I acknowledge that it does appear somewhat odd that I'm posting a comment about the May 20 budget announcement, almost two weeks later ... but I have a confession to make. I've actually been out of the country for the past few weeks on holiday in the northern hemisphere ... it was quite a shock to return to NZ and be met by the weather bomb, having just enjoyed some great weather in the UK.
Some commentators have been calling it the "Savers Budget" and I'd have to agree that it definitely is does "enable" people to save more and "reward" them for doing so.
At the simplest level, reducing the amount of tax people pay does give them more money in their pocket and therefore the potential to save more. The question is where do they save or what do they invest in, and does this budget influence the answer to those questions?
Back in March, I speculated re the budget and what it was likely to offer, and it's pleasing to see that PIE deposits remain attractive by way of the tax effectiveness benefit. Whilst the difference from October will only be 5%, between the top RWT rate and the top PIR rate, whereas it is currently 8%, I still see this significant and enough of an tax incentive to continue to invest in PIE deposits.
There has been a lot said about Kiwi's passion for property, over the capital markets, as a preferred investment option. Clearly there have been tax benefits for property in the past which have influenced people's decisions, and this budget has also focussed on that by way of the tax treatment for depreciation on property.
I see this budget as a continuation of the focus on saving and investing by Kiwis, started by the then-Labour government. Following on from the implementation of KiwiSaver and then PIE(s), this budget does carry on from this in terms of changes to "reward" savers and investors ... overall a good thing for individuals and the country as a whole.
Here are a few pages that you might find useful for further insight into the budget and what it means in real terms for Kiwis:
To steal a phrase from a friend of mine, Kiwi's are money rationale, and we've seen this by way of their take up in property investing; KiwiSaver and PIEs. I have no doubt the same approach will be taken when assessing the opportunities this latest budget provides them with.
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04/06/2010 - I recently had a chat with Andy Thompson on the Farming Show about the budget – take a listen to see what we both had to say. According to their website to listen, you must need to have Windows Media Player installed on your computer, and your firewall must allow the downloading of Windows Media files.
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