Federated Farmers on the Budget Policy Statement
Released 11 Feb 2010
Good morning Mr Chairman and members of the Committee and thank you for having us. My name is Don Nicolson and I am the President of Federated Farmers of New Zealand.
With me is Philip York, national board spokesperson on economics and Nick Clark, the Federation's manager of general policy.
Federated Farmers welcomes the opportunity to present its submission on the 2010 Budget Policy Statement.
Federated Farmers has been a long-time submitter on the Budget Policy Statement.
We consider it very important to support and participate in this process.
This is because the Government's fiscal policy has significant direct and indirect implications for the economy and the primary sector.
Fiscal policy has a direct impact in that decisions on spending and taxes will have immediate impacts on those receiving the funds and paying the taxes as well as flow-on impacts for the economy.
Meanwhile, fiscal policy's indirect impact is that these decisions also affect other aspects of Government policy, including monetary policy.
Our interest is in both impacts.
I won't go into great detail because it's all laid out in our submission, which you will be familiar with.
The key point though, is that for several years, the New Zealand economy has been unbalanced with the tradeable sector in recession at the same time as the domestic economy has hummed along, supported by rapid growth in Government spending and a housing boom that has made people feel richer.
Federated Farmers has for years submitted to the Budget Policy Statement, warning of this unbalanced economy and urging for more restraint in Government spending and for all Government policies to work together to promote competitiveness and productivity.
We said exactly this in our 2007 submission to the Finance and Expenditure Committee's Inquiry into Monetary Policy.
It is extremely frustrating that it has taken so long for the penny to drop and for progress to have been so slow in turning what is an economic super tanker.
The Government's more recent comments, including those of the Prime Minister yesterday, indicate to us that there may be some progress in the right direction.
It's great to not only see an emphasis on constraining overall spending, but also on reallocating money towards research and development, water storage and ultra-fast broadband, to name just a few.
Government spending, however, is still far too high and our view is that the cushioning of the domestic consumer and the non-tradable sector from the impact of the recession, has delayed a necessary rebalancing and has been a factor behind keeping the dollar too high.
To achieve this rebalancing, we need to get Government spending down as a proportion of the entire economy.
Decisive action to contain Government spending and reduce it to below 30 percent of GDP will reduce the build-up in Government debt. It will help make tax reductions more affordable without resorting to increasing taxes or creating others. It will help take pressure off the exchange rate and facilitate the export-led recovery we all want.
On the matter of taxes, we support what the Tax Working Group wants to achieve but we think that rate alignment should be funded by cutting back the growth in spending rather than imposing new, or increased, taxes.
A land tax, in particular, is anathema to the agricultural sector. We are very pleased that the Prime Minister said in his statement to Parliament that the Government has ruled it out.
To conclude, I refer you to our submission.
We point out that the total net income for the agricultural sector, inside the farm gate, was $1.4 billion for the year to March 2009.
It was just 6 percent of gross agricultural revenue. This is the sliver that is left over to pay income tax, repay debt, invest in our businesses and feed our families.
If agriculture is to grow and lead the economy to greater things, then somehow, we need to get that percentage up on a more sustained basis.
But the Emissions Trading Scheme, local government, the Cabinet endorsed National Animal Identification and Tracing (NAIT) scheme, Resource Management Act and ACC are all examples where cost creep keeps on happening.
It's why every aspect of Government policy is of such great interest to farmers and why fiscal policy must be brought firmly into line, so it can do its bit to compliment rather than contradict other policy areas, most notably monetary policy.
Thank you and we welcome the opportunity to field questions.
For a copy of Federated Farmers submission please click here.
For further information contact:
Don Nicolson, Federated Farmers President, 027 226 6331
Philip York, Federated Farmers economics and commerce spokesperson, 027 290 5418
