Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 

BUDGET 2013: More tax, less spending keep surplus in sight

BUDGET 2013: Higher tax take, spending restraint keep 2015 surplus intact

By Jonathan Underhill

May 16 (BusinessDesk) – Finance Minister Bill English will meet his targets for a return to budget surplus in 2015 and a drop in net debt by 2021 by putting a cap on new spending, taking in more tax and delaying the resumption of pension contributions.

The Budget Economic and Fiscal Update forecasts a faster track for economic growth over the next four years, excluding a drought-impacted fiscal 2014, which will help bolster core Crown tax revenue by some $14.5 billion. That provides room for some $5.1 billion of new operating spending, cuts in ACC levies starting in 2014, and an additional $2.1 billion contribution to the Christchurch rebuild.

The latest Treasury forecasts are for a wafer-thin operating surplus before gains and losses of $75 million in 2014-2015, in line with the estimate in December’s Half Year Economic and Fiscal Update. Residual cash deficits over the forecast horizon are estimated at $12.7 billion, which will be met from the net proceeds of bond sales of $16.5 billion.

“Although we are making good progress, there is still much to be done,” English said. “The government is firmly focused on capping, and then reducing, debt. We’re quite happy with the relatively small surplus in 2015 because it is in an environment where tax and spending is under control.”

The Treasury has lifted its forecast for economic growth in the year ended March 31 to 2.5 percent from its estimate in December of 2.3 percent.

For the 2014 March year, the estimate has been trimmed back to 2.4 percent from 2.9 percent, after drought dried off dairy herds earlier than usual in the North Island in the current season and prompted some farmers to cull capital stock. Growth is seen accelerating to 3 percent in 2015.

Core tax revenue is forecast at $62.4 billion, or 27.4 percent of gross domestic product in 2014, rising to $72.8 billion, or 28.3 percent in 2017 as the economy grows. Growth in tax revenue is expected to strongly outpace forecast nominal GDP growth over the forecast horizon, with all tax types picked to rise, especially tax from employees, the Treasury estimates.

Net debt is forecast to be $57.9 billion, or 27.1 percent of GDP in the year ending June 30, before reaching a peak in 2015 at 28.7 percent and retreating to “no higher than 20 percent of GDP” in 2021. By delaying the resumption of contributions to the New Zealand Superannuation Fund, the government avoids more than $4 billion of payments, which it may have had to borrow.

This year’s budget lifts the operating allowance by $100 million to $900 million, while in Budget 2014 it is trimmed by $200 million to $1 billion. From 2015, operating allowances will grow by 2 percent a year.

Health is the biggest beneficiary of budget largesse, with $1.6 billion allocated for new initiatives and to meet cost pressures and population growth over the next four years. Of that, $250 million goes to district health boards to address inflationary pressures and a growing customer base.

Total health spending will reach a record $14.7 billion in 2014.

The government’s contribution to the Canterbury rebuild rises by $2.1 billion to $15.2 billion over the next four years, with the timing of payments one of the key risks identified in the budget forecasts. The government’s contribution is forecast to peak in 2014 at $3.28 billion, before retreating to $538 million in 2017.

Spending in Canterbury is expected to be “a significant driver” of economic growth, mainly through residential and business investment.

Canterbury also gets a contribution of $900 million from the Future Investment Fund to rebuild Christchurch hospitals.

The FIF, set up to hold the proceeds of state asset sales and to fund capital spending on schools, hospitals, railways and irrigation will swell to $2.1 billion with a $1.5 billion allocation from Budget 2013. The fund benefits from the $1.7 billion raised from the sale of MightyRiverPower shares and will get a bigger infusion when half of Meridian Energy is put on the block later this year.

Some $94 million from the FIF had already been allocated to KiwiRail’s turnaround.

(BusinessDesk)

© Scoop Media

 
 
 
Business Headlines | Sci-Tech Headlines

 

Scoop 3.0: How You Can Help Scoop’s Evolution

We have big plans for 2018 as we look to expand our public interest journalism coverage, upgrade our publishing infrastructure and offer even more valuable business tools to commercial users of Scoop. More>>


Statistics: Butter At Record $5.67/Block; High Vegetable Prices

Rising dairy prices have pushed food prices up 2.7 percent in the year to October 2017, Stats NZ said today. This followed a 3.0 percent increase in the year to September 2017. More>>

ALSO:

Science: New Research Finds Herbicides Cause Antibiotic Resistance

New University of Canterbury research confirms that the active ingredients of the commonly used herbicides, RoundUp, Kamba and 2,4-D (glyphosate, dicamba and 2,4-D, respectively), each alone cause antibiotic resistance at concentrations well below label application rates. More>>

ALSO:

CO2 And Water: Fonterra's Environment Plans

Federated Farmers support Fonterra’s bold push to get to zero emissions of CO2 on the manufacturing side of the Co-operative, both in New Zealand and across its global network. More>>

ALSO:

Fisheries: Decision To Delay Monitoring ‘Fatally Flawed’

Conservation group representatives say a decision by the new Minister of Fisheries, Stuart Nash, to delay implementation of camera monitoring of fishing efforts in New Zealand is ‘fatally flawed’. More>>

ALSO:

Kaikōura Quakes: One Year On

State Highway One and the railway were blocked by damage and slips and the Inland Road suffered significant damage. Farms, homes and businesses suffered building and land damage. Power and internet went down, drinking water systems, sewage systems and local roads were all badly affected... More>>

ALSO:

 
 
 
 
 
 
 
 
  • Bill Bennett on Tech