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The New Zealand economy will continue to expand in 2012.
It has now grown in 10 of the past 11 quarters, despite the ongoing European debt crisis, the Canterbury earthquakes and a high exchange rate.
Earthquake damage amounts to about $20 billion – or around 10 per cent of GDP – but rebuilding will stimulate domestic growth.

Our two largest trading partners, Australia and China, are forecast to maintain relatively high growth rates and  demand for our major export commodities from emerging markets is strong.
We are expected to grow more strongly over the next two years than Europe, the United Kingdom, Japan, the United States and Canada.
That has been recognised in recent weeks by some Australian businesses investing here and moving jobs to New Zealand.
Global risks remain and we’re likely to see confidence bounce around for some time. But we are getting there.

More than 4700 businesses in Southland stand to benefit from the 1 April cut in company tax to 28 per cent.

This is more assistance for productive businesses in Southland.  Cutting company tax from 30 per cent to 28 per cent increases incentives for our firms to reinvest earnings back into jobs and growth.  This company tax cut puts us ahead of Australia, and helps make New Zealand companies more competitive.

The company tax cut is part of the second round of Budget 2010 tax changes.  Across-the-board personal tax cuts kicked in last October.  These tax cuts are paid for by last year’s increase in GST and a number of other tax measures that take effect on 1 April and make the tax system fairer.

The National-led Government’s tax reforms are helping tilt the economy towards savings, investment and exports, and away from unsustainable consumption, borrowing and government spending.

The economy is growing, unemployment is dropping, and our exports are increasing.

About 40,000 more people are in jobs than this time last year. The value of New Zealand’s exports has increased by 15 per cent as we enjoy near record commodity prices.

And all of this is happening as we rebalance our economy on to a more sustainable footing – away from borrowing and consumption, and towards saving, investment, and exports.

New Zealanders are saving more rather than borrowing to speculate on houses or buy flat screen TVs.

This trend towards saving more builds a strong platform for faster long-term economic growth.

Growth matters. It creates jobs. It lifts incomes. It boosts living standards and pays for the world-class health and education services that families need.

We had some more good news last week.  Annual inflation was just 1.5% in the year to September, the lowest annual inflation rate in more than six years.  This confirms cost of living increases have generally been low and real wages are gradually increasing.

When Labour left office, the economy was deep in recession, annual inflation was 5.1 per cent – with no compensation for anyone – and real after-tax wages were falling.

The latest figure is the lowest since March 2004. Labour stands for tax increases, higher debt and looser controls over inflation. That only leaves hard-working Kiwis worse off.

After National’s tax changes, nearly three quarters of income earners now have a top tax rate of 17.5 per cent or less.

We have a long way to go, but this shows we’ve made a good start.

Firstly, I’d like to congratulate Nigel Skelt, the team at Stadium Southland, Sport Southland, and all those who have rolled their sleeves up to get on with business after the Stadium collapse.

You can-do attitude has meant the school holidays sporting programmes, major events, and local sports have been able to continue despite the major disruption to business as usual.

Another major disruption, and one that will hit the entire province hard, is the loss of so much stock in the week-long winter blast.  My condolences go out to all those involved, and while I know it is not a good time for either farmers or animals, stay strong in this time of gloom.

From October 1, the tax cuts promised by the Government come into effect.

The average family will be about $25 per week better off, the average wage earner about $15 better off, and a couple on NZ Superannuation will get about an extra $11 a week.

The lowest tax bracket will drop to 10.5 percent, and there is an immediate increase of 2.02 percent in Working for Families, superannuation, and benefits.

The 1 October changes are an important part of National’s plan to boost growth,create jobs, and lift incomes.

There are quite a few other tax changes, such as reducing taxes on savings over the medium term.  The tax changes will boost New Zealand’s longer-term growth prospects by tilting the economy towards savings, investment and exports and away from borrowing, housing speculation and consumption.

This is the next step in the Government’s programme to achieve faster growth and support sustainable, higher-paying jobs. In addition, the personal tax cuts-GST switch will leave the vast majority of Kiwis better off.

Treasury advice indicates even when all forecast cost of living increases for the rest of the year are taken into account, including the rise in GST and other issues, real after-tax wages will grow as a result of these changes.

We expect some volatility in the next few quarters. The Canterbury earthquake and uncertainties about the global outlook will no doubt impact on New Zealand’s immediate economic performance. That reinforces the need for the Government to press on with its comprehensive plan for turning around the economy.

This is the first part of the most significant tax reform package in New Zealand for nearly 25 years. For ordinary New Zealanders it will reward effort, encourage savings and help families to get ahead.

There are a lot of hurdles ahead of us at the moment.  Economists are noting the Canterbury earthquake will hurt GDP growth as people are unable to work and capital assets need to be rebuilt.

Nevertheless, these changes from October 1 will benefit all hard working New Zealanders.

There’s a lot more thinking to be done on GST.  No decision has yet been made about increasing GST to any particular level – the Government has asked for more work to be done on this.

For hard-working Kiwis, lower personal taxes across the board are good because they give people incentives to work hard, improve their skills and get ahead here in New Zealand. But we do have to pay for them.

Our Government is acutely aware that a rise in GST would have an impact on lower and middle income New Zealanders – so we’re not interested in tax changes that adversely affect these groups.

Nevertheless, we want to encourage more investment, savings and exports and have less borrowing and consumption – because New Zealand spends a lot more as a country than its earns.

The work on GST and tax cuts continues.  The Budget on May 20 will outline more details.

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You can contact me either by email me here, phone my electorate office on 218 7749, or call in to 97 Dee Street Invercargill (opposite Waxy O'Shea's).

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Authorised by Eric Roy, 97 Dee St, Invercargill

July 2018
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