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Budget 2024: Did the engine room of our economy get more horsepower?

Confident or not, a reprieve was needed. The combination of rising costs, high interest rates, relatively persistent inflation and subsequent falling confidence, has taken a toll on households, and in turn, local enterprises of all sizes.

Highly anticipated in the run-up to today’s reveal, tax changes to deliver cash back into the pockets of New Zealanders was the main event. The adjustments to personal income tax thresholds are the first since 2010 and include adjustments across almost all income tax brackets, with the exception of those at the top.

Included in the changes is an extension to the Independent Earner Tax Credit – a tax credit of $20 per fortnight - which sees upper eligibility limits extended from $48,000 to $70,000 per year, announced in Budget 2024.

For 400,000+ sole traders in New Zealand – or those at least that are able to pay themselves a salary – this means a few dollars extra in the back pocket. For employing businesses, income tax bracket adjustments mean a little bit more cash in the hands of their hardworking employees.

With a total operating allowance of $3.2bn, what else does the spending outlined in Budget 2024 offer for businesses? Overall, despite its focus on rebuilding the New Zealand economy, there was little in the way of direct relief or targeted support to offer a boost for battle-weary business owners and leaders to be found.

In terms of new announcements which might provide a glimmer of good news for SMEs and mid-market businesses based on policy hopes we saw in our pre-Budget polling, a few call-outs include:

Training more apprentices: Future-proofing the workforce and supporting local businesses to upskill their teams was a standout priority for SMEs and the mid-market heading into Budget 2024. Announced today, the new Budget sets aside an additional $65m for the next four years, to continue the Apprenticeship Boost scheme. Employers of second year apprentices will continue to receive monthly payments of up to $500 until the end of this year, and from January 2025, first year apprentices in key industries will be eligible for the $500 per month subsidy.

Growing economic efforts in the regions: The establishment of a $1.2bn Regional Infrastructure Fund, announced by Minister for Regional Development, Shane Jones, includes a focus on ‘enabling infrastructure’ – infrastructure which supports regional growth and connectivity. With an eye on projects that would deliver benefits to multiple local businesses or parts of a community, this could include investment in innovation or business parks, and other initiatives that boost productivity in the regions.

Investing in roading and transport infrastructure: Policy and investment into transport connections that ensure goods and services from local businesses can move efficiently around the country will be vital to New Zealand’s economic recovery, helping to keep the supply chain moving and hopefully reducing freight costs long-term. Amongst key spending initiatives announced today is a $2.68bn investment into improving roads, rail and public transport infrastructure, and accelerating the delivery of priority projects including new Roads of National Significance and the Rail Network Investment Programme.

However, as we consider the challenges facing New Zealand businesses, particularly alongside their potential to help propel New Zealand’s economic recovery efforts, many will feel a bit disheartened after today’s Budget.

There were - and are - a number of actions and changes the Government could make to improve operating conditions for business.

One example is changes to streamline regulation and compliance requirements, to improve the ease of doing business. Likewise with changes to simplify the consenting process. For many businesses, the painful process of negotiating consent permissions can be both time-consuming and costly. Streamlining and reducing these processes would encourage, instead of hinder, business innovation and expansion – not to mention, reduce costs, and we hope to see this prioritised with the new Ministry for Regulation.

In the lead up to Budget 2024, we also saw a strong appetite from SMEs and the mid-market for the Government to prioritise more investment in mental health. While funding for Gumboot Friday was announced recently, it is disappointing that there is no allocation in this year’s Budget to extend support for the First Steps programme designed specifically for business owners, for which funding is due to conclude in June this year.

Lastly, there has been much discussion about creating a productive and future-proof economy. However, to deliver this, local businesses and their teams must be equipped with the skills and tools they need to take their operations to the next level. In addition to extending the Apprenticeship Boost scheme to include new sectors like STEM and digital industries, financial support or incentives to improve digital adoption amongst local SMEs or grow their investment in R&D efforts, would offer both short- and long-term benefits to the economy.

All in all, with little to help take the heat out of their rising costs or to boost business productivity, it’s understandable local business owners may feel a fraction despondent around Budget 2024 - particularly given Treasury has reported that the economy is weaker than expected and wage growth remains high.

Ensuring business support is funnelled into the right places – and delivering strong action in the near future – will be crucial to providing certainty and improving confidence as conditions remain challenging.

Published on The Press - Thursday 30th May.