widely shared."

Budget gives $40 a week to support saving

It is vital New Zealanders save more so we can better deal with our economic and social challenges, which is why Budget 2007 significantly enhances KiwiSaver.  A new system of tax credits and compulsory matching employer contributions will be introduced to encourage more saving and make it even easier for New Zealanders to save through KiwiSaver, the landmark work-based saving scheme.

"KiwiSaver gives New Zealanders a helping hand so more of us can start saving earlier in our working lives to avoid a harder savings challenge later in life," said Finance Minister Michael Cullen and Revenue Minister Peter Dunne.

"The changes we are announcing today will mean more New Zealanders can grow assets beyond the family home which is critical to growing an adequate retirement income to meet their aspirations. 

"Budget 2007 supports saving by providing a contribution of up to $40 a week in tax credits - $20 per week for each KiwiSaver and another $20 a week via a tax credit for employer contributions.  If we are to build a stronger economy and a fairer society we must do more to improve saving habits.

"If we save more, we spend less. That will mean less inflation and help to ease pressure on interest rates and the dollar. That's good for workers, good for businesses and good for the economy."

$3.4 billion for investment and innovation

Budget 2007 delivers the most substantial changes to the business environment in twenty years, which will help develop a more innovative and dynamic economy, better able to compete in the global marketplace.

"The Labour-led government is investing $3.4 billion dollars over the next four years in order to accelerate the transformation of New Zealand into a more resilient and flexible economy able to withstand the challenges we face today," said Finance Minister Michael Cullen and Revenue Minister Peter Dunne.

"If we are to lift the sustainable rate of growth of the economy businesses must do better at producing the kinds of products that can command a premium in overseas markets.

Budget 2007 provides: (over four years)

• A cut in the company tax rate from 33 per cent to 30 per cent.  The direct cost is $2.1 billion, effective 2008/09.  In addition, the cost of transitional company tax changes will be $130 million over four years.
  
• A 15 per cent tax credit for research and development ($630 million) 
  
• Changes to tax treatment of savings vehicles ($180 million)


• Greater export market development assistance ($87.8 million)
  
• Expansion of industry training ($53 million). 

Towards a sustainable rail network

Budget 2007 is funding significant improvements to the Auckland and Wellington rail passenger networks as part of the Labour-led government's drive to put the economy on a sustainable footing.

"A world-class transport network is vital to meet our economic and environmental challenges and that's why Budget 2007 makes additional investment in the rail network a priority," said Finance Minister Michael Cullen and Transport Minister Annette King

"We are supporting the electrification of Auckland’s urban passenger network, and will provide funding for the necessary infrastructure assisted by revenue from a regional fuel tax.    

Budget 2007 provides $600 million over six years for the government’s contribution to these urban rail development projects in Auckland and Wellington. It also provides an additional $50 million for general track improvements to the national rail network over 2008 to 2010.

"The latest investment builds on the considerable investment the Labour-led government has made in building a world-class transport network."

Major investment in the health of New Zealanders

Budget 2007 provides a $750 million per annum boost to the health budget and funds major new investments in the health of New Zealanders of all ages including children and young people and families.

"Over eight budgets, the Labour-led government has invested heavily in health. This budget builds on that work, rebuilding a health sector torn apart by the reforms of the 1990s," Health Minister Pete Hodgson said. 

"Budget 2007 funds a four-year $124.2 million investment in child and youth health. Immunisation is a powerful tool to prevent ill health, disability or even death. The prevention of illness and the problems associated with pneumococcal meningitis is a crucial service we can offer the youngest family members.

"This Budget recognises the diversity of our society and invests accordingly.  It contains the largest ever investment of $150 million over four years to the Aged Residential Care sector and better support to the workforce that cares for them.  A further $81.2 million will further enable older New Zealanders to maintain their independence in their own homes and the Budget provides $48.3 million over four years to support those with disabilities in their own environment.

"I am determined to see continuous improvement in access to quality health services.  An $80 million funding boost over four years for our pharmaceutical spend will enable the cost of most community prescriptions to be no more than $3 and help keep pace with developments in hospital-based drug therapy," Pete Hodgson said.