Fiscal fight continued

Steven Joyce continues to push Minister of Finance Grant Robertson on expected net debt in relation to Labour’s pre-election fiscal plan. Joyce had been widely criticised for suggesting their was an eleven billion dollar hole in the plan. Robertson was adamant Labour’s plan was sound and accused Joyce was scaremongering.

Yesterday from Stuff: Economists see Government debt rising billions more than Labour’s plan

In Opposition Labour laid out a fiscal plan which would borrow around $11 billion more than National had proposed, but still cut debt as a share of the total economic output from 24 per cent to 20 per cent by 2022.

The plan formed a major point of contention during the election campaign, as National finance spokesman Steven Joyce was widely mocked for his claim that Robertson’s plan had a major “fiscal hole”.

But bank economists, who monitor the likely issuance of government bonds, are warning of pressure for Treasury to borrow billions more than Labour had signalled because of new spending promises.

The fiscal situation continually changes, but there was always a likelihood that spending would increase due to coalition bargaining.

ANZ chief economist Cameron Bagrie

ANZ has forecast that Labour will borrow $13 billion more than Treasury’s pre-election fiscal update maintained the former Government would over the next four years, although around $3b of that would go to the NZ Super Fund. This would see net Crown debt at 23 per cent of gross domestic product, 3 percentage points higher than Labour’s plan.

Outgoing ANZ chief economist Cameron Bagrie said the estimates for new spending were “conservative”, including an assumption that the new $1b a year regional development fund would come entirely from existing budgets.

“[S]pending pressures are all headed one way – and a lot depends on the economy holding up.”

BNZ senior economist Craig Ebert

BNZ has also indicated it expects borrowing to be stronger than Labour had flagged. Strategist Jason Wong said the half year economic and fiscal update would probably show “in the order of” an additional $2b-$3b a year in bond issuance in the coming years.

BNZ senior economist Craig Ebert said the figures were hard to determine so early in the term, but borrowing “could amount to a number of billion dollars” more than Labour had outlined.

“Some of this is taking place in a little bit of a vacuum still, because we’ve heard a lot of policies but it’s still a little unclear which ones have been confirmed confirmed, as opposed to just strongly proposed,” Ebert said.

ASB chief economist Nick Tuffley

However ASB chief economist Nick Tuffley now forecasts that unemployment will eventually fall to 3.9 per cent by 2021, while wage growth would gradually rise to 2.8 per cent by early 2020, on the back of both lower migration and plans to hike the minimum wage to $20 an hour by 2021.

Tuffley said based on its forecasts, and the assumption that Labour was able to stick to its spending plans, ASB was forecasting borrowing would be $1b higher than Robertson had signalled.

“Any slippage in [spending plans] will mean more debt issuance,” Tuffley said.

Joyce questioned Robertson about that in in Question Time yesterday, joining a patsy (question 1):

Tamati Coffey: What objective does the Minister have for core Crown net debt?

Hon GRANT ROBERTSON: As indicated during the Speech from the Throne, the Government is committed to reducing net debt to 20 percent of GDP within five years. Progress towards this will be set out by the Government during the usual Budget reporting cycle to the House, starting with the Half Year Economic and Fiscal Update, before Christmas.

Hon Steven Joyce: Has he seen amongst those reports the economic forecast from ANZ chief economist, Cameron Bagrie, who calculates that the Minister , in fact, won’t be able to meet his own Budget responsibility rule No. 2, to keep net debt below 20 percent of GDP, even with some rather heroic spending assumptions?

Hon GRANT ROBERTSON: I have seen those reports and I disagree with them.

Then in question 3:

Transcript (slightly edited):


3. Hon STEVEN JOYCE (National) to the Minister of Finance: Can he confirm core Crown net debt was $59.5 billion at 30 June 2017, and that it is his intention as Minister of Finance to increase net debt to $67.6 billion by 2022, as laid out in Labour’s pre-election fiscal plan?

Hon GRANT ROBERTSON (Minister of Finance): I can confirm that at 30 June 2017 net core Crown debt was $59.48 billion. I can further confirm that it is this Government’s policy to reduce net core Crown debt to 20 percent of GDP within five years. As the member knows, the exact dollar amount of debt in each year will be determined by the Budget process.

Hon Steven Joyce: I raise a point of order, Mr Speaker. That was a question written down on notice, and I don’t believe the Minister of Finance answered the second part of the question. He talked about something about 20 percent of GDP, but he didn’t actually answer yes or no to whether it was his intention to increase net debt to $67.6 billion by 2022.

Hon GRANT ROBERTSON: Speaking to the point of order, I’m not sure if the member heard the last part of my answer, where I did specifically address the question of what the exact dollar amount might be.

Hon Steven Joyce: He didn’t answer the question. Nobody is any the wiser as to whether, actually, he will allow net debt to get to $67.6 billion by 2022, as laid out in Labour’s pre-election fiscal plan.

Mr SPEAKER: Well, Speakers’ rulings are pretty clear in this area. I think somewhere around page 171 is the ruling that members cannot demand a yes/no answer, and I’m just about confident enough that the former Minister of Finance understands that these figures might be affected by growth figures.

Hon Steven Joyce: Sorry to prolong things, Mr Speaker, but actually it is possible to say whether it will be higher or lower or about that figure. It is a question on notice—it’s not a supplementary question—and I do think that the Minister of Finance could be a bit more specific as to that number, given that prior to a certain date in September he was actually accusing people of showing an affront to democracy for—

Mr SPEAKER: OK—[Interruption] All right, OK. I think where I’m going to leave it is that I might be slightly more liberal, as long as they are direct, on the supplementaries, if the member wants to drill down that way.

Hon Steven Joyce: Can the finance Minister confirm that the pre-election fiscal update forecasts net debt to reduce to $56.2 billion by 2022, meaning that his forecast of $67.6 billion is over $11 billion higher than in the pre-election fiscal update?

Hon GRANT ROBERTSON: I can confirm that those were the numbers in the pre-election fiscal update. What we have discovered is that those numbers did not take account of the need for increased spending in education capital expenditure, health capital expenditure, or a range of other areas.

Hon Steven Joyce: Is the Minister then saying that, actually, he expects to increase debt significantly higher than $67.6 billion because of his concerns about the matters he raised in the previous answer?

Hon GRANT ROBERTSON: The commitment of this Government has been that we will reduce net core Crown debt to 20 percent of GDP. The member well knows, from having prepared a Budget himself and being beside someone else who’s prepared Budgets, that the exact dollar figures for debt are never decided until later in the Budget process.

Hon Steven Joyce: Why doesn’t he agree with the ANZ analysis of 7 November that concludes net debt will be billions of dollars higher than he has forecast, and that he will breach his own Budget responsibility rule number 2 to reduce net debt to 20 percent of GDP within five years, particularly as he’s just told the House—

Mr SPEAKER: Order! The member’s finished his question.

Hon GRANT ROBERTSON: Because nothing that I have seen, in terms of the advice I’ve got to this point, would point to that, and because this Government is committed to reducing debt as a percentage of GDP—20 percent—within five years of taking office.

Hon Steven Joyce: If he doesn’t like the ANZ’s commentary, does he agree with the comments from the Bank of New Zealand on Monday, who stated that Labour’s election campaign budget was just too tight to be credible; if not, what does he think the BNZ has got wrong?

Hon GRANT ROBERTSON: What this Government has committed to is a set of Budget responsibility rules, and we will work within those. We made commitments before the election to address the social deficits in health, in education, and in infrastructure, and we will do that. I make no apology for having a slower debt track than that Government if it means that we build affordable houses, contribute to superannuation, and invest in our regions.

Hon Steven Joyce: Just to be clear, does he commit to meeting all the Government’s promises, including those in his coalition agreement and his agreement for confidence and supply with the Green Party, and also the Speech from the Throne, while increasing net debt by only $11 billion, from what it was going to be, over the next five years?

Hon GRANT ROBERTSON: I absolutely stand by those Government commitments and the Budget responsibility rules that we have put forward.

Hon Steven Joyce: Does he commit to meeting all the Government’s promises, including those in those coalition agreements from the Speech from the Throne, not in relation to a percentage of GDP but by increasing net debt by no more than $11 billion relative to the pre-election fiscal update over the next five years? A very specific question.

Hon GRANT ROBERTSON: The final exact dollar figures, as the member well knows from the Budgets he’s been involved in, will be decided later in the Budget process, but we remain 100 percent committed to our goal of reducing net debt to 20 percent of GDP within five years.


No doubt there will be continuing questioning on Government spending and deficits.

Labour targeting social and infrastructure deficits, not financial

Finance spokesperson Grant Robertson says that a Labour government would target infrastructure deficits and social deficits’ and revise the Government targets on lowering financial deficits.

NZ Herald: Debt targets to be revised under Labour-led Government says Robertson

National increased the debt as a result of the global financial crisis and the Christchurch earthquakes from 5.4 per cent of gdp in 2008 to 24.3 per cent now. The deficit peaked at a record $18.3 billion in 2011.

The current target of reducing net debt to 20 per cent of gdp by 2020 will be replaced by getting it down to 10 to 15 per cent by 2025, Joyce recently announced.

But Robertson says that Labour will have a different priority and will revise that.

If Labour’s Grant Robertson is the next Finance Minister he will ditch the new ambitious net debt target set by Steven Joyce as part of the 2017 Budget or the current target.

“We believe there are infrastructure deficits and social deficits that are going to need some investment before we can get to the 20 per cent target,” Robertson said.

“We will review and revise those targets once we are in Government and we’ll see where we get,” said Robertson.

“The last time Labour was in office we got debt down close to zero so of course we are in favour of reducing debt.”

He said the numbers Joyce had “plucked out” for the 2025 target was where Treasury’s longer term forecasts were going anyway.

Greens are on the same page as Labour. This was been written into the Labour-Green fiscal responsibility code.

The wild card is Winston Peters.

Meanwhile New Zealand First leader Winston Peters says the Government will present a surplus on Thursday only because it has underfunded many public services including in health, education, police, conversation and housing.

“The Government will have to explain how there is a surplus after addressing all the reasonable demands that need money spent on them,” he said.

“If this Thursday’s Budget does not do that, then claims of a surplus will be without credibility, plausibility or integrity.”

What that means in practice, and whether Peters will come out of coalition negotiations with credibility, plausibility or integrity, won’t be known until late September at the earliest.

 

Labour’s financial and fundraising problems

It’s been well known that the Labour Party has struggled with it’s party finances for a number of years. This was highlighted by spending returns from last year’s election, when the Greens outspent Labour in advertising.

From Greens outspent Labour on election advertising:

  • National $2.6 million
  • Conservative Party $1.9 million
  • Greens $1.29 million
  • Labour $1.27 million

Claire Trevett now reports Labour has been running annual deficits and is still repaying loans from the 2008 campaign in  Labour’s finances in the red:

The Labour Party has run at a deficit for at least two years, forcing it to dip into its cash reserves and highlighting one of the problems the party faced in last year’s election.

A copy of the party’s financial report obtained by the Herald shows it recorded a $71,373 deficit in 2014 and an even larger $104,915 deficit the year before, a shortfall president Professor Nigel Haworth put down to the costs of byelections and its leadership contests.

That resulted in a $117,410 drop in its cash reserves ($612,378) and the value of its net assets dropped from $270,000 to $199,000. Those assets include about $500,000 in property.

After last year’s election, a review of Labour’s performance raised fundraising as a priority, saying the party risked ongoing “electoral failure” if it could not raise more money.

This doesn’t show what their finances are like now.

Yesterday, leader Andrew Little denied it was embarrassing that Labour was in deficit despite criticising the Government for its deficits.

However, he said, it “absolutely” highlighted the need to focus on fundraising.

“There is no question about that. A singularly poor point of our organisation’s performance is fundraising.”

Little says “is fundraising” suggesting it is still an issue for them. A major problem with leaning towards the unions (and Little relied on union support to win the Labour leadership) is that the unions are not generous donors, money-wise.

The figures show the party is still paying off loans from some of its electorate branches, which Dr Haworth said dated back to before 2008. The interest on the loans is costing $30,400 a year and it still has more than $700,000 owing. The practice of taking loans from local electorates to fund the campaigns was halted in 2009 by Mr Little who was then president.

Ouch. Still paying off loans used to finance the 2008 election defeat.

The Herald shows revenues:

  • 2013 – $1,326,254
  • 2014 – $1,187,501

Reduce revenue in an election year must be a major worry. David Cunliffe wasn’t a big attraction for donors.

Can Andrew Little turn this around?

The two hands of Robertson’s surplus response

Today’s Herald editorial – Use surplus for benefit of everyone – highlights a contradiction in the opposition response to the National Government finally, after seven years, achieving an actual surplus.

Across the aisle, opposition parties waved their wish-lists with new confidence, calling for the surplus to be spent on child poverty, more hospital operations, more pre-school education … you name it.

At the same time, they predicted the slender surplus would disappear as suddenly as it arrived.

Labour have long criticised National for following their surplus years under Helen Clark and Michael Cullen with a sequence of deficits.

Even now they lambast National because they say the surplus will be short lived due to tightening economic conditions and low inflation.

But Labour have opposed many measures aimed at keeping a tight rein on spending.

They have pushed for more spending.

As soon as the surplus was announced Labour MPs suggested how it could be spent many times over.

On one hand Labour’s finance spokesperson Grant Robertson was highly critical of the meagre surplus:

First surplus a blip on radar screen of debt

by  on October 14, 2015

Bill English’s first surplus is just one black drop in a sea of red, with New Zealanders still paying over $10m a day in interest payments, Labour’s Finance spokesperson Grant Robertson says.

“The Finance Minister has finally found a surplus needle in his haystack of debt. Despite promising a ‘significant’ surplus, it’s just $414m. That’s less than 0.2 per cent of GDP – a rounding error, not a surplus.

“But the surplus show is over before it has begun. With the economy running out of steam, National’s promises of a string of surpluses are extremely unlikely to become reality. That’s poor financial management.

“National’s financial management will go down in history as one small surplus – at the peak of the economic cycle – out of nine Budget deficits.

And on the other hand, on the same day, he issued this complaint about the lack of spending required to achieve the surplus:

Nats sacrifice Kiwis’ health and education for surplus

by  on October 14, 2015

National’s drive for surplus has meant less investment in critical areas like health, education, housing and transport – yet John Key told Parliament today he wants the money for cycleways, Labour’s Finance spokesperson Grant Robertson says.

“The Government’s belated surplus has been partly achieved by dropping spending by $235m in education, $97m on housing and community development, $52m in health and over $300m on transport and communications.

“These are critical areas. Too many students are failing NCEA, dilapidated state houses are making people sick, patients are waiting far too long in hospital emergency departments and regional roads and internet services are in desperate need of upgrades.

“It also appears that $444m has been taken out of the EQC claims budget. No one in Canterbury waiting for repairs or needing their repairs redone would think that money isn’t needed.

“The next time Kiwis find themselves waiting for an operation, getting sick in their home, worrying about their children’s performance at school, or nearly crashing on a dodgy road they can thank their lucky stars Bill English has a surplus and John Key has his cycleways,” Grant Robertson says.

This is Opposition opposing gone mad – criticising National for finally, only just achieving a surplus but hammering them for not spending more. For not spending a lot more.

On one hand he criticises years of deficits, but he wants to hand out heaps more money with his other.

The Herald wrote:

If the surplus in the final account for the year that ended on June 30 can be sustained in the current year and projected to continue, the best use of it would be to reduce debt more quickly. The next best use would be to resume the contributions to the NZ Super Fund that the Government suspended six years ago.

The level of debt and stopping contributions to the Super Fund have also been criticised by Labour.

If Robertson ever becomes Minister of Finance it will be interesting to see how he goes about balancing the books.

A surplus, just

The Government have got their surplus, just. Bill English may be more relieved than happy, and prudence will need to continue with financial conditions being a bit iffy.

GOVERNMENT POSTS FULL YEAR OPERATING SURPLUS

By Hon Bill English

The Government has reported an operating surplus in the fiscal year that ended on 30 June, meeting a target set in 2011 following the Canterbury earthquakes and the international financial crisis, says Finance Minister Bill English.

The OBEGAL surplus of $414 million in the year to 30 June 2015 is equal to 0.2 per cent of GDP and the Government’s operating balance inclusive of gains and losses was a surplus of $5.8 billion or equal to 2.4 percent of GDP.

While core Crown expenses grew by $1.2 billion (1.7 per cent), the increase in spending was lower than the pace of growth in the economy, resulting in expenses easing to 30.1 per cent of GDP, compared with over 34 per cent of GDP four years ago.

“Returning to surplus in 2014/15 is a significant milestone. I’m proud of the steps taken across the wider public service to help deliver the surplus target while also improving the quality of social services delivered to New Zealanders,”  Mr English says.

“The Government is committed to continued prudent management of the public finances, including ongoing attention to operating spending and the underlying drivers of demand for public services. The Government supports reprioritisation of spending that is not delivering results and rigorous management of the Crown balance sheet.

“Our focus must remain on steady and ongoing reductions in public debt over the medium term. That is the most prudent approach to take in a still uncertain global environment,” Mr English says.

“The economy is growing. It recently registered its 18th consecutive quarter of expansion to deliver annual growth of 2.4 per cent in June 2015.

“The Government’s programme to build a more productive economy is delivering dividends in the form of higher living standards and better quality essential services. And it is also delivering returns in terms of the health of the Crown’s finances.

“What today’s figures from Treasury indicate is the Crown’s overall finances have been radically turned around in the years since they had to absorb cumulative shocks outside of the control of any government,” Mr English says.

In the wake of those shocks, the Crown’s annual operating balance excluding gains and losses (OBEGAL) was a deficit of $18.4 billion – that’s equivalent to around nine per cent of national income or GDP in that year.

“It has required very careful stewardship over day-to-day expenses to permit the Government to chip away at the size of the OBEGAL deficits year after year and, in 2014/15, to return to surplus and deliver on the target first set in 2011,” Mr English says.

“Our focus must remain on steady and ongoing reductions in public debt over the medium term. That is the most prudent approach to take in a still uncertain global environment,” Mr English says.

Having criticised National for running deficits for siz years Labour have switched to criticising them for not spending more (which would keep us in deficit).

Nats sacrifice Kiwis’ health and education for surplus

by Grant Robertson on October 14, 2015

National’s drive for surplus has meant less investment in critical areas like health, education, housing and transport – yet John Key told Parliament today he wants the money for cycleways, Labour’s Finance spokesperson Grant Robertson says.

“The Government’s belated surplus has been partly achieved by dropping spending by $235m in education, $97m on housing and community development, $52m in health and over $300m on transport and communications.

“These are critical areas. Too many students are failing NCEA, dilapidated state houses are making people sick, patients are waiting far too long in hospital emergency departments and regional roads and internet services are in desperate need of upgrades.

“It also appears that $444m has been taken out of the EQC claims budget. No one in Canterbury waiting for repairs or needing their repairs redone would think that money isn’t needed.

“Bill English says this is the Government saving money but the truth is he is trying to cover his Budget blushes and belatedly scrape together a surplus.

“Incredibly now the Government is in surplus John Key doesn’t want to fix these critical areas – he wants to spend the money on more cycleways.

“The next time Kiwis find themselves waiting for an operation, getting sick in their home, worrying about their children’s performance at school, or nearly crashing on a dodgy road they can thank their lucky stars Bill English has a surplus and John Key has his cycleways,” Grant Robertson says.

I await Robertson’s plan for spending more, resuming contributions to the Super fund, and reducing Government debt.

Budget headlines

I’ve only seen headlines and summaries on the budget. Two stand out to me from those that the Herald has highlighted in Budget 2015: 10 things you need to know.

  • Budget deficit of $684 million this financial year.

That was signalled so is no surprise, and was expected to be a major criticism of Bill English, John Key and National,

  • A $790 million child hardship package, includes an increase in $25 of core benefit for beneficiaries with children.

In contrast that’s a major surprise.

And it isn’t hard to see that if the increase in benefits wasn’t included the deficit could have been avoided.

This is a very significant choice and signal from National, putting welfare of some of the poorest ahead of a long standing target.

Broken promise budget promises little

It’s been well signalled that the soon to be announced budget will break one of National’s long standing ‘promises’ – that they will balance the books by now after years of deficits.

National have to cop some flak for that because it’s been a major campaign plank. But attention will soon turn to what they are actually offering this year. A bugger all change budget could be as damaging to their re-election chances as an old broken promise.

A Dominion Post editorial is scathing – Budgets and broken promises.

Nothing can disguise the fact that this Budget also brings a big broken promise. It won’t supply the Budget surplus that National has promised for so long.

Prime Minister John Key and Finance Minister Bill English have been busy downgrading the pledge that they boasted about for so long; now it’s an “artificial target” and apparently doesn’t mean much at all. Yes, it was an artificial target. But it was National’s artificial target.

And they are also pessimistic.

Right now the fiscal cupboard is bare and it might stay that way for some time. The danger then is that more National promises, both large and small, will have to be broken. And that might end up really damaging the John Key brand.

The pre-budget announcements have been, inevitably, embarrassingly thin.

Are they under-promising while planning to over-deliver?

That’s an old political PR tactic, but if the delivery is still paltry then ‘steady as she goes’ might become ‘steadfastly going nowhere’.

Is there nothing available to deliver?

As English says, the big problem is that low inflation is putting a huge brake on the Government’s tax revenues. The effective cut is billions of dollars and it is forecast to last for years.

This and the collapse of dairy prices mean the Budget surplus might not even arrive next year.

National may be fenced in by their prudence – something voters have rewarded them for so far but there’s a risk they will swing away from it, especially if targets aren’t met.

Presumably, the Budget measures on child poverty will be small and disappointing. This might not damage Key much by itself. After all, his supporters are probably not personally much affected by the problem.

But, if more and more promises are broken and there is a slowdown in growth, the Key formula will begin to fray.

The Key formula is already fraying around the edges, something that’s inevitable by the third term.

But if a broken promise budget promises little for the future then the National Government may start to unravel.

English signals missed surplus target

Bill English has clearly signalled he will announce another deficit budget this month.It’s likely to be a small deficit relative to the size of the budget, but red ink is red ink.

On The Nation yesterday:

Well, okay, it would be nice if the number got there this year; it’ll just take a bit longer.

We’ll soon be in a position to start paying off debt. Our expenditure’s under control; the revenue’s a bit harder.

We think that it’s really important we get to surplus…it’s going to take a bit longer.

In the whole scheme of financial management over seven budgets this won’t be a big deal.

Except that English and National have promoted and campaigned on reaching surplus by now so conceding this target is a bit of an embarrassment to them. English will take this on the chin, outwardly at least, but he will be frustrated. At least he should be.

The financial crisis followed by the Christchurch earthquake made it a very challenging two terms for National and despite clocking up some huge loans they have managed things fairly well, and compared to many other countries (notably Australia) it’s been well managed.

Minister, you used the analogy of weight loss, but let me use another one, the All Blacks. They set a goal to win the World Cup; they don’t. That’s a failure, and they call it that. You set a target for a surplus, and you haven’t met it. That’s a failure, isn’t it?
Well, for a lot of people, the surplus is less important than the World Cup. But the thing about the World Cup is—
But it’s your target, Minister. Minister, you set the target. It’s your target, and you didn’t get there. Isn’t that a failure?
With the World Cup, there is a final, and you’re absolutely judged on the final. With a surplus, it can take a bit longer and you still get there. You don’t get another go at the World Cup.

It is a failure to achieve what English has promoted and what National campaigned on last year. It’s not a broken promise. It’s pragmatic. But it’s a failure to achieve a target.

You’ve set yourself a time limit, and we were supposed to be in surplus and you’re not going to get there. Can you not concede that that is a failure?
No, I don’t call it a failure. It is what it is, and that is for the 14/15 year, we budgeted $370 million surplus. It looks like it will be a $500 or $600 million deficit, and the surplus will be the next year. So we’re on track.

But if English and National can’t get to surplus by next year’s budget the pressure will pile on them. They could be judged at the 2017 election by extended failure to achieve a surplus.

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.