Budget needs incentives for economic productivity

Media Release

11 May, 2007
CPA Australia looks for Budget to provide incentives to enhance economic productivity

The New Zealand branch of CPA Australia, the pre-eminent body representing the diverse interests of more than 112,000 finance, accounting and business professionals working in the public sector, public practice, industry and commerce, academic and the not-for-profit sector throughout Australasia and the world is bringing together their top specialists in New Zealand to analyse and comment on Budget 2007 on Thursday 17 May.

The team is hopeful of a budget that will aim to make New Zealand internationally competitive for business, and make the country a better place to live, work, save and invest.

CPA Australia’s New Zealand branch says next week’s New Zealand Budget needs to include incentives to encourage older people to stay in the workforce longer which will help overcome skills shortages. There should also be a progressive move toward making retirement savings compulsory.

Chye Heng, New Zealand branch council president and CPA Australia fellow would like to see some of the initiatives revealed in the Australian Federal Budget mirrored in the Cullen offering, but remains cautious in his expectations. “While I am not enormously hopeful, our organisation believes it’s vital for New Zealand to have the policy and spending to re-energise Kiwi businesses and households. We need to attract vibrant young skilled people to our country, while providing the correct balance in the tax burden to encourage our businesses to thrive here, not overseas.”

The following areas are of priority to members, their clients, and the accounting profession, he says.

Taxation Reform

If New Zealand is to remain competitive globally, a review of the tax burden on companies should be undertaken. Company tax rate reductions will release funds for companies to re-invest in capital and workers, reducing the risk of New Zealand losing any more iconic companies offshore.

Personal income tax reform will not only boost the economy, but attract skilled migrants, particularly to the professions, which are currently experiencing a skill and candidate shortage that shows no signs of easing. New Zealanders are currently well behind Australians in terms of overall taxation, a gap which has only widened after the release of the Federal Budget.

Superannuation / Retirement income

Australia has recently commissioned its second intergenerational report indicating the dangers of failing to recognise the real future cost of age care including healthcare and pensions. In addition to the need for increased spending on provision for this group, there is a need to offset this cost with incentives to encourage older workers to remain in the workforce longer and to ensure New Zealanders adequately save to self fund for retirement.

While CPA Australia applauds the Kiwisaver initiative it questions the adequacy of the contribution levels and would prefer an incremental move toward compulsion over voluntary participation in superannuation schemes. In Australia for example, super schemes are taxed at 15% whereas investments in an individual’s name are taxed at up to 40%. It should be noted that this would also assist the move away from reliance on property investment and result in a re-investment in equities reducing the current reliance on offshore capital.

Education / Skill shortage

The Hays quarterly survey has identified accountancy and finance as a market sector in desperate need of qualified candidates for available positions. Policy must ensure that universities provide more courses at an undergraduate level or the problem will worsen.

There is also a need for stronger requirements for universities to provide English language training for international accounting students to enable them to enter the workforce rather than returning home on completion of training.

CPA Australia is convinced that the provision of funding to tertiary institutions to fund work experience placements for both domestic and international accounting students will help redress the current imbalance.

Trans-Tasman Mobility

With ever more New Zealand companies doing business on a regular basis with Australia it is time for the government to negotiate with Australia to allow employees who travel across the Tasman for short term assignments to have an exemption from Australian PAYE. Creating an environment where portability across both countries is not hindered can only improve our export market, in both goods and expertise.

Ageing Workforce

The intergeneration report commissioned in Australia has become the roadmap to providing answers to allow older workers to remain productive for longer. Some recommendations included reducing tax burdens for older workers and changing attitudes toward older employees.

With skill shortages in many professions looking set to continue, older workers will become increasingly vital in addressing the need for retention of valuable skills. Incentivising workers to delay retirement with tax breaks on lump sum super scheme withdrawals has worked well in other countries.

Analysing the budget will be:
- Chye Heng, CPA Australia New Zealand branch president and CFO Executive Director and Head of Legal, Beca Group, and other members of the New Zealand branch council including:
- Craig Richardson, CFO Coca-Cola Amatil New Zealand and Fiji
- David Searle, Partner Audit and Assurance Services, Staples Rodway
- Craig Anderson, General Manager Corporate and Specialist Risks, QBE Insurance International.

Their Budget 2007 comments will be distributed as soon as practicable following the conclusion of the reading. The team can be contacted for comment before and after the Budget announcement via the contact details below.

ENDS

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