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

Gordon Campbell:
On The National Leadership “Contest”

Key’s endorsement of English has turned this “contest” into a race for second place.

This succession was well planned. Lets not forget that English was told by Key in September of his intention to resign, and English was the only member of Cabinet entrusted with that information before it was sprung on everyone else on Monday morning. More>>

Latest: Judith Collins and Jonathan Coleman have withdrawn from the leadership race, leaving Bill English the only candidate to replace John Key as Prime Minister.

 

Education, Marketing, Taxes: Health Groups Call For Actions For Sugary Drinks

The New Zealand Dental Association is launching a new consensus statement on Sugary Drinks endorsed by key health organisations. The actions seek to reduce harm caused by sugary drinks consumption. More>>

ALSO:

More Departures? David Shearer Proposed For UN Peacekeeping Role

Mt Albert MP David Shearer is being proposed for a demanding and exciting role heading the United Nations peacekeeping force in South Sudan, says Labour Leader Andrew Little. More>>

ALSO:

Security Agencies' Reports: GCSB Wants To Give ISPs More Power To Block Threats

The Government Communications Security Bureau wants to give internet service providers more information and power to block cyber threats which are increasing, its director told the intelligence and security select committee yesterday.. More>>

ALSO:

Education: Charter Schools Misleading Pass Rates

Labour: NCEA results for charter schools have been massively overstated... In one case a school reported a 93.3 per cent pass rate when the facts show only 6.7 per cent of leavers achieved NCEA level two. More>>

ALSO:

Rebstock Report Resolution: SSC Apologises To Derek Leask And Nigel Fyfe

Following a complaint by Mr Leask, the Ombudsman found that the State Services Commission acted unreasonably in relation to Mr Leask and identified numerous deficiencies in the investigation process and in the publication of the final report and in the criticisms it contained of Mr Leask... More>>

ALSO:

International Rankings: Student Results 'Show More Resourcing Needed'

NZEI: New Zealand had only held relatively steady in international rankings in some areas because the average achievement for several other OECD countries had lowered the OECD average -- not because our student achievement has improved. More>>

ALSO:

Earlier:

Salvation Army Report: Beyond The Prison Gate Report

A new Salvation Army report says changes must be made to how prisoners re-enter society for New Zealanders to feel safe and secure in their homes and communities. More>>

ALSO:

Surprise Exit: Gordon Campbell On The Key Resignation

The resignation of John Key is one thing. The way that Key and his deputy Bill English have screwed the scrum on the leadership succession vote (due on December 12) is something else again. It remains to be seen whether the party caucus – ie, the ambitious likes of Steven Joyce, Judith Collins, Paula Bennett, and Amy Adams – will simply roll over... More>>

ALSO:

Get More From Scoop

 

LATEST HEADLINES

 
 
 
 
 
 
 
 
Politics
Search Scoop  
 
 
Powered by Vodafone
NZ independent news