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Call for Christchurch flat tax to help rebuild

Thursday 24 Jan 2013 7:42 a.m.

A leading economist has called for a flat tax in the Canterbury area to attract businesses and assist with the rebuild.

"I'd like to see them look at Canterbury… it would be great to see them bring in a low flat tax of say, 10 percent, within the Christhchurch, Canterbury area to encourage new businesses," Sam Stanley of the NZX told Firstline this morning.

"Ring-fence that Christchurch area and see if they can encourage new businesses to come in and activity to be fuelled out of the Christchurch zone.

"I think that will be a very, very positive thing – it's been done in other areas before and has worked successfully."

Mr Stanley also says the New Zealand market, coming off a great 2012, is "pretty excited" at the prospect of the country's power companies going on the block.

Trading on the New Zealand Stock Exchange jumped more than 20 percent last year, with $30 billion worth of shares traded.

"I think the landscape out there is still pretty strong," says Mr Stanley. "We had a very strong performance last year… and really, the same fundamentals are in place."
He says low interest rates, unaffordable housing and a lack of investment alternatives is driving trades on the exchange.

The improving outlook in Europe is also helping.

"Certainly with regards to the general feeling around risk and appetite in the market, what's happened in Europe has been pretty impressive in the last few months or so, restored confidence."

If the Government successfully manages to sell of up to 49 percent in state assets such as Mighty River Power, Mr Stanley says it will act as a "buoy".

"It will provide another great investment for New Zealanders to get involved in. There will be a lot of interest building ahead of the partial floats, so from the point of view of potential investors with money to look at putting into stocks, there are some very good upcoming floats potentially.

"It's widely anticipated in the market and everyone's pretty excited about it."

New Zealand's inflation rate at 0.9 percent is "non-existent" he says, and could lead to the Reserve Bank dropping interest rates.

"They could easily do so, and I don't think there's a single economist out there that would disagree with that."

He says the only fear is creating another bubble in the Auckland housing market.

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