Plenty of work to rein in budget deficit - English

Hon Bill English
Minister of Finance

July 3 2009

Media Statement

Plenty of work to rein in budget deficit - English

Finance Minister Bill English has welcomed news that the Budget operating deficit of $7.2 billion for the 11 months to May 31 is lower than the forecast $8.4 billion.

But he has cautioned about reading too much into month-to-month variations in the Crown accounts. Most of the $1.2 billion variance was due to higher-than-forecast investment gains by the NZ Superannuation Fund and ACC.

“We are facing large structural deficits that are forecast to continue for the next 10 years,” Mr English says. “It’s entirely appropriate that the Government plays its part in helping New Zealanders through the recession.

“To do that, we’re borrowing an extra $30 billion over the next four years to preserve welfare entitlements, invest in productive infrastructure and prepare the economy for recovery.

“But as we indicated in the Budget, there will need to be ongoing restraint on government spending increases to ensure that future taxpayers are not burdened with higher debt.

“It’s important that we get back into surplus in less than 10 years, because surpluses give us choices. As long as we are running deficits, we don’t have those choices.”

Mr English noted that the Crown accounts issued today showed that corporate tax receipts were $400 million lower than forecast for the 11 months to May, indicating that business profitability is weaker than expected.

This was matched by core Crown spending coming in $400 million below forecast, with benefits payments remaining broadly in line with forecast.

ENDS