The Government predicts economic growth over the next few years to be around 3 percent per annum, with CPI inflation at 0.1 percent. This is solid, but not spectacular growth. Combine this with low interest rates and we continue to foster a predictable economic landscape in New Zealand. This adds a lot of comfort, certainty and security when planning your business strategy. The 2015 Budget sees an additional $425 million of new spending going into the Business Growth Agenda over the next five years.
So here’s what New Zealand small businesses need to know:
$500 million in ACC levy cuts over 2016 and 2017
As already signalled, ACC levies will reduce by $375 million in 2016, followed by cuts of $125 million in 2017. These cuts will be across motor vehicle, work and earners accounts. There will be a consultation process on these cuts later this year. The recommendations put forward will come into effect in 2016. Additionally, as of 1 July, ACC levy cuts already announced in motor vehicle registrations will come into effect.
Action for small business: watch this space as savings should be coming your way. Good news for cashflow.
Small tax cuts in 2017 if everything goes to plan
Reducing income taxes is a priority for the Government but it will only do this when cuts are affordable. Current estimates have 2017 as that time, with small reductions in tax expected. This will depend on economic conditions and lots of things could change by then. A rebound in oil prices or a further drop in dairy prices could put the promise of tax cuts on hold.
Action for small business: watch this space, don’t bank on anything too early to tell.
Connecting New Zealand
$210 million for more ultra fast broadband and $150 million for improvements to rural broadband
It is great to see more funding for connectivity infrastructure extending ultra fast broadband to 80 percent of the country. For New Zealand to compete in the global marketplace, we need to have the latest productivity tools – whether that is in the factory, office, school or farm. Better connectivity means more collaboration, more thought sharing and more idea generation. Better internet connections also bring New Zealand’s regions closer to the rest of the world, creating jobs and helping Kiwis enjoy the lifestyle we love.
$12 million for New Zealand Business Number (NZBN)
Further funding for the NZBN is another positive for small business. This is something Xero has been advocating for since the beginning. The NZBN is part of the Government’s Better Public Services for business (Result 9) programme. By 2017 it aims to reduce business costs when interacting with government by 25 percent. Anything that helps reduce compliance for business has got to be good.
The government is looking at how the NZBN should be rolled out to businesses that are not companies. This means that small businesses will benefit from lower compliance costs. It will also be used to expand the register to include sole traders, partnerships and trusts. The NZBN will ensure a single business number for all businesses, making it more efficient to work with the government and other businesses.
Business Growth Agenda Initiatives
The Government announced a number of additional initiatives aimed at business growth and increasing skilled employees, including:
$25 million to establish regional research institutes
This could add three new research centres outside the main regions. They will focus on creating new jobs, products and services to support regional development. More details are needed here to understand what kind of impact this can have for small businesses operating from regional New Zealand.
A further $80 million over four years to Callaghan Innovation
As per the April announcement, funding will go towards grants in hope of encouraging private sector research and development. These will be administered by Callaghan Innovation.
$113 million for tertiary sector education
This funding will help develop graduates with more knowledge and skill. This in turn will create a better workforce and boost New Zealand’s economy.
Removing $1,000 kickstart for KiwiSaver
Obviously a money saving move by the Government. But won’t have a huge impact on businesses. This will take effect immediately for any new KiwiSaver members.
More labour inspectors
Labour inspectors police minimum employment rights to protect vulnerable employees. They enforce health and safety standards and labour laws. More inspectors should mean safer workplaces and fewer exploitative employers. However, the Government has not clarified whether the role of these additional Inspectors is educative or enforcement.
The full Budget can be viewed on the Budget website.
Overall it’s a reasonable budget. It provides stability for businesses so they can invest with confidence, puts cash back in owners’ pockets, ensures the infrastructure is there to support success and tries to address the long term issues we have around skilled employees. I’d like to see more investment in initiatives to reduce the compliance burden on businesses. There’s not enough detail in either the Business Growth Agenda or in this budget.