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Budget 2014 Extract- Economic Outlook
Budget 2014 Tax Announcements
Pies for New Zealand Resident Individual Investors
Setting your Prices
The New Zealand economy has recovered much of the ground lost in the recession and the global financial crisis. The economy grew 3.1 per cent in 2013, the fifth-highest rate in the OECD.
Growth that was initially driven by low interest rates, elevated terms of trade, a catch-up in housing supply and the Christchurch rebuild has turned into a broader-based recovery supported by strong consumer and business confidence, new investment and higher productivity. Growth is already delivering more jobs, and wages that are rising faster than inflation.
The Budget forecasts show real GDP growth of between 2 and 4 per cent in each of the next four years, with growth forecast to peak at 4 per cent in the year to March 2015. Compared to the December quarter of 2013, Budget forecasts show an additional 170,000 people in work by mid-2018, and the unemployment rate is expected to fall to 4.4 per cent.
The average full-time wage is forecast to rise to almost $62,300 by mid-2018, which would be $7,600 more than it was in December 2013.
The Government is taking a long-term view of economic growth, because some of the factors driving the economy today will peak over the next few years.
Export prices are likely to return closer to normal levels, housing supply will eventually catch up and the Christchurch rebuild will peak and eventually slow.
And the New Zealand economy faces ongoing global risks, including uncertainty about the performance of our two largest and linked trading partners, China and Australia.
But against the background of a growing economy, we have the opportunity to do more work on longer-term economic fundamentals like investment, skills and productivity.
Our aim is a long period of steady growth delivering pay rises and more jobs every year, rather than a shorter period of unsustainable growth.
BUDGET 2014 TAX ANNOUNCEMENTS
Budget 2014 (presented 15 May 2014) continues the Government’s focus on further strengthening the tax system and improving public services to help provide an environment that supports business.
The announcements include proposals to:
Budget 2014 also contains a proposed change to the Student Loan Scheme to freeze the repayment threshold at its current level of $19,084. You can find details of the proposed change at www.minedu.govt.nz/.
Also included in the Budget is extra funding for Inland Revenue to follow up on unfiled tax returns.
SETTING YOUR PRICES
is one of the elements of a marketing mix.
The right price should meet the requirement of the buyer or seller.
If you hit the optimum price , your customers will be happy, your
profits will be higher, and your bottom line will be healthy.
setting the right price is one of the most difficult decisions to make when
starting a business. Many small business owners make the mistake of setting
up a flawed pricing structure. As
a result, they find themselves out of business very soon, or they are
working so hard for so little.
prices must be based on a broad, thoughtful basis.
It requires a basic understanding of both your financial and business
goals. Here are a few
principles to consider to apply when your decide what prices to put on your
merchandise or service:
Keep Your Prices Realistic
realistic price is the price you set after taking into consideration various
factors, such as the direction of your business, your cost structure and
expenses, your resources and financial goals.
Avoid setting you prices based on “what everybody else is
charging”. What is
right for your competitors may not be profitable for your business.
After all, their goals, strategies and financials may be different
from yours. Research your
competition and see what they are charging, but do not copy their pricing
structure just to charge what everybody else is charging.
Set your prices based on your own situation.
Cover all your Costs
price of your item should cover the costs associated with it, its
contribution to the overhead, and profit.
A successful pricing strategy is one that results in the most dollars
after all your costs have been met. Be
careful in setting your prices too low:
whilst it may attract large sales volume, you may not be making
enough revenue to cover the costs of selling the merchandise.
If you set your prices too high, your sales volume may be so low you
can’t cover operating expenses.
Check your Prices against Inflation
prices must keep up with inflation.
Inflation increases your
cost of doing business, with the prices
of your materials, overhead and other costs increasing.
If you maintain your prices despite rising inflation, you will erode
your profit margin. Allow
your business to increase your prices at least once a year, but give your
customers sufficient warning about the price increase. Once you’ve
established your policies, constantly monitor your prices and operating
costs to ensure profit.
Include in your Pricing the Value of your Time
Avoid committing the mistake of not including a salary for yourself, particularly if you are operating a service business. Your time is valuable, and you need to compute it in your pricing structure.
Customers are not always looking for the best Price
Price is not always the topmost concern of customers. There are many customers who do not mind paying higher prices, particularly if they know that they are purchasing exclusive merchandise, or your business is located in a convenient or high-end location. Many customers are willing to pay premium prices for quality service, speedy delivery, helpful and friendly customer relations, excellent product knowledge, or satisfaction in handling complaints.
Price Low, but Smart
common pricing strategy for small businesses, particularly new entrants into
the market is to price low just to get the work.
By pricing low, the aim is to penetrate the market and get as much
repeat business. However,
be careful that pricing low can have adverse repercussions on your business.
First, a low price may signal a low quality product and service..
Secondly, it may be difficult to raise prices later on once customers
are accustomed to your low prices. Third,
your start-up business is yet to develop economies of scale that makes it
hard to compete on price.
Use Discounts with Care
discounts is a good strategy for encouraging repeat/ bulk orders, bundling
sales, and early payment of customers.
Discounts also allow you to more quickly sell products with vanishing
opportunity e.g. products with
sell-by dates, seasonal and quick obsolescence like fashion and technology.
You can stimulate demand for your products during the times when your
product/ service is less popular. Discounts
are also used to clear out merchandise that has become outdated.
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