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Dominion-Post
Last year, Finance Minister Grant Robertson released the “Welfare Budget”; This year, the focus will be on the economic recovery.
ANZ says the government may announce a national recycling program in next week’s Budget to support the transition to a “new post-Covid economy.”
But while new training expenses may be at stake, transforming tourism workers into “elder or forest care workers, for example” would not be an easy task and would take time, the bank warned.
The bank does not have much hope of tax cuts or “helicopter money” in its budget forecast, but says an extension of some specific wage subsidies and an increase in Working for Families tax credits are possible policies.
However, ANZ warned that for some companies, wage subsidies would simply be “delaying the inevitable, at a huge cost to taxpayers.”
The bank said new taxes are likely to be imposed in the coming “years” as governments sought to consolidate their finances.
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“Capital gains, inheritance and wealth taxes are all possibilities, but they are unlikely to get airtime in the next Budget.”
However, the retirement rules could be examined, as the government tried to address issues related to “intergenerational equality,” he said.
“Past attempts have been made to address equity and affordability of retirement, such as establishing the New Zealand Super Fund, but anything more than that, such as raising the age of eligibility or the means test, has been nullified.
“However, it might be worth a new visit.”
Senior economist Miles Workman said all eyes would be on how the government intended to manage its books during the Covid-19 crisis, as spending increased and tax revenue declined.
“The government will have significant deficits in the short term to limit the economic consequences of Covid-19 and facilitate the eventual recovery.”
ANZ expected the central debt of the Crown to rise to between 40 and 50 percent of GDP, from 19.2 percent in February.
“Covid’s response is the only thing that matters, but at this early stage we don’t expect the government to have all the answers.”
“We also do not believe that the Treasury is in a position to develop a definitive vision on how the economic and fiscal situation will develop.”
Once the debt-to-GDP ratio stabilizes, the government will try to put it back on a trajectory of about 30 percent, Workman said.
“A growing economy will help achieve this in a painless way, but sustained surpluses will also be required to occur within a reasonable time horizon.”
