The Labour Party is promising a government surplus of NZ$497 million in 2014/15, the same year as National, but a billion dollars below the current track.
The party released a fiscal strategy in Parliament Buildings today, refuting claims from National it would need to borrow an additional NZ$17 billion over the next four years to pay for its spending promises.
In response, Labour today said it would borrow NZ$2.6 billion more than National over the next three-year Parliamentary term, and that net core Crown debt would peak NZ$4 billion higher than what Labour said was the current Budget track, in 2016/17.
Labour used figures including the assets held in the Superannuation Fund to show it would get net government debt to zero in 2021/2022, saying that would be a year ahead of the current track under National.
'Include the lost dividend stream'
However, it compared its track to a Budget track in Treasury's Pre-Election Fiscal Update (PREFU) which Labour had altered to try and show what it thought the impact would be from lost dividends due to the sell down of SOEs under the planned mixed-ownership model.
Treasury's current approach is to not include any possible lost dividend flow from the up to 49% sell-down of Mighty River Power, Genesis Energy, Solid Energy, Meridian Energy and Air New Zealand shares into its five year projections. The government says the sell-down in shares would take place over three to five years and raise between NZ$5-7 billion to be used over at least five budgets for new capital spending such as that on schools and hospitals. In the PREFU Treasury says:
"The Government has announced its intention to offer partial ownership of certain State-owned enterprises to private investors if it is re-elected. This is often referred to as the "Mixed Ownership Model". As there is insufficient information to forecast individual transactions, there are no estimates of sale proceeds, selling costs, foregone dividends or ownership changes in these forecasts."
The government has made the committment that any new capital expenditure above the NZ$800 million allowance it has given itself in each of the next five budgets will be met from its existing capital base - most likely the sale of assets it currently owns.
Although Treasury does not include an assumption in its forecasts over the next six years that this will be met from the sale of the specific assets mentioned above, Labour says it is obvious that is what is being planned, so Treasury should account for up to half of the expected dividends from those companies not being included in its forecasts.
Labour Party Finance spokesman David Cunliffe stood behind Labour's decision to include the super fund in government assets when calculating net Crown debt - something Treasury does not do for its headline net debt figures (although it does provide net debt excluding and including the Super fund in its budget documents).
Labour is proposing to put NZ$750 million into the super fund in 2012/13, NZ$1.5 billion in 2013/4 and NZ$2.25 billion in 2014/15 - money that will need to be borrowed as the books would be in deficit for the first two of those years, and a small surplus in the third.
By including the super fund in the net Crown Debt calculation, the liability created by the extra borrowing would be neutralised by the asset placed in the super fund. If Labour were to use the current administration's approach to calculating net Crown debt without the super fund, its debt track would therefore be higher as the borrowing could not be offset by a corresponding asset.