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

 


Prefu shows National’s economic credentials intact

Prefu shows National’s economic credentials intact as Dirty Politics captures headlines

By Jonathan Underhill

Aug. 19 (BusinessDesk) - The National government heads into the election with its Budget surplus target broadly intact, delivering a set of economic and fiscal forecasts marginally revised from May to reflect weaker commodity prices and a lower tax take.

The Treasury now forecasts a surplus this year of $300 million, down from the $375 million it projected in the May Budget but still allowing Finance Minister Bill English to deliver on a promise to balance the books that he first made in the 2010 Half year Economic and Fiscal Update.

The Treasury has shaved 20 basis points off its forecast for gross domestic product in the year ending March 31, 2015, to 3.8 percent, from the 4 percent Budget forecast to reflect a faster decline in the terms of trade from the highest levels in 40 years and a slower pace of domestic inflation.

The Pre-election Economic and Fiscal Update allows National to tout its credentials for economic stewardship to an electorate captivated by Nicky Hager’s Dirty Politics book, which risks tarnishing Prime Minister John Key’s popularity by exposing his party’s muck-rakers and their links to his office.

National’s support fell 2 points to 47.5 percent in a 3 News Reid Research poll taken before Hager’s book was released, while Labour rose 2 points to 29 percent and the Greens polled at 13 percent. A One News poll had National down 2 points to 50 percent and Labour down 2 points to 26 percent, with the Greens at 11 percent.

“New Zealanders have the opportunity to build on their hard-won gains of recent years – providing we stick with the government’s successful programme,” English said in his statement with the Prefu. This year’s forecast Budget surplus “is still modest…and yet we already have political parties making expensive promises and commitments.”

Asked if the Dirty Politics saga had overshadowed the government’s economic record, he said: “The economy matters a lot more to people than some argument in the blogosphere.” New Zealanders were more interested in jobs security and wage increases, he said.

He dangled little in the way of election bribes, telling a media briefing in Wellington that any tax cuts would be modest if at all, while Budget allowances are set at $1.5 billion a year. There was some scope for a reduction in ACC levies, which are projected to fall to $2.97 billion in 2018 from $3.4 billion in 2013.

The Treasury’s assessment of the economy is broadly in line with the Reserve Bank’s, including a continued decline in the trade-weighted index of the New Zealand dollar, a CPI rate that peaks within the bank’s 1 percent to 3 percent target band. Impetus comes from construction activity, household income growth and in the short-term, strong net migration inflows.

Prices of dairy products slumped to their lowest levels since October 2012 in the latest GlobalDairyTrade auction, and combined with a drop in prices of logs is likely to cause a sharper decline in the terms of trade than the Treasury had been expecting. But the government department still expects dairy prices to stabilise this year.

Treasury secretary Gabriel Makhlouf told a media briefing in Wellington that the drop in dairy prices probably reflected of short-term demand, including the winding down of inventory levels in China, rather than any greater than forecast structural weakness.

The track for the current account deficit has been revised up, at 4.8 percent of GDP in the March 2015 year, up from the earlier forecast of 4.4 percent, and up to 6.2 percent in 2016 and 6.4 percent in 2017.

Risks to the Treasury’s forecasts included geopolitical risks offshore, how households respond to rising interest rates, the pace of the Canterbury rebuild and the possible weaker performance of emerging economies, Makhlouf said.

“Our assessment is the economy is expanding above its long-term sustainable rate” and inflationary pressures “are building up,” he said. That underlined “the importance of fiscal restraint.”

Net core Crown debt is forecast to peak at 26.8 percent of GDP in the June 2015 year, slightly up on the Budget forecast of 26.4 percent. Still, the Debt Management Office kept its domestic bond programme unchanged from the Budget, at $8 billion in the current year, falling to $7 billion a year in 2016 through 2018.

The Treasury says fiscal policy will “exert a dampening influence on economic activity over the forecast horizon as slow growth in spending, combined with rising tax revenue, see the fiscal balance improve.” It kept unchanged it assessment in the Budget of an “average fiscal impulse” of -0.4 percent.

The Treasury has shaved $2.1 billion off its forecast tax take over the forecast period, reflecting less goods and services tax because of reductions in private consumption and less residents’ withholding tax. Still, core tax revenue if forecast to rise to $77.1 billion in 2018 from $61.5 billion in the current year. GST is seen rising to $20.4 billion from $16.1 billion in that time.

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Sky City : Auckland Convention Centre Cost Jumps By A Fifth

SkyCity Entertainment Group, the casino and hotel operator, is in talks with the government on how to fund the increased cost of as much as $130 million to build an international convention centre in downtown Auckland, with further gambling concessions ruled out. The Auckland-based company has increased its estimate to build the centre to between $470 million and $530 million as the construction boom across the country drives up building costs and design changes add to the bill.
More>>

ALSO:

RMTU: Mediation Between Lyttelton Port And Union Fails

The Rail and Maritime Union (RMTU) has opted to continue its overtime ban indefinitely after mediation with the Lyttelton Port of Christchurch (LPC) failed to progress collective bargaining. More>>

Earlier:

Science Policy: Callaghan, NSC Funding Knocked In Submissions

Callaghan Innovation, which was last year allocated a budget of $566 million over four years to dish out research and development grants, and the National Science Challenges attracted criticism in submissions on the government’s draft national statement of science investment, with science funding largely seen as too fragmented. More>>

ALSO:

Scoop Business: Spark, Voda And Telstra To Lay New Trans-Tasman Cable

Spark New Zealand and Vodafone, New Zealand’s two dominant telecommunications providers, in partnership with Australian provider Telstra, will spend US$70 million building a trans-Tasman submarine cable to bolster broadband traffic between the neighbouring countries and the rest of the world. More>>

ALSO:

More:

Statistics: Current Account Deficit Widens

New Zealand's annual current account deficit was $6.1 billion (2.6 percent of GDP) for the year ended September 2014. This compares with a deficit of $5.8 billion (2.5 percent of GDP) for the year ended June 2014. More>>

ALSO:

Still In The Red: NZ Govt Shunts Out Surplus To 2016

The New Zealand government has pushed out its targeted return to surplus for a year as falling dairy prices and a low inflation environment has kept a lid on its rising tax take, but is still dangling a possible tax cut in 2017, the next election year and promising to try and achieve the surplus pledge on which it campaigned for election in September. More>>

ALSO:

Job Insecurity: Time For Jobs That Count In The Meat Industry

“Meat Workers face it all”, says Graham Cooke, Meat Workers Union National Secretary. “Seasonal work, dangerous jobs, casual and zero hours contracts, and increasing pressure on workers to join non-union individual agreements. More>>

ALSO:

Get More From Scoop

 
 
Standards New Zealand

Standards New Zealand
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news