What the new Govt means for NZ’s economy
National, Act and NZ First have found quite a bit of common ground on key policies affecting both business and the economy.
In July, they will adjust income tax brackets for inflation, take the brightline test back to two years, and progressively allow residential property investors to write off interest as an expense when paying tax.
They will pay for some of these tax cuts by preventing commercial and residential property owners writing off depreciation as an expense.
NZ First quashed one of National’s key proposed revenue generators – the introduction of a foreign buyers’ property tax.
Without this tax, which National estimated would generate more than $700 million in revenue a year, the Government may need to borrow.
While NZ First prevented the return of wealthy foreigners to the property market, it couldn’t stop its partners loosening immigration settings.
The Government will increase the cap on the number of people who come to the country under the Recognised Seasonable Employer scheme, make it easier for migrants’ parents to come to New Zealand; remove the median wage requirement from the Skilled Migrant Category; and make it easier for family members of visa holders to work in New Zealand.
While potentially higher levels of immigration and tax cuts could be inflationary, all three parties are adamant they want to reduce inflation.
Doing so by cutting public sector spending by 6.5 per cent is a priority, with Wellington-based Finance Minister Nicola Willis.
While Act would’ve liked to have closed several identity-based government agencies, its partners only agreed to disestablishing the Productivity Commission.
The savings banked from culling this agency will be used to set up a new department that to assess the quality of new and existing legislation and regulation. David Seymour will be Minister for Regulation.
The three parties also agreed on removing the Reserve Bank’s employment target, requiring its Monetary Policy Committee to focus solely price stability.
The Government will investigate some more drastic changes to the Reserve Bank proposed by Act.
It will “take advice” on requiring the Reserve Bank to meet its inflation target in a set timeframe, rather than in the “medium term”.
This could see the Reserve Bank make more aggressive changes to the Official Cash Rate (OCR).
The Government will also consider getting rid of the Monetary Policy Committee, putting this power back in the hands of the governor.
On the topic of finance, the Government will rewrite the Credit Contracts and Consumer Finance Act (CCCFA) to “protect vulnerable consumers without unnecessarily limiting access to credit”.
A new CCCFA could be significant for banks and lenders, and possibly support the property market.
The three parties have agreed to the sorts of employment relations changes one might expect from a right-leaning Government.
The Fair Pay Agreement regime, which supports collective bargaining, will be gone by Christmas, and 90-day trials will be expanded to all businesses.
There will be “modest” increases to the minimum wage every year, thanks to NZ First.
Act delivered some certainty for companies such as Uber, getting National and NZ First to agree to maintain the status quo, meaning people who explicitly sign up for a contracting arrangement can’t challenge their employment status in the Employment Court.
NZ First secured a couple of wins, getting its partners to agree to the establishment of a Regional Infrastructure Fund with $1.2 billion in capital funding over three years, and a National Infrastructure Agency to co-ordinate government funding, improve procurement and connect investors.
The Government will also reduce expenditure on cycleways, cancel Auckland Light Rail and Let’s Get Wellington Moving, and commit to a four-lane highway alternative for Northland’s Brynderwyn Hills.
It will allow public-private partnerships, tolling and value capture rating to fund infrastructure, and work with Auckland Council to implement congestion charging.
It will also work to replace fuel excise taxes with electronic road user charging.
The Government will investigate sharing GST collected on new residential builds with councils to incentivise them to enable the building of more houses.
NZ First and National will have their wish fulfilled to make bank bosses justify their high profits in front of MPs, as a select committee inquiry into banking competition will be set up.
This inquiry will occur on top of the Commerce Commission market study, currently underway.
In another win for Act, the Government will amend the Overseas Investment Act to limit ministerial decision-making to national security concerns.
The Government will (thanks to NZ First) better resource Inland Revenue to do audits to crack down on avoidance and evasion.
National’s Simon Watts has been appointed Revenue Minister.
He will sit outside Cabinet. Seymour and NZ First’s Shane Jones have been appointed Associate Finance Ministers along with National’s Chris Bishop, who also gets housing, infrastructure, and RMA reform (along with other portfolios).
National has kept the agricultural portfolio for itself, coupling it with trade and giving the roles to Todd McClay.
The climate change and environment portfolios have gone to ministers outside Cabinet.
A review of the Emissions Trading Scheme, aimed at getting businesses to reduce rather than offset their emissions through forestry, will be stopped — . something NZ First, which is supportive of the forestry sector, wanted.
With NZ First also hot on energy and resources, Jones will become Resources Minister.
The commerce and consumer affairs portfolio has gone to National’s Andrew Bayly, who will also get small business and manufacturing, and statistics, and sit outside Cabinet.