By Bernard Hickey
Finance Minister Bill English has acknowledged a sharp slowdown in China could cut the government's revenues and force it to return to surplus later than the current plan for a surplus in 2014/15.
Treasury included a downside scenario in budget documents that would see New Zealand’s growth rate fall to 2.1% in 2015. This would mean the budget does not return to surplus that year and net government debt to GDP would rise above the government’s 30% threshold.
English said the government would allow the surplus track to slip, but “not too far”
“The imperative to get on top of the debt is still vital,” he said.
English’s comments tie in with those from John Key earlier this week when he said a sharper than expected downturn in the global economy could force the government to delay the return to surplus, implying the government would choose to borrow more rather than cut into government spending harder.
The Treasury’s central forecast is for GDP to rise 2.6% and 3.4% in the years ended 2012/13 and 2013/14. That produces budget deficits of 3.6% of GDP in 2012/13 and 0.9% in 2013/14, before returning to a 0.1% surplus in 2014/15.
Net debt is forecast to peak at 28.7% of GDP in 2014.
Meanwhile, the government stuck to its plan for a surplus in 2014/15 through a series of minor increases in revenues to raise an extra NZ$1.36 billion over four years
They included:
- increasing tobacco excise by 10% a year in each of the next 4 years to raise an extra NZ$528 million.
- Tightening tax deductibility for boats and baches,
- Changing livestock valuation rules
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