Grant Robertson rejects ‘spending spree’

Yesterday the Government announced a much larger than expected surplus of $5.5 billion ($2.4 billion more than forecast)- see Government announces strong surplus.

James Shaw called on a big spend up:

Green Party Co-Leader James Shaw is calling on the Government to use the money from its “extremely healthy” books to invest in New Zealand’s public sector.

“What good is a surplus if you have people living in cars or garages – that makes no sense,” he told the Herald.

“Frankly, a surplus is inefficient if you don’t use it.”

Shaw said the Government should be using that money to invest in New Zealand’s “massive infrastructure deficit”.

“New Zealand’s debt levels are well within what the international markets would deem to be prudent, interest rates are historically low and we have a massive infrastructure deficit; to me, that just all points in the direction of using that surplus for infrastructure investment in particular.”

That investment, he said, should come from both the surplus and the 2.1 per cent headroom the Government has before it reaches its 30 per cent spending limit – a combined total of $11.5 billion.

https://www.nzherald.co.nz/politics/news/article.cfm?c_id=280&objectid=12139642

But Minister of Finance Grant Robertson is trying to dampen down spending expectations.

Is this a one off result? Surely Treasury has adjusted it’s budget forecasts after this unexpected result.

Government announces strong surplus

The Government has announced a surplus nearly twice what was in the Treasury’s Budge 2018 surplus – this is good news for spending plans or debt reduction, but may also increase demands from state servants seeking large pay rises.

This gives the Government an opportunity to make some bold moves on things like child poverty, prisoner rehabilitation to reduce prison numbers, reducing violence, addressing drug abuse and related problems, and climate change.


Government books show surplus, falling net debt

A strong surplus and falling net debt reflect a growing economy and show the Coalition Government is managing the books responsibly, Finance Minister Grant Robertson says.

The Crown financial statements for the year to 30 June 2018 are the first official check in on the Government’s commitment to run surpluses, pay down net debt and keep expenses under control.

“It’s important we run surpluses and pay down debt to make sure we are in a good position to deal with any rainy day. Economists have been warning about growing risks in the international economy, particularly due to rising trade protectionism, which we need to be well-placed to face in case this flows through to the New Zealand economy,” Grant Robertson said.

“The headline results today are ahead of the Treasury’s forecasts in Budget 2018. This was largely due to timing issues with Crown expenses, which will reverse out as that planned spending occurs early in the 2018/19 year. This means Budget 2018 spending and investment plans are on track.

“The books show we are meeting the Budget Responsibility Rules. A headline $5.5 billion surplus operating balance before gains and losses (OBEGAL) is $2.4 billion above the Treasury’s Budget 2018 forecast.

“A number of factors contributed to this result being ahead of Budget 2018 expectations. A number of one-offs led to core Crown expenses coming in 1.4 percent below forecast at 30 June 2018. The Treasury says that this was largely due to timing issues, meaning much of this variance is set to reverse out in the 2018/19 accounts. Core Crown expenses were stable at 27.9 percent of GDP.

“A strong economy contributed to core Crown tax revenue coming in 0.9 percent higher than expected in the year to 30 June 2018. Corporate tax revenue was up, due to profits for both large and small businesses being higher than the Treasury had forecast at Budget 2018. This result indicates the strength of the growing economy.

“This underlying strength of New Zealand businesses saw the number of people in employment rise by 3.7 percent over the year, while average wages rose 3 percent. These numbers show that our economic fundamentals are strong.

“The financial statements also indicate the Coalition Government’s commitment to making the important infrastructure investments New Zealand needs to unlock the growth potential of our cities and regions. At the same time, we are making up for neglected investment in critical public services in recent years.

“Net capital investment of $5.9 billion in the year was the highest since 2009 and an increase of $2.2 billion from the previous year. This included investments in hospitals, schools and state highways, while also reflecting the Coalition Government’s move to resume contributions to the NZ Super Fund.

“We are committed to a balanced approach by adopting a responsible debt reduction track. At 30 June 2018, net core Crown debt was 19.9 percent of GDP, compared to the 20.8 percent forecast in Budget 2018.

“We remain committed to the Budget Responsibility Rule that net debt will be 20 percent of GDP in 2021/22. This gives us the space required to make the critical infrastructure investments that New Zealand needs, while still building a buffer,” Grant Robertson said.

Green response to PREFU

A media release from Green leader James Shaw after the release of the PREFU:


Bigger surplus means we can end poverty, clean up our rivers, and tackle climate change

A bigger surplus will allow a new government to manage the economy responsibly while making the changes people know are needed, like lifting kids out of poverty, cleaning up our rivers, solving the housing crisis, and tackling climate change, the Green Party said today.

The Pre-Election Fiscal Update (PREFU) released today shows stronger growth in the short term, resulting in a higher than forecast surplus for the government this year by $2.1 billion. However, forecast productivity growth remains weak and will undermine our longer term economic prospects, resulting in lower long-term growth.

“It’s clear now after the opening of the books that there is more money available in the short term, and we’ll be taking a good look at the best way to invest that in our priorities of ending poverty, cleaning up our rivers, and tackling climate change,” said Green Party Co-leader James Shaw.

“We can manage the economy responsibly and use the bigger surplus to improve the lives of New Zealanders by building more homes, lifting incomes, and providing free public transport for young people.

“Further tax cuts from National, before they’ve even restarted payments to the New Zealand Superannuation Fund, would smack of desperation and highlight how they’re more interested in staying in power rather than managing the economy for the long term.

“We will deliver modest tax cuts for everyone earning less than $150,000, as part of our family incomes package, lifting hundreds of thousands of kids out of poverty, and making everyone who earns less than $150,000 better off than they are now.

“Free buses and trains, including school buses for kids and teenagers, will make a much bigger difference to family budgets than another tax cut.

“Free public transport would save some families hundreds of dollars a week while addressing high levels of congestion on our roads.

“After nine years, National have gone stale and are unwilling to make the changes people know are needed, like lifting kids out of poverty, cleaning up our rivers, building more homes, and tackling climate change.

“No child should go to school hungry, especially when times are good. We’re going to fix that,” said Mr Shaw.

Larger surplus

A larger than forecast surplus has been announced by the Government.

This will help National with their budget in a couple of months, and shouldn’t do their election chances any harm, but do they usually announce 7 month results? Or are they just want to get a bit of good news out there?


BREAKING: Seven month surplus better than expected

Even the Government misuses ‘Breaking’.

The Government’s books are better than expected, with a $1.1 billion OBEGAL surplus for the seven months to January, Finance Minister Steven Joyce says.

“Stronger tax revenues as a result of a healthier economy are flowing through to the Government’s financial performance,” Mr Joyce says.

Tax revenues year-to-date are 3.8 per cent more than they were predicted to be in Budget 2016.

“Company tax in particular is higher than expected, and that reflects the good performance of New Zealand companies in what is still an uncertain world,” Mr Joyce says.

The $1.1 billion OBEGAL surplus compares to Treasury’s forecast of a $517 million surplus at the start of the fiscal year.

Core Crown expenses for the seven months to January were $234 million lower than the Budget forecast, reflecting the Government’s ongoing commitment to prudent spending.

Mr Joyce says that a number of variables made the final out-turn for the full financial year hard to predict.

“The biggest variable at this stage is the cost of the Kaikoura earthquake and how those are allocated between this year and next year,” Mr Joyce says.

“The good news is that this Government’s strong economic management means we can afford to step in to help these communities and support them when they are most in need.”

 

Tax ‘cuts’ essential

Now that a sizeable cash surplus has been announced there has been a lot of conjecture about what should be done with this surplus and potentially future surpluses.

There have been calls for more spending on the police, on education, on health, and on the poor. Probably about ten times as much expenditure as surplus, but opposition parties can get away with that.

One very contentious issue is whether there should be tax cuts or not. National have been saying they would like to cut taxes further for years.

I think at least modest tax cuts are essential – not actually cuts, but reinstating tax rates that have gradually slipped away through bracket slippage.

One reason why Helen Clark’s government (with Michael Cullen as Finance Minister) ended up getting rejected by voters was due to growing annoyance that effective tax rates had gradually increased during buoyant a financial time period. We were gradually taxed more, and Cullen was too late to react.

National have been constrained by deficits, until now.

They should at least change income tax brackets to adjust for wage inflation, so we are at least back to where we were in 2009.

Tax brackets should be indexed to wage inflation and adjusted regularly, otherwise they will continue to be used as tax increases by stealth.

No surplus?

Stephanie Rodgers claims that the surplus announced yesterday is not actually a surplus – because, she says, the Government should have spent more so there wouldn’t be a surplus.

There is no surplus

In Year Eight of this National government, the idea of a budget surplus is a joke (and not just because it’s been completely engineered by the catastrophic Auckland housing bubble). They’ve promised it for nearly a decade. They’ve fiddled the books to make the numbers come out OK. They even declared a surplus in the middle of the financial year – that’s how desperate Bill English has been to pretend that everything’s going along just fine in New Zealand.

That shows an alarming lack of understanding of how how a Government budget works, and why the surplus was announced now.

“Finance Minister Bill English has today presented the Crown accounts for the year to June”.

It’s normal to announce financial results a while after the end of the financial year, like about now.

The Government is required to announce crown accounts, even when the timing isn’t too Rodgers’ liking.

The truth is, there is no surplus.

This surplus isn’t a success for our government. It is a sign of their failure. It shows they do not understand what their job is: to look after the people of this country. To govern us – not bean-count.

There is no surplus – not if you care about people more than money.

So Rodgers doesn’t want a surplus because she wants more money spent, probably a lot more money than Crown revenue, which means a deficit. She would probably complain if a deficit was announced at this time of year too.

$1.8b surplus announced

The Crown accounts for the year to June were presented yesterday, with the big news being a bigger than expected surplus.

Media release:


Government surplus increases to $1.8 billion

Finance Minister Bill English has today presented the Crown accounts for the year to June, showing a surplus of $1.8 billion in 2015/16, up from $414 million in 2014/15.

The Crown accounts show core Crown expenses are under 30 per cent of GDP for the first time since 2006, net debt has stabilised to 24.6 per cent of GDP and net worth has grown to $89.4 billion in 2015/16.

Mr English says the $1.8 billion operating balance before gains and losses (OBEGAL) in 2015/16 – which compared to a forecast of $176 million in Budget 2015 – is a significant turnaround on the $18.4 billion deficit in 2011 following the Global Financial Crisis and Canterbury earthquakes.

“Government surpluses are rising and debt is falling as a percentage of GDP which puts us in a position to be able to make some real choices for New Zealanders,” Mr English says.

“The New Zealand economy has made significant progress over the past eight years. This delivers more jobs and higher incomes for New Zealanders, and also drives a greater tax take to help the Government’s books.”

Core Crown tax revenue was $1.6 billion higher than forecast in Budget 2015.

“We’ve also been getting on top of our spending, exercising fiscal restraint while still investing responsibly in our growing economy and public services.

Core Crown expenses were $73.9 billion in 2015/16, below the forecast of $74.5 billion at the beginning of the year.

“We’ve focussed on results and are starting to address the drivers of dysfunction by investing in better public services. We remain committed to maintaining rising operating surpluses and reducing net debt to around 20 per cent of GDP in 2020.

“If there is any further fiscal headroom, we may have the opportunity to reduce debt faster and as we’ve always said, if economic and fiscal conditions allow, we will begin to reduce income taxes.

“The outlook for the economy is positive, the Government’s books are in good shape and we are addressing our toughest social problems. However, we also need to bear in mind that there are a lot of risks globally and that is why it is important to get our debt levels down.

“Budget 2017 will make positive long-term choices to strengthen the economy and our communities.”

11 month Government surplus

The ODT reports a better than forecast Government surplus in  in Surplus to requirements:

The Government accounts are in surplus by more than $2.3billion for the 11 months ended May…

The last time the Crown accounts recorded a larger year-to-date obegal surplus than the May 2016 surplus of $2.3billion was the June 2008 annual financial statements, when the year-to-date surplus was $5.6billion.

This should be something to celebrate.

The financial accounts, released by the Treasury, showed core Crown tax revenue was $64.7billion, 0.6%, or $364million higher than forecast, largely due to customs and excise duties ($188million), source deductions ($182million) and GST ($98million). The variances were a mix of timing and permanent in nature.

Core Crown expenses of $67.2billion were close to forecast.

And in what has become a familiar theme, the operating balance, which includes all the losses and gains, was in a deficit of $1.5billion, $82million larger than forecast.

The operating balance was again hit by ACC actuarial losses, this time of $880million. The Emissions Trading Scheme liability increased due to an increase in carbon prices, resulting in losses of $520billion. But the losses were partly offset by favourable movements in Crown investments of $1billion.

But the ODT says that no one cared, or at least politicians didn’t seem to care:

However, Finance Minister Bill English did not bother to put out a statement congratulating himself or saying how the Government’s fiscal prudence was paying dividends. Nor did he comment on how the accounts were subject to seasonal influences and there was no guarantee a surplus would be achieved next month.

There should have been something from Mr English, especially around whether debt repayment, more infrastructure spending or tax cuts were on the agenda.

Neither the Green, Labour nor New Zealand First parties bothered to put out a statement criticising the Government for racking up a surplus…

The end of year result should receive more attention, from the Government if it’s good news and from Labour and the greens if it’s negative.

Tax revenue $1.1b under forecast

Stuff reports that Government’s surplus nearly $1b less than forecast at Budget 2016 due to core Crown tax revenue being $1.1 billion lower than forecast in the 10 months to April.

The Government’s financial statements, released on Friday, showed the operating balance before gains and losses (Obegal) was $297 million in the black for the 10 months to April. 

Finance Minister Bill English said it highlighted the monthly volatility in the Crown accounts. 

The surplus was $941m smaller than forecast in Budget 2016, largely as a result of core Crown tax revenue coming in $1.1 billion lower than forecast.

English said the lower-than-expected tax revenue was mostly driven by corporate tax being $1.4 billion below forecast.

“Treasury consider that most – if not all – of this variance will reverse out by June 30.

This shows that balancing the Government books (and forecasting accurately) is an ongoing challenge.

Further forecasts are for growth but a flattening out of the economy must cause some concern.

At the same time in possibly related news the ODT reports Economic activity static in quarter.

The national economy stood still in the three months ended March, the ANZ Regional Trends index failing to lift for the first time in five years.

ANZ economic statistician Kylie Uerata said the pause needed to be put into context.

Regional-based growth estimates were “incredibly strong” late last year.

“Pausing for breath after strength is not unusual.”

This chart of budget surpluses and deficits over the past 10 years from Trading Economics shows that New Zealand has barely recovered from the Global Financial Crisis that hit hard after New Zealand was already moving into recession in 2008 plus the substantial cost of the Christchurch earthquakes.

TradingEconomicsNZBudgetSurpluses

Stuff charts a longer period of 20 years of surpluses and deficits plus 5 years of forecasts.

BudgetSurplusdDeficitStuff

So after only just getting back to a meagre surplus it has flattened out, the forecast for next year is flat, and then someone hopes that the economy will recover and grow from there.

However what has to be considered is the possible effect of an election year budget where a thirds term Government may be tempted to splurge a bit on spending (vote buying).

Also what should be considered is the possibility and the possible effects of a change to a Labour-Green government next year, or to a Labour-Green-NZ First government, or to a National-NZ First government.

It is normal for larger minor parties to push for spending on their pet policies in reward for enabling a large party to form a coalition.

This could be exacerbated if a weakening Labour is joined by Greens and/or NZ First who are growing in relative strength.

Perhaps it’s time to seriously consider what influence NZ First would have on Government spending.

Would they assist with economic prudence or would they demand increased spending?

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.