At about this time of year, every year, we focus on the Government’s Budget. This year we have asked ourselves why? And the answer is not any sort of curiosity as to what’s in it for us.
At its simplest, the government, whatever your view, is a significant proportion of the economy. At a minimum, its plans and activities influence how the economy will perform and its expectations for the economy are a factor that business needs to consider when making their own plans.
How the Government funds its expenditure is important for both business and the general well-being of the economy. The Government’s tax decisions impact the level and nature of investment in the economy and the negative impact of these decisions are lessened if the approach results in efficient and fair taxes.
On the expenditure side, the Government needs to be efficient and effective. The media drives public attention to focus on the cost – the hard part is determining the value.
Solving these issues requires balance and judgement.
What we’ve recently read in papers and seen in the news about Greece offers up two lessons. The first is somewhat obvious. A government, and a country, needs to live within its means, at least over the long run. That requires not only control of expenditure but also an effective, broad based tax system that collects the revenue – fairly – to fund the expenditure.
The second lesson is that in a democracy it is important that decisions are politically sustainable. The post-1984 New Zealand reforms had a degree of acceptance of the need for action – this allowed them to proceed. The Tax Working Group was conscious of the need for political sustainability: policies which have a long-term focus need to have long-term support.
So, back to our original question, why focus on the Government’s Budget?
The business of government is important for the business of business. It’s important for the economy and it’s important for the community in which we live and work. We all have a role to play. Our role today, Thursday 24 May 2012, is to bring our expertise to tease out the insights from the Budget and help push New Zealand businesses along the pathway to prosperity.