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.

More than a Little over the top

Andrew Little was more than a little over the top claiming National’s ‘promise’ to return to surplus by this year was “one of the biggest political deceptions in a lifetime”. Especially considering what Labour said in the same campaign.

In his pre-budget speech today Little said:

That promise, “to return to surplus in 2014/15” sat proudly as their number one commitment in their election material, distributed to every corner of New Zealand.

But their promise was clear. Their good economic stewardship would see us in surplus.

And now they’ve abandoned their promise.

National’s talk now is about how achieving surplus was an “artificial target” and that getting a surplus is “like landing a 747 on the head of a pin.”

A lot of effort has gone into glossing over the broken promise. But I see it for what it is – one of the biggest political deceptions in a lifetime.

It was election rhetoric that has come back to haunt National a bit. They said it, they have to cop flak for not achieving what they claimed they could do. Finance can be fickle. They should have qualified their claims more carefully.

But the gross overstatement from Little is hardly any better. Especially considering Labour’s own campaign rhetoric, like:

Everything is paid for plus we’re in surplus

Labour’s Alternative Budget

As Kiwis we all want to be able to raise a healthy and happy family, have a well-paid and secure job and the chance to buy our own home. To give every Kiwi those opportunities, we need to grow a strong economy. That means we need solid and stable economic management.

Labour will balance the budget and run surpluses every year. We’ll reduce net debt faster than the current government and pay off National’s record debt by the end of our second term. All of our policies are carefully costed and funded. 

No more carefully costed and funded than National.

Little’s statement that National’s election claim was “one of the biggest political deceptions in a lifetime” may not be one of the biggest political overstatements in a lifetime, but it’s more than a little over the top.

Labour source: http://campaign.labour.org.nz/everything_is_paid_for_plus_we_re_in_surplus

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.