Best of Business

Very few frills or surprises are expected to be in today’s Budget.
Auckland Business Chamber CEO Simon Bridges predicts a “sensible, prudent, boring, Presbyterian” Budget, with only a few goodies coming from reprioritised spending.
He told Ryan Bridge he was more interested in the "nuggets" that pointed to the Government's future policy direction.
He wanted Finance Minister Nicola Willis to “stake some strong positions, defend them and stick with them”, with details on how the Government planned to lift innovation, productivity and growth.
Bridges believed most people understood restraint was required, but said he wanted to see evidence the Government knew the difference between “frittering” on large social projects and “real investment” that would grow the economy.
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Over in the UK, household energy prices will rise by 13 percent a year in July, as soaring wholesale costs caused by the impact of the Iran war hit bills for the first time.
Energy costs have jumped as a result of Iran blocking the crucial Strait of Hormuz shipping route - where a fifth of the world's oil and gas is carried.
UK correspondent Gavin Grey says even if the Strait was unblocked tomorrow, this conflict would still leave a significant economic impact.
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Accountants are hopeful the Government will use the Budget to do something about the secret little wealth tax those with offshore investments are currently paying.
As it stands, most people with more than $50,000 directly invested in assets offshore, including shares in companies listed on stock exchanges, need to pay tax on a portion of the value of their investments, regardless of if they receive income from those investments.
Those who invest in shares in New Zealand companies or New Zealand-domiciled funds only need to pay tax on the income they receive from their investments.
NZ Herald Wellington business editor Jenee Tibshraeny explained further.
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The Reserve Bank has opted to keep the OCR on hold at 2.25 percent today.
Most markets had priced in a hold, but the views on what will happen next are split, especially considering concerns around inflation.
Milford Asset Management's Remy Wisenberg explained further.
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Well, that Official Cash Rate decision is probably one of those moments where you find out whether you're a glass half-full or glass half-empty person.
Because on the bright side, the Official Cash Rate didn’t go up. On the downside, it looks like it’s definitely going up next time. So yes, it’s a reprieve - but it’s only a reprieve for six weeks, excuse me, before the screws on the economy start turning again.
Thanks to the new transparency rules at the Reserve Bank - which, frankly, we should all love - we know that the committee voted and it was split right down the middle. Three members of the committee wanted the OCR to stay at 2.25 percent. Three of them voted for it to be raised by 25 basis points immediately to calm down inflation pressures.
But Anna Breman, who is the governor, has a casting vote. She said it needs to stay, so it stays put.
But they didn’t hide the fact that it is going to go up sooner than they had thought just three months ago. And it will go up by more than they thought just three months ago.
Much of it appears to hinge on what businesses do with prices from here on in. Because what the Iran war is doing to prices is so widespread - and so many prices are going up, from fuel to fertiliser to food - that it runs a higher risk that businesses start jacking up more prices in a second round of increases. And that is what they’re worried about at the Reserve Bank.
So economists are now calling for three hikes in quick succession from here: July, September and October.
Now, there are two problems with that. The first: all three hikes are before the election in November. National, especially, should be sweating, because poorer voters are not happier voters - they are voters who turn to New Zealand First.
The second problem - and this is probably the biggest of them all - is what this is going to do to our recovery, our economic recovery.
We are probably in negative growth this quarter. Next quarter is probably not that flash but at least positive. Entire sectors, like construction, are still struggling to get back on their feet. Unemployment is still in the fives. The Iran war is still pushing up fuel prices and therefore pushing up the price of everything.
So, glass half full: at least we get another six weeks before the screws start turning.
Glass half empty: when they tighten, they will be tightening fast on an economy that doesn’t need that kind of pressure.
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