Pre-Election Fiscal Update 2017

Media release from Minister of Finance Steven Joyce on the PREFU.


A slightly softer growth forecast is the main feature of largely unchanged Pre-election Fiscal Update compared to the Budget forecasts three months ago, Finance Minister Steven Joyce says.

“The softer growth New Zealand has experienced in the six months to March flows through to a lower starting point in the 2017/2018 year,” Mr Joyce says.

“The net effect is that growth is slightly lower through the forecast period – averaging 3.0 per cent over the next four years rather than the 3.1 per cent predicted in the Budget.

“The other notable change is that Treasury expects the labour market to be tighter over the next four years, with lower unemployment and stronger nominal and real wage growth.

“Treasury forecasts unemployment to drop to 4.3 per cent by June 2020 and for the average annual wage to increase from $58,900 at March 2017 to $65,700 by 2021, a $1300 per annum improvement on the Budget forecast.”

Other changes to the forecasts include:

A smaller balance of payments deficit across the forecast horizon
Lower CPI inflation, especially in the 2017/18 year
Net government debt falling below 20 per cent of GDP in the 2020/21 year. New Zealand Superannuation Fund contributions remain scheduled to resume in that year.
Most other elements of the forecast remain very similar to budget predictions, with nominal GDP, migration levels and budget surpluses largely unchanged, although the timing of budget surpluses has changed.

“The Budget surplus is expected to be $2.1 billion higher in the year just finished,” Mr Joyce says. “However Treasury expects the lower growth forecast to result in surpluses that are $1.8 billion lower over the next four years. The net effect is about even.

“The Government’s strong fiscal management means that New Zealand is one of the few OECD countries to be posting fiscal surpluses. This hard-won position is underpinning the Government’s strong economic plan which is delivering jobs and steady real wage growth for New Zealanders.”

The large infrastructure spend committed to in Budget 2017 means that residual cash remains broadly in balance until the 2019/20 financial year.

“There is limited room for any additional expenditure beyond what is already proposed in these forecasts until the 2020 financial year when there is expected to be a $1.7 billion cash surplus.  Anything significant in the meantime would involve more borrowing or raising additional tax revenues,” Mr Joyce says.

The PREFU forecasts include the following budget spending commitments:

  • $7 billion in additional operating expenditure over four years in Budget 2017 which commenced on 1 July 2017.
  • $1.7 billion per annum ($6.8 billion over four years) operating allowance to be allocated for Budget 2018, increasing by 2 per cent each subsequent budget.
  • $32.5 billion in total capital infrastructure investment between 1 July 2018 and 30 June 2021.
  • $6.5 billion over four years ($2 billion per annum in out years) for the         Government’s Family Incomes package commencing on 1 April 2018.

“Government annual operating expenditure in these forecasts increases from $77 billion to $90 billion over the next four years, which is sufficient for significant ongoing improvement in the provision of public services,” Mr Joyce says.

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9 Comments

  1. Corky

     /  August 24, 2017

    “The Government’s strong fiscal management means that New Zealand is one of the few OECD countries to be posting fiscal surpluses. This hard-won position is underpinning the Government’s strong economic plan which is delivering jobs and steady real wage growth for New Zealanders.”

    Some will take issue with that rosy picture. However, the general ‘go forward’ of our economy cannot be denied.

    Yep, this picture needs to be contrasted with Sir Michael Cullen’s ‘we spent all the money’ quip. Hammer that home time and time again.

    Reply
    • Blazer

       /  August 24, 2017

      it has been conceded by Stephen Joyce that productivity has been stagnant for the last 4 years.Smoke and mirrors ,convinces the …faith.fool.If trade is what it is all about,then the tradeable sector is not expanding.A FIRE economy,’a delusion,inside an illusion,wrapped in a ..fantasy’.

      Reply
      • Corky

         /  August 24, 2017

        ”It has been conceded by Stephen Joyce that productivity has been stagnant for the last 4 years.”

        Can you give me a link please.

        If what he said was true, then the National Party is beyond compare, competence wise.

        Reply
  2. Conspiratoor

     /  August 24, 2017

    “Kiwis have a choice. They accept the Treasury numbers at face value and all is well with the world.
    “Or they can choose reality … the much-touted surplus will vanish in the twink of an eye when population growth driven by immigration is properly accounted for.” WRP

    Reply
    • High Flying Duck

       /  August 24, 2017

      Will the surplus vanish as quickly as people’s Contact Energy shares when Mr Prosser gets into cabinet and finds that $11B he needs?
      Do we believe Winston who said Prosser was incorrect and re-nationalising is not their policy – or do we believe the NZ First Website that says it is…

      Reply
      • Conspiratoor

         /  August 24, 2017

        There is no surplus, merely a margin between immigration fuelled demand and deferred expenditure
        If prosser gets into cabinet he will not be spending $11b

        Reply
        • High Flying Duck

           /  August 25, 2017

          And yet under National per capital spending is up in policing, health, education…infrastructure spending is well up.
          Where is this deferred expenditure again? Or are you relying on Grant Robertson’s talking points?
          I think the $11B figure was only if they destroyed all the shareholders gains (think retirement funds, Kiwisaver etc) since Contact Energy listed and compulsorily bought back at the original listing price.
          He may need much more if he decides fascism isn’t the best look when in Government.
          He’s probably looking to borrow it from the bank of Wogistan.

          Reply

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