Crown accounts surplus, more pressure on spending booost

From the Beehive (Minister of Finance Grant Robertson): Govt accounts in surplus, debt remains low

The Government’s books are in good shape with the accounts in surplus and expenses close to forecast, Finance Minister Grant Robertson says.

The Treasury today released the Crown accounts for the five months to November.

The operating balance before gains and losses (OBEGAL) was above forecast by $0.7 billion resulting in a surplus of $100 million.

The variance is due to lower than forecast Core Crown expenses and higher than forecast revenue.

“While the month by month results do tend to fluctuate due to tax timing changes, it is pleasing to see this positive result,” Grant Robertson says.

“The surplus and low levels of debt show the fundamentals of the New Zealand economy remain strong.”

Net debt remains low at 20.1% of GDP, while expenses were within 0.6% of forecast.

Net investments gains of $3.6 billion were $1.3 billion above forecast, largely because of favourable changes in market prices.

“Our careful fiscal management has resulted in low government debt, which alongside record low borrowing costs has given us room to invest an extra $12 billion to future-proof New Zealand,” Grant Robertson says.

“This package of infrastructure projects will provide further support to boost the New Zealand economy in the face of slowing international growth and global headwinds.

“It will also give certainty to the construction industry about upcoming infrastructure projects and will create more opportunities for Kiwis.

“We’ll be announcing the specific projects in the near future,” Grant Robertson says.

I think we can expect some election year spending announcements on top of the proposed large spend on more infrastructure.

It will be interesting to see if they adjust the personal tax rates – part of the reason for rising revenue is tax bracket creep.

Grant Robertson has been a relatively low profile and uncontroversial finance minister, with most criticism coming from the left who want a lot more Government spending.

Like: Borrow, build, hold says Green co-leader

Government should hold onto the houses it has pledged to put out on the open market, Greens co-leader Marama Davidson says.

The Government taking on more debt for public housing would open up more opportunities than fully funding existing programmes like the Auckland Housing programme.

Davidson said a reluctance to ditch the Budget Responsibility Rules and take on debt is the reason those houses aren’t being provided to low-income tenants as part of a mixed tenure development scheme.

“We’ve got low borrowing rates, we’ve got expensive land, the Crown can borrow money. It can hold onto more of the houses it is building right now.”

Stuff:  Green Party scrap Budget Responsibility Rules

The Green Party is ditching its commitment to the restrictive Budget Responsibility Rules, which set targets for lowering government debt and spending.

The Greens first signed up to the rules ahead of the 2017 election while teaming up with Labour.

Labour retained a commitment to the rules, while signalling it wanted to somewhat loosen them next term.

So they may not move much on this until after this year’s election, if Labour and Greens get back into government, and NZ First don’t demand most of the extra spending.

Government announces $12b infrastructure spending,

The Government has announced $12 billion in infrastructure spending, but haven’t given a lot of details yet. Specifics won’t be revealed until next year.

$12 billion in extra infrastructure investment

The Government is lifting capital investment to the highest level in more than 20 years as it takes the next step to future-proof New Zealand.

Finance Minister Grant Robertson has announced $12 billion of new investment, with $8 billion for specific capital projects and $4 billion to be added to the multi-year capital allowance.

The $8 billion includes:

  • $6.8 billion for new transport projects, with a significant portion for roads and rail.
  • $400 million one-off increase to schools’ capital funding
  • $300 million for regional investment opportunities
  • $300 million for District Health Board asset renewal
  • $200 million for public estate decarbonisation

The specific projects will be announced in early 2020.

The extra $4 billion to be added to the multi-year capital allowance takes it to $8.4 billion, with allocation of that money to be announced over coming Budgets.

“The new investment is forecast to increase the size of the economy by a further $10 billion over five years, with further positive impacts on GDP beyond that period,” Grant Robertson says.

With debt low and borrowing costs at record lows, the conditions are right for the Government to invest to future-proof New Zealand.

So they intend borrowing to spend on infrastructure, but at the same time have announced a surplus of the same amount over the next four years.

Strong economy, careful spending gives $12bn of surpluses

The Government is forecast to run $12 billion worth of surpluses across the four years to 2023/24 as the economy continues to grow.

The surpluses will help fund day-to-day capital requirements each year. These include fixing leaky hospitals, building new classrooms to cover population growth and take pressure off class sizes, and putting aside savings in the Super Fund for future retirement costs.

The new forecasts are in the Treasury’s 2019 Half Year Economic and Fiscal Update. This was released alongside the Government’s $12 billion plan for new infrastructure investment to future-proof the economy, and the 2020 Budget priorities.

Across the four years from 2020/21 to 2023/24, the annual surplus is forecast to rise to 1.5% of GDP. This delivers a total of nearly $12 billion of surpluses.

“The Government has committed to running a sustainable surplus across an economic cycle, and today’s forecasts show we are delivering on that,” Finance Minister Grant Robertson says.

The Government inherited net debt at 22.9% of GDP. The forecasts show net debt of 21.5% of GDP in 2021/22, falling to 19.6% in 2023/24 – within the new 15%-25% range. This includes the impacts of the additional $12 billion infrastructure investment that the Government announced today to future-proof the economy through a package of new transport, education and health infrastructure.

But they are actually going to borrow $19 billion.

I guess the additional $7 billion will be for more election year spending.

But bragging about surpluses while announcing borrowing much more seems like a bit of a PR job.

Government to borrow more, boosting spending on ‘infrastructure’

Minister of Finance Grant Robertson has announced that the Government will take advantage of low interest rates and borrow more so they can increase spending in infrastructure. Details will come later.

RNZ: Government signals big new infrastructure spend, looser purse strings

Finance Minister Grant Robertson flagged extra spending in his speech to the Labour Party’s annual conference in Whanganui.

He said Cabinet had committed to a boost to infrastructure as part of the short to medium term spending plan.

“We are currently finalising the specific projects that the package will fund but I can tell you this – it will be significant.”

The government had heeded the calls from the construction industry for “greater certainty” about the pipeline of transport projects from 18 months’ time, he said.

“We will give that certainty”.

It made sense to take advantage of low government debt and the very low cost of borrowing, said Mr Robertson.

“Right now, we can borrow at an interest rate of 1.3 percent for ten years. Just think about that for a minute – when we came in to office, this was up at 3 percent,” he told delegates.

“We have the lowest borrowing costs in New Zealand’s history, so it is time to invest.”

There will be no details until the next update on the government books – the Half Year Economic and Fiscal Update on December 11 – when Mr Robertson will release more details about the areas of spending, and the price tag.

Greens are keen (they have been wanting this for some time):

It should give the economy a good boost for election year. A first term Government overseeing and stimulating a thriving economy will be hard to defeat.