By Bernard Hickey
Treasury has reported a much bigger than expected Budget surplus for the 11 months to May, increasing the chances the Government may meet its four year old surplus target after all.
Treasury reported there was an Operating Balance Excluding Gains and Losses (OBEGAL) surplus of NZ$1.176 billion in the 11 months to the end of May, which was well above the NZ$193 million surplus forecast for the 11 months in the May 21 Budget.
With just one month to go in the financial year to June 30, the 'run-rate' for the Budget is well ahead of the current forecast for the full 12 months for a NZ$684 million deficit. Finance Minister Bill English had appeared to give up on the prospect for a surplus in 2014/15 in the May 21 Budget, but recent monthly results have suggested a surplus could still be possible and English has been more upbeat about the prospect in recent weeks.
English was cautious in his initial statement after the release of the Treasury figures.
"There is always volatility in the monthly Crown accounts and we won't know for some time if there will be a full-year surplus in 2014/15," English said.
"What is important is that these results indicate the Government is on track to anchor Crown debt levels at a low, sustainable level," he said.
Treasury said tax revenues were NZ$401 million stronger than forecast, due largely to corporate tax being NZ$395 million better than expected and 'other individuals'Â being NZ$112 million higher than expected. It said the bulk of this improvement was expected to persist through to June and resulted from higher than forecast provisional taxes and higher Portfolio Investment Entity taxes.
However, GST receipts continued to track below forecasts, being NZ$261 below forecasts, "implying downside risk to the full-year GST result."
Core Crown expenses were NZ$433 million below forecasts with Education spending NZ$205 million below forecasts. Treasury said a large portion of the variance was due to timing factors, although "some of the variance may persist until year end."
Treasury said the Core Crown residual cash deficit for the 11 months to May NZ$1.291 billion was NZ$155 million better than expected with capital payments NZ$142 million less than expected, "largely relating to delays in Canterbury rebuild capital projects."
No chart with that title exists.
(Updated with more detail, reaction from Bill English, chart)
23 Comments
Ah, the glass half empty brigade out in force here. There is no pleasing some people. My preference is a mix of pay down debt and tax relief. However, as most commentators here and Lab/Greens/Winny are saying we are heading for gloomy times maybe a fiscal shot in the arm is required so keep debt the same and inject some money into peoples wallets? This is required after Auckland's LABOUR Mayor has imposed 10% plus increases in rates on the hard working folk who live here.
BTW, good work Bill & John.
okay...just so I know I understand you:
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You think national will have done a good job, by posting (or predicting, still, at this stage), a budget surplus (difference between a year's tax take and a year's tax spend), for 1 or the 7 years they've been in government.
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Whilst overseeing a national debt of 98 billion and counting?
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In contrast, labour (the "spend" party), posted a budget surplus nearly every single year they were in government, and had a national debt of about 10 billion.
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I'm sorry, but I can't see how that' a job well done.
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Bear in mind, too, that National didn't really cut any taxes...they brought the highest tax band down a few notches (lightened the load of the rich), and increased GST (after explicitly promising not to touch GST - and this increased the burden of the poor).
Good work? Good work, how, exactly?
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If you're looking to blame the Canterbury earthquake for the ballooning national debt: that's cost about 25 billion.
If National is really better with money than other governments, I'd have expected the National debt to be in the region of 35bn max. Not nearly 3 times that.
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National good with money? yeah...when it comes to corporate welfare and lining the pockets of their mates, to ensure they have a cushy job when they get voted out.
'When they get voted out." Only when Labour have a leader that people can relate to. Someone who has a normal personality and who has some business experience. The current one cannot not even make headway against an MP who will never be in cabinet and that speaks volumes. And I have voted for Labour in the past.
Someone who has a normal personality and who has some business experience.
Is this a current example of preferred business acumen?
The proceeds from debt sales have been funneled into buybacks and dividends as myopic (not to mention price insensitive) corporate management teams have focused squarely on artificially boosting the bottom line and of course, on boosting their own equity-linked compensation. Read more
Yeah, business experience. That's another joke.
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Conservative governments get in on promising "to run the economy like a business". They then completely mismanage that which they get paid to do, proclaim after a few years it's not working (really admitting they're incompetent at their jobs), and then shift the responsibility by "outsourcing" (privatising) the whole undertaking.
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And still people keep buying into the mantra that 'running it like a business' is a good thing.
It's not
The government is not supposed to be done at a profit. it's providing necessary services, paid for by the taxes it levies for the people it provides those services for.
If it does happen to run these services at a profit, fine: these then get ploughed back into the community by means of increased funding for education and healthcare and whatnot.
If an outsourced government job runs at a profit....the community does not see a red cent of that profit.
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Why oh why does everybody still think that all this is so great?
Maybe DFTBA
When Labour were in this is what happened to the M# money supply
http://www.tradingeconomics.com/new-zealand/money-supply-m3
And here's the current account for the same period.
http://www.tradingeconomics.com/new-zealand/current-account
And here's the CPI for the same years.
http://www.tradingeconomics.com/new-zealand/consumer-price-index-cpi
And here are the retail sales
http://www.tradingeconomics.com/new-zealand/retail-sales-annual
National have not had the best of runs with a GFC, earthquakes etc.....one thing I would like to see in NZ is that all bureaucrats must exit their jobs when there is a change in Government!! Because what is happening is that we democratically elect in new people with the same sods behind the scenes who have been advising.
The CPI has gone from 800 in 2001 to about 1200 in 2014....I can't see how this is good?
The MM money seems to go up quite steely after the GFC....QE and funny money coming to our shores..again, is this a good thing? Especially since there seems to be little direct investment in the economy, and has only served to allow the housing market to go mental?
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And the current account...apart from a dip around 2008 (GFC), the peaks and troughs are a lot wider uinder the national government than under labour.
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Retail sales: same thing. More consistent and higher under Labour than under the national government, apart from a massive drop in 2008...GFC, again.
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So, not quite sure what you were trying to prove with your graphs. You've actually helped strengthen my argument, not yours.
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And the bureaucrats get out of office when there's a change in government?
Why? They're not the ones setting policy. Do you really think governments don't bring in their own advisors?
Are you now trying to blame the civil servants for the mismanagement of the country?
Probably best you actually take a look at these Accounts. Check out pages 15 and 16.
Gross debt is $80.4 bln sovereign debt, plus $30.7 bln debt that is "not sovereign guaranteed" - ie SOE debt.
But that is Gross Debt. If you account for the Crown's financial assets, the Net Core Crown Debt is only $16.4 bln. By any measure, that is low.
If you decided not to include some core Crown advances and the NZSF, then the "net debt" is closer to $60 bln.
Gross debt is just a bookkeeping entry. Good for politics. Net debt is what you actually owe others after taking everything into account.
"BTW, good work Bill & John." these two's running of this country has been nothing short of terrible i would not let either run a bake sale.
the leader was a joke from the day he went on letterman and has not let up since then
the double dipper from dipton has been swayed by treasury and has no thoughts of his own
we will look back on this period in future and compare it to muldoonish
you are correct in the woeful opposition and that is why we are headed for the mess these two have created.
Share trader you comments are wide of the mark.You say that English is swayed by treasury then compare him to Muldoon (someone who never listened to treasury and did his own thing)
However I also have a hint of scepticism with Govt figures and am concerned with the storm clouds brewing on the horizon..
What many on here fail to grasp is the art of politics..which is Key has no equal currently..
Prior to the budget we had the Greens banging on about poverty and labour about housing..the ground was pulled out from under them post budget as National began to address these key areas..
Prior to yesterdays forecast Angry Andy has been harping on about the perfect storm..how National promised a surplus and were not going to deliver."one of the greatest deceptions of our time " he said..
nek minute a surplus looks imminent....bugger now what?
they opposition have no where to go..they have been out played at every turn..
all they can do now is come up with silly ideas how to spend it..
The next labour primeminister is not even in parliament yet..
"What is important is that these results indicate the Government is on track to anchor Crown debt levels at a low, sustainable level," he said.
C'mon - nearly seven years down the national government track and the economy is imploding according to ANZ economists, which can only mean more extend and pretend, hence more debt to add to that already issued. Piling debt upon debt at cheaper rates is the global strategy currently falling apart at the seams.
Yes, but... The problem is that whilst low government debt is nice, I think the current settings of low interest rates is the result. So we have high house prices that can never be repaid or high government debt that can never be repaid (but which can be written off if you have your own currency).
I have gone around this circuit to the point where I think we are better off with slightly high interest rates that put pressure on house prices to stop them rising, plus a moderate budget deficit that puts money into the economy so that wages rise slowly.
measuring Nationals performance of the economy against Labours performance- as a direct comparison is fairly pointless exercise as the conditions they operated in were vastly different -
For example - You are hardly likely to say that this year the Dairy farmers have been half as good as last year - half as efficient - no this year the global price for their product has fallen because of less global demand and more global production and better conditions in other areas- and as a result despite their increased productivity and yields or better performance their results have been poorer.
Better to measure the respective Governments management in relation to other countries at the same time - ie how did labours outcomes stack up in their period of government to those of the 22 OECD countries - and is that ranking higher or lower than Nationals for their period when compared against the same countries -
that would be a far better comparison measure - after all pretty sure that national would have been posting surpluses in the five years prior to taking power and Labour deficits after the GFC and Christchurch earthquakes
In any case the return to surplus is GOOD NEWS and creates positive options
The cynic in me wonders if this is just a smoke and mirrors manoeuvre on behalf of the Government, so that they can say that they did finally achieve a surplus before a fresh set of world economic and domestic problems made it necessary to run deficits to protect us from the effects of a fresh round of economic turmoil caused by Greece, China (and largely their own total lack of vision and foresight)
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