Budget 'low on surprises'

Johannesburg - Finance Minister Pravin Gordhan's maiden Budget speech on Wednesday offered few surprises, with economists praising the drop in income tax.

"Today's budget was wholly lacking in surprises and instead provided a very balanced approach to dealing with an economy newly emerged from severe recession," said Investec economist Annabel Bishop.

"Despite a lot of noise to the contrary, there was no increase in taxes, besides fuel and sin taxes, and instead income tax relief of R6.5bn was provided, largely to counter the effects of rising inflation causing bracket creep," she said.

Gordhan announced government's spending commitments will remain substantial, rising slightly to R907bn for 2010/11 from the previously estimated R905bn.

"There were no announced changes either to exchange controls or to the inflation targeting framework, and Gordhan is steering a very steady ship following on from the successes of his predecessor," said Bishop.

Peter Attard Montalto, emerging markets economist at Nomura International, concurred with Bishop. "[It came] in broadly as expected with no major changes to tax or exchange policy, no mandate change. Overall reaction - nothing too dramatic save for mining royalties."

According to Montalto, the South African Reserve bank (Sarb) will change its mandate by the end of the year. "There was no mention of mandate change. However, Gordhan did stress that the Sarb needs to consider the whole range of impact on the economy and how they affect inflation. Overall, I think he didn't want to commit too much too early on," said Montalto.

First National chief economist BankCees Bruggemans told I-Net Bridge great compassion was shown for the poor, as usual.

"Income tax tables were changed, with two million more children this year qualifying for child support, and R7bn extra allocated to municipalities to shield the poor from coming electricity and water tariff increases.

"All in all, an impressive maiden Budget speech in which the minister had to take into account widely varying interests and views of many groupings in society against a terrible global backdrop, but doing so with great finesse from a position of financial strength," said Bruggemans.

- I-Net Bridge