The elusive surplus threatens poverty measures

It looks like the Government won’t make their promised surplus next year due to reduced tax take and pressure from reducing milk prices.

NZ Herald reported No surplus this year – Treasury

Treasury this morning delivered a body blow to the Government’s hopes of returning to surplus, saying it now expects a deficit of over half a billion dollars for the June financial year.

At this morning’s Half Year Economic and Fiscal Update, Acting Treasury Secretary Vicky Robertson said despite solid growth in the economy, the Crown’s finances would take a hit from lower than previously forecast tax take.

That had seen Treasury change its forecast operating balance before gains and losses (Obegal) for the 2014-15 year from a slim surplus of $297 million to a deficit of $572 million.

Treasury said softer outlook for economic drivers of the tax such as lower dairy prices and interest rates had seen the expected tax take for the year fall by $600 million.

The changed forecast isn’t a big deal on it’s own, changing economic conditions and revisions are to be expected.

Unless there’s a significant turn around and the surplus is achieved this is embarrassing for National and Bill English who have put a lot of emphasis on reaching a surplus after some very difficult years since the Global Financial Crisis.

Generally English deserves a lot of credit for managing the country’s finances prudently, this played a significant part in National doing so well in the election.

But English has not been so prudent on two counts – staking so much of his reputation on reaching a surplus by 2015, and leaving no room for mistakes or unexpected changes in his last budget.

English cut the surplus too fine, leaving virtually no margin for a negative change. Mr Reliable gambled and looks like losing this bet.

It isn’t a major problem for National at this stage of the electoral cycle. But it will make their promise to address poverty in next year’s budget challenging.

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8 Comments

  1. Ian McKinnon

     /  18th December 2014

    Come on poverty is a figment of the left’s imagination. It is a tool used by MSM in their attempt to deliver their vile message for EPMU Andy.

    Reply
  2. kiwi_guy

     /  18th December 2014

    NZ govt debt is a major problem, over 93 billion!:

    http://www.nationaldebtclocks.org/debtclock/newzealand

    Now we know how the tax cuts are subsidised by Nats.

    Under Labour it was a fraction of this. So much for right whingers claims about superior economic management.

    Reply
    • Not so Kiwi-guy.
      Labour’s 2008 PREFU had a $6.3 billion deficit. The economy in early-2008 tipped into recession and it looked pretty grim. And this was before the GFC hit! The DEFU in 2008 was a nightmare – on the Labour policy settings, the projection was annual deficits of more than $20 billion. The gross debt projections in 2008 were catastrophic. And this was based on Treasury projections that underestimated the impact of the GFC and estimated that the global economy would rebound strongly!

      And work was being done by the Government to create a 30:30:30 tax system while Labor was still in power – the reason was because other countries were lowering their rates, and because NZ’s were higher there was starting to be significant revenue leakage overseas). And in mid-2008 Cullen was talking about dropping the 39% top rate because the higher rate was unsustainable. So the tax cuts were not a National thing (though National of course took the credit for them!!) – work was already being done on changing the rates in 2008 under Labour.

      I know that a lot of Labour supporters tout how Labour ran a surplus but it is factually incorrect (and I find it frustrating that such a myth keeps getting told) – the fact is that Labour left a structural deficit before the GFC hit.

      Reply
      • kiwi_guy

         /  18th December 2014

        Labour did run a surplus for the 9 years of its government, that is factually correct.

        What Labour would have achieved if it remained in power is speculation, but it had a great track record up to that point.

        What we do know is National has been at the wheel for over SIX YEARS now, and the debt keeps growing, fast.

        Treasury predicts the debt to decline by 2020 or so, maybe it is not such a big problem.

        Blaming previous governments for failures has a limited use by date, it has definitely expired when a government is starting a THIRD term.

        Reply
  3. Mike C

     /  18th December 2014

    There is no poverty in New Zealand !!!

    But there are a bunch of bludgers who spend their income on Cigarettes and Alcohol, who think that a grocery shop
    consists of the drive through at KFC and McDonald’s.

    Reply
  4. Mike C

     /  18th December 2014

    @kiwi guy. I do not like having that type of rude language directed at me personally. Please play the ball, not the man. Thanks.

    Reply

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