Budget 2014 - PwC New Zealand report card

Subject: Budget 2014

Name: The New Zealand Government

PwC New Zealand report card

General comments

Despite the improving economic climate, this is still going to be a challenging Budget for the New Zealand Government. But, we don’t expect the Minister of Finance to be unhappy, as the Budget will be set in the best economic climate of the last six years. Here we list the key modules we believe will make up the Government’s 2014 Budget announcement.

Subject remarks

Surplus

We’ve had very clear signals from the Minister of Finance that the Government will be aiming for a surplus and start a programme of debt repayment. We are $1 billion behind in tax revenues, and this shortfall to get to surplus will have to be made up from spending compromises.

Tax cuts

There might be $1 billion of extra spending. But one thing’s for sure – no tax cuts now, or in the near future.

Exports

We’ll see a very clear focus on increasing New Zealand’s exports: expanding trade agreements and removing barriers for New Zealand businesses to go to market.

Economic growth

We’ve come out of the Global Financial Crisis strongly, and economic growth is forecast to continue at about 2.5 to 3% for the next four years. This is a big opportunity to capture the gains that have been made and drive reform to cement recovery and keep it going. On the economic front, we predict a real laser focus on reforming regulatory regimes that might impede business growth.

Risks

While we’re in a very good position and hopefully New Zealand will be ready to rise, it’s not guaranteed. We face headwinds internationally from our major trading partners and there are some domestic concerns starting to emerge about rising interest rates and inflation.

Critical points for our
Assessment

• The Canterbury rebuild – will the region get additional funding?

• SOE sales – given share sales have raised less capital than forecast, how will this affect the Government’s programme over the next four years?

• Government’s KPIs* – will they be achieved? How much money will be re-prioritised?

• Interest rates will go up – New Zealand’s Reserve Bank has signalled reasonably steep rises over the next year or two. How will Government spending impact monetary policy?

*KPIs = Key Performance Indicators

For our full assessment and reaction to Budget 2014, please visit pwc.co.nz/budget

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