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
5 Comments
The budget relies entirely on building at 50% greater rate than during the boom of the mid 2000s (it's not even 50% of that at the moment!).
All very unlikely as NOTHING MUCH is going to happen in Christchurch, the payout money is already running away. A good amount of the small repairs that are to be done have already been completed but have we seen any real boost in activity?
There is virtually no way recovery in ChCh can save NZ. ChCh can't even save itself. The management has been a disaster yet the Govt is patting itself on the back for a job well done!!!
The way JK is prancing round in Parliament at the moment is just embarassing and childish. We have no hope, with this clown in charge.
Chris_J, unfortunately I think you are right.
It reminds me of the naked king in the Emporers new clothes, fairytale story. We can see he's naked!
Not the only assumption in their forecast that is not realistic, it is the real story of this budget.
Treasury has overcooked their growth forecasts for last five years...it's fair to say they are still overly optimistic...3.4% in two years still seems a bit high....no one likes being negative, but to be realistic there are more storm clouds yet to roll in....China & Europe yet to play out...USA will be flat for some time...etc etc.
English should change his words from
"let the surplus to slip a bit"
to "have a deficit where we cannot see the bottom"
As with the above few comments, nobody believes his words that we can go back into surplus 2014/15.
By recent history, everybody knows that Treasury has either brain deficit economist or are just cooking the figures to fit the budget target.......they have been wrong so many times in their ever optismitist forecast that even "Wolfboy" sounds credible.
Christchurch ?? Ha Ha Ha
Europe ? (Now i am holding my stomach laughing)
China ?? (Now i am rolling on the ground from stomach cramps laughing)
Milk ??............. : (
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