Covid-19 Coronavirus: Parliamentary government facing ‘a hell of tax repair job’

According to experts, the economic figures that the Treasury will publish tomorrow in the budget tomorrow will give a clear picture of New Zealand’s economic position.

The numbers will also show the colossal challenges ahead as New Zealand approaches, what a senior economist said this morning would be the “deepest and deepest economic recession in history.”

Economic and fiscal experts appeared before the Outbreak Response Committee on the eve of tomorrow’s budget to voice some of their concerns about the economy.

Cameron Bagrie, chief economist at Bagrie Economics, said the data to be released tomorrow will be “horrible.”

He is estimating that the government deficit will explode to approximately $ 30 billion, which exceeds the pre-Covid expectation of just a deficit of $ 1 billion.

Bagrie also forecasts a government debt of $ 180 billion in four to five years, almost triple the current levels.

At the same time, the economy is going to take a significant hit as the recession bites.

Bagrie chose that Covid-19 will impact the economy by $ 3 billion a month each month the country is at level 1.

That means that even at level 1, Covid-19’s economic impact will be greater than that of the global financial crisis, he said.

“[The Government] will have an excellent job of tax repair, “he told parliamentarians this morning.

One thing the government could do to help save some financial pain in the future would be to raise the retirement age.

And he was not the only pessimist about the economy going forward.

Independent economist Michael Reddell, formally one of the top economists at the Reserve Bank, said the next recession would be the “deepest and deepest economic recession in history.”

New Zealand’s GDP will suffer at least a 10% impact and the unemployment rate will rise to levels not seen in decades.

Like Bagrie, Reddell expects government debt to rise and this morning he asked the Reserve Bank to reduce the official cash rate (OCR) to negative territory.

This, he said, would help reduce the value of the New Zealand dollar and, therefore, make exports to the country more competitive.

When it comes to the government’s response, Reddell said Finance Minister Grant Robertson should consider reducing the cooperation tax for companies.

This would help stimulate more investment, he said.

PwC New Zealand partner and tax expert Geof Nightingale said this was something worth considering, especially if Australia does it first.

But he said the worst thing the government could do right now would be to raise taxes or create new ones.

Instead, he said the government must do everything possible to help the country return to solid economic growth.

That would be that tax revenue would automatically increase, he added.

Wealth tax ‘not a good idea’

PwC New Zealand partner and tax expert Geof Nightingale said New Zealand is going to have a “huge burst” in government debt levels, at 40 to 50 percent of GDP.

He said it may be necessary to increase taxes in the future, to help lessen the burden.

But in the meantime, the government must do everything possible to help the country return to solid economic growth.

That would be that tax revenue would automatically increase.

“The worst thing we could do is start raising taxes or implement new taxes, too soon.”

Nightingale said the government has already taken a series of measures to help companies reduce their tax burden.

He praised the IRD and the Government for having such a well-resourced tax department.

He said that a wealth tax was not a good idea, but said the government will have to think about changing the way New Zealand is taxed in the future.

He noted that a capital gains tax has been ruled out, but Nightingale said the tax system should lean toward capital in the future.

He said a fourth tax bracket, higher than the top level of the 33 percent level, would not actually generate a large amount of income.

A better use of government resources would be to restart economic growth.

He said that in the future, foreign investment is critical. But to get it, the way that investment is taxed must be competitive.

The main competition is Australia: “If they started to reduce their cooperative tax rate, we would have to respond,” he said.

In other words, if the Australian government cuts its business taxes to attract more foreign business, New Zealand will have to do the same.

‘The government needs to reduce taxes for companies’

Independent economist Michel Reddell, formally one of the Reserve Bank’s top economists, said government officials were simply not prepared for the economic impact of Covid-19.

Looking to the future, Reddell said New Zealand was seeing the “deepest and most acute economic crisis.”

He said the world is in a “wild and deep” recession.

In New Zealand, he said that GDP could still be 10 percent lower as a result of Covid-19.

Reddell said RBNZ needs to implement a “deeply negative” OCR to help lower the New Zealand dollar, which would help stimulate growth.

Reserve Bank Governor Adrian Orr has already ruled out a negative OCR: Reddell said he was wrong to do this.

Fiscal measures (more government spending) will help, but the Reserve Bank must do more to help the economy.

“We must do what we can … to limit widespread unemployment.”

In fact, Reddell said the government must cut taxes for companies.

This would help stimulate more investment, he said.

Can you be trusted?

National Iwi Presidents Forum spokesman Rahui Papa said there was “growing sentiment” that the Government’s efforts are undermining the iwi.

He cited the public health response bill, which said “it smells like discrimination,” for example, how the police are allowed to enter marae under the new rules.

“As we do our part to care for one another in our communities, there is a growing feeling that the Government’s efforts are determined to undermine the iwi, the whanau and the hapu.”

“The public health response bill before the house today marks maraes and employs a totalitarian right of application and, above all, a hint of discrimination. Some phrases are being coined saying that this is an affront to our way of life. It is also an attack on our way out of death. “

He said that the Governor General, Lady Patsy Reddy, officially pardoned 20th-century pacifist Rua Kenana in December for “exactly the kind of situation we are getting into now, that the police entered the marae without a warrant and without cause and wreaked havoc years after the event. “

In 1916, the Crown invaded the prophet Tuhoe’s settlement in Te Urewera and accused Kenana of trying to prevent Maori from being recruited by the armed forces.

“It is very disappointing that Maori are seen as different and unable to control our own spaces, especially in a Tikanga space in regards to marae and in relation to tangihanga,” said Papa.

“The Maori have been protecting their people from generation to generation and we do not see that we should be targeted in any of the bills. Marae is particularly targeted. There are no provisions for other entities.

Bridges asked, “I don’t mean to be funny, but I’m really asking you this, can you trust you to continue with marae meetings, tangihanga and things like that? That’s the question. Could you be trusted to do that?”

Dad said “a lot”.

“We don’t need the Ministry of Health, we don’t need the New Zealand police to regulate tikanga in our marae. If you’ve ever been in a marae, you will know that babysitters rule. And when nannies rule, babysitters follow.” .

He said there would be social distancing, sanitation and in some cases there would be a one-day tangi.

The 10-person limit was “ridiculous,” Papa said.

“Frankly, there are some phrases that say we should have our tangi in the pub because 100 people are allowed there. We should have it in a mall because more people are allowed there, and they are allowed to have a kai. But for our Marae, the restrictions are such that it makes it impossible for us to use our tikanga.

“There may be people on a rugby field hitting each other and then not being able to shake hands. There are some inconsistent messages.”

Bridges asked about the future of the hongi.

“He’ll be back,” said Dad.

“We have put it aside for now, but this is a temporary measure that the Maori have called. It was not due to the guidelines of the Ministry of Health or the guidelines of the Government.”

Meanwhile, he said iwi has shovel-ready projects that the government should prioritize.

At the end of the day, Papa said that iwi should be involved in the economic response in the future.

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Dad was challenged by his comments that the government is not working with iwi by Tamati Coffey de Labor and Kiri Allan, who noted a number of initiatives in which Maori and the government have partnered on Covid-19.

For example, iwi checkpoints and care packages.

But Papa said those checkpoints would not have gone ahead without iwi proactively leading them, while lawmakers discussed them.

Allan disagreed and said the government was supportive and that the police were helping with checkpoints.

She said the checkpoints were “well supported” by the government and were not an “afterthought,” as Pope hinted.

Dad said he was disappointed to hear negative comments about National’s iwi checkpoints.

Budget Eve

Finance Minister Grant Robertson was expected to address the committee after parliamentarians questioned economists and tax experts, but withdrew this morning.

The committee meeting comes on the eve of tomorrow’s budget release, which will be the third delivered by Robertson.

He has said it will be a “budget like no other”, given the enormous economic and fiscal pressures created by Covid-19.

Many billions of dollars of new spending are expected to be announced, in addition to the more than $ 20 billion that has already been allocated and spent to fight Covid-19 and cushion the economic blow.

New Zealand is expected to fall into a recession.

Bridges said an economic recovery plan is of “immense importance.”

“The committee will listen to presentations from respected economists who can paint a picture of what we are facing and how we can begin to rebuild.”

Bridges said the Epidemic Response Committee continues to play an important role in New Zealand’s response to Covid-19.

“When we start trying to get out of the deep economic hole we find ourselves in, it is important that we make sure that our response is up to the challenge and ensures the best future for all New Zealanders.”