By Bernard Hickey
The Government announced in Budget 2013 it is still on track to post a surplus in 2014/15, but the surplus is smaller than expected and came after a slight increase in net new spending in the next two years and a two year delay in the resumption of contributions to the New Zealand Superannuation fund.
There were few big new spending announcements not already previewed by the government, but Budget 2013 did include plans for ACC levy reductions of NZ$300 million in 2014/15. These levy reductions will escalate to NZ$1 billion by 2015/16.
A surplus of NZ$75 million is forecast for 2014/15, allowing the government to keep its promise of a surplus by then. This follows a deficit of NZ$2 billion in the 2013/14 year and NZ$6.3 billion in the yet to be completed 2012/13 year. Economists had forecast a 2014/15 surplus closer to NZ$1 bln.
The government plans NZ$900 million of net new spending in the 2013/14 year, up from NZ$800 million indicated before the budget and follows two years of 'zero' budgets of no net new spending. This allowance for 'discretionary spending increases to NZ$1 billion in 2014/15 and operating spending is scheduled to increase by 2% a year after that.
The government also stuck to its forecast of reducing net debt to under 20% of GDP by 2020 from almost 30% of GDP in 2014/15, but it has delayed plans to restart contributions to the NZ Super Fund by 2 years to 2020/21 to do that.
Elsewhere, the government announced it had signed a Memorandum of Understanding with the Reserve Bank to allow it to require banks to hold an extra buffer of capital during upswings in the economic cycle, to require banks to hold an 'overlay' of capital for lending to certain sectors, to require them to use more stable sources of funding, and to restrict high loan to value ratio lending in housing.
Finance Minister Bill English later said the decision about imposing limits on high LVR lending, which would hit first home buyers hardest, was with the Reserve Bank.
English detailed plans for legislation for housing accords with councils that would accelerate building consents in high growth areas. He later told a news conference the accord would allow, under certain circumstances, the central government to over-ride councils and directly issue consents centrally.
"This legislation, which will apply for three years, is an immediate response to housing pressures in areas facing severe affordability problems," English said in his budget speech in Parliament.
The Budget followed the announcement of an accord with the Auckland Council last week that aimed to build 39,000 extra houses over the next three years, which would be nearly triple the amounts built by the private sector over the last 3 years.
The government also confirmed expectations that it would sell up to 49% of Meridian Energy in the second half of 2013.
Other key details:
- Treasury forecast economic growth in the year to March 2014 of 2.4%, rising to 3% in 2015, before falling to 2.6% in 2016 and 2.2% in 2017.
- Treasury forecast the current account deficit rising to 6.5% by 2017 from 4.8% in the current year, although it noted it would only be around 5% without the costs of the Christchurch rebuild.
- Future investment fund to spend NZ$1.5 bln in 2013 budget, mostly on Christchurch hospitals and Christchurch rebuild. Budget 2013 included an extra NZ$2 bln in spending on the Christchurch rebuild overall. The total government contribution to the rebuild was increased by NZ$2.1 billion to NZ$15.2 bln. The total overall cost of the rebuild was now NZ$40 bln.
- NZ$100 million for Healthy Homes over 3 years
We welcome your comments below. If you are not already registered, please register to comment
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.