Gordon Campbell | Parliament TV | Parliament Today | News Video | Crime | Employers | Housing | Immigration | Legal | Local Govt. | Maori | Welfare | Unions | Youth | Search

 


Boom helps deliver balanced budget

New Zealand Budget Update: Boom helps deliver balanced budget

The New Zealand government has presented the first fiscal surplus in six years, as expected, at $NZ0.4bn in 2014/15 (+0.2% of GDP). The surplus is projected to rise further from there, to $NZ1.3bn in 2015/16 and $NZ2.4bn in 2016/17. This will limit the peak in net debt to 26.4% of GDP. Fiscal policy is expected to remain a modest headwind to growth in coming years, with the government focused on delivering a sustainable budget surplus – something the booming New Zealand economy should easily manage. The strong economy has given policymakers a little more scope to ease up on the pace of consolidation, with the government announcing an increased spending allowance for future budgets. Today’s budget is unlikely to surprise the RBNZ and we continue to expect a rate hike from the central bank in June.

Facts
- The New Zealand government projects an Operating Balance before Gains and Losses (OBEGAL), of -1.1% of GDP in the current fiscal year (versus -0.9% in the May 2013/14 Budget). The OBEGAL is expected to return to surplus of +$NZ372m in 2014/15 (from +$NZ75m in Budget 2013/14).

- The Treasury has upgraded their outlook for the domestic economy, with average annual GDP growth of +4.0% now expected in the March 2015 year (up from +3.0% in the Budget 2013/14).

- Net debt is expected to peak at +26.4% of GDP in 2014/15 (previously +28.7 % in Budget 2013/14). Bond issuance is projected to total $NZ8bn in 2014/15, falling to $NZ7bn in each of the next three years.

Implications
Today’s budget suggests that the New Zealand economy is on track to deliver the first fiscal surplus in six years. The New Zealand government has maintained a commitment to expenditure constraint since the global financial crisis and this has seen the budget bottom line improve from -4.6% of GDP in 2010/11 (excluding earthquake expenses) to an expected +0.2% of GDP in 2014/15.

The government remains committed to expenditure constraint in future budgets, with the fiscal surplus projected to rise further in coming years. This will see fiscal consolidation remain a modest headwind for the economy – with the Treasury estimates implying a fiscal drag averaging -0.7% of GDP a year over the next four years. The New Zealand economy should easily weather this further tightening, as it remains on track to deliver one of the strongest growth rates in the OECD. A continued commitment to expenditure constraint will help manage New Zealand’s boom and keep pressure of the exchange rate and interest rates.

Given this commitment to expenditure constraint, net debt is projected to peak at 26.4% of GDP in 2014/15 and fall to 20% of GDP by 2019/20.

The booming economy has allowed the government to loosen the reins a little and still achieve its targets for net debt. Previously, the government had allocated a new operating allowance of $NZ1 billion for future budgets. This new operating allowance will be increased to $NZ1.5 billion in 2015/16 and will grow by +2% annually thereafter. The existing operating allowance has allowed for extra spending programs in today’s budget, including: an expansion of paid parental leave entitlements; increased funding for early childhood education; a suspension of some import duties to decrease housing costs; and additional spending on education and healthcare.

Increased future spending allowances may also allow the government to announce additional spending or revenue measures in the lead up to September’s election – potentially taking the form of modest tax cuts or revisions to income tax thresholds.

In terms of the implications for monetary policy, today’s budget is unlikely to significantly surprise the RBNZ, with fiscal consolidation having been a feature of the New Zealand macroeconomic landscape for a number of years. As a result, we continue to expect the RBNZ to hike rates further in June.

© Scoop Media

 
 
 
 
 
Parliament Headlines | Politics Headlines | Regional Headlines

Issue 49: Werewolf Weekender

Philip Matthews: From The Lost Continent
It’s a case of better late than never for Olivier Assayas’ marvellous After May/Apres Mai, which first screened at Venice in 2012, had a couple of North Island screenings last year during the International Film Festival’s “Autumn Events” season, got a theatrical release in Australia – but not here – and only now appears on DVD, after Assayas himself has moved on. More>>

The Complicatist: Blue Eyed & Soulful
For a while in June, the top two singles on the US Billboard charts featured Iggy Azalea, an Australian model turned hip hop performer. To some, this may seem like just the latest chapter in a long saga of whites ripping off black culture, while enriching themselves in the process. Obviously, there’s some truth in the stereotype. Yet it can also obscure the positive collaborations – in jazz, soul music and hip hop – between musicians who treated each other as creative equals, race regardless. More>>

Satire: Carry On Captaining
Oh hello. Scanner Technician Davis. To what do I owe the pleasure?
You think we’re what?
Oh, pish. This vessel has been travelling along smoothly for generations – particularly smoothly in the last few years though I say so myself – and I happen to know we have never once been hit by an asteroid... More>>

 

Parliament Today:

False Electoral Return: John Banks Sentenced To Community Detention, Community Work

“The conviction of John Banks today is another sad chapter for John Banks and the ACT Party”, says Labour candidate for Epsom Michael Wood. More>>

ALSO:

Gordon Campbell: On The Rise Of ISIS And Labour

While global attention got distracted by the fate of MH17 and the atrocities in Gaza, the world’s other mega ‘bad news’ story – the rise of ISIS-led fundamentalism in Iraq – has reached a tipping point. More>>

ALSO:

Rebuild: Christchurch City Council Releases Milestone Report

The Cameron Partners report says the Council may need to find an additional $783 million to $883 million by 2019... Options Cameron Partners proposed include increasing rates, borrowing more, maximising insurance payments, and freeing up capital from its commercial assets. More>>

ALSO:

Parliament Today: Parliament Adjourns

The 50th Parliament has adjourned for the final time. After the completion of the adjournment debate, MPs left for the campaign trail with Parliament to be dissolved on August 14 ahead of the September 20 election. More>>

ALSO:

Novopayout: Government-Owned Company To Take Over School Payroll

After lengthy negotiations, the Ministry of Education and the existing school payroll provider, Talent2, have settled both on the amounts payable by Talent2 towards the costs of remediating the Novopay service and a new operating model for the school payroll system. More>>

ALSO:

Employment: Labour Will Raise Minimum Wage, Restore Work Rights

A Labour government will raise the minimum wage $2 an hour to $16.25 and restore work rights to ensure the benefits of economic growth are shared fairly by all New Zealanders, Labour Leader David Cunliffe says. More>>

ALSO:

Police: Crewe File Review Released

No new evidence has come to light implicating any specific person as being responsible for the murders of Jeannette and Harvey Crewe... The review identifies there is a distinct possibility that Exhibit 350 (the brass .22 cartridge case) may be fabricated evidence, and that if this is the case, that a member of Police would have been responsible. More>>

ALSO:

Werewolf Issue #49: Gordon Campbell Interviews Laila Harre

For 25 years, Labour and National have been in virtual agreement about the basics of economic policy, and differed mainly on how to go about managing its social consequences. More>>

ALSO:

Get More From Scoop

 

LATEST HEADLINES

 
 
 
 
 
 
Politics
Search Scoop  
 
 
Powered by Vodafone
NZ independent news