Spoiler alert – the Finance Minister has plenty to be happy about, with a surplus almost $1 billion higher than expected

With the Budget just over a week away, the Government’s books look to be in healthy shape, according to numbers from Treasury.

But the Opposition has used the strength of the numbers to criticise its spending priorities.

In the nine months to March, the operating balance before gains and losses (OBEGAL) was a surplus of $3.3 billion - $910 million higher than expected.

The surplus is $1.8 billion higher than the same time last year.

The numbers also show the Government’s tax take was $1.1 billion higher than had been expected over the period, rising to $57.5 billion.

"Corporate tax was above forecast by $0.3 billion mainly owing to provisional tax assessments being stronger than expected. GST and source deductions were both above forecast by $0.2 billion and $0.1 billion, primarily as the levels of employment and residential investment were above forecast. Customs and excise duties were also above forecast by $0.2 billion. Much of this variance can be expected to remain until year end," Treasury says.

National’s Finance Spokeswoman Amy Adams says the numbers show there is “absolutely no justification” for going back on election promises.

During the election campaign, Labour promised cheaper GP visits from July 1 this year.

But that date has been pushed back, with Health Minister David Clark saying the policy would instead have to be phased in.

“[Labour] promised everything to get elected and they simply can’t hide behind some excuse that there is not enough money to do it,” Adams says.

When asked about the broken promise in light of the much larger than expected surplus, Finance Minister Grant Robertson told reporters to “wait until Budget day.”

“You’ll see next Thursday that there is an ambitious programme that the Government is putting forward. We also need to deal with a range of social and infrastructure deficits we were left by the previous Government,” he says.

The Treasury figures show Core Crown debt is also lower than expected, coming in at 21.4% of GDP ($60.8 billion) compared to a forecast 22.2%.

This adds up to the Government owing $2.2 billion less than it had previously expected.

In its half-yearly economic and fiscal update (HYEFU), Treasury expected Government debt to be 21.7% in the year to June.

Asked if the Government will meet the HYEFU target, Robertson again took the wait and see approach, but did say “clearly the trend is that it will be significantly better than HYEFU.”

Under its fiscal responsibility rules, the Government promised to reduce net Core Crown debt to 20% of GDP by 2021/22.

The Numbers:

Core Crown tax revenue – $57.5 billion ($1.1 billion higher than forecast).

Core Crown expenses – $59.1 billion ($100 million lower than forecast).

Surplus – $3.3 billion ($910 million higher than forecast).

Core Crown residual cash – $1.6 billion deficit ($1.4 billion lower than $3 billion deficit).

Net debt - $60.8 billion ($2.2 billion lower than forecast).

Read the Government’s full financial statements here.

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56 Comments

The bottom line:

COL performing better than expected under National. Labour again proven to be expert managers of the economy.

This is tongue in cheek. Getting in before the anti Labour trolls.

Also, the link doesn’t work.

Fixed now.

Thank you.

And every dollar we earn over $48.000 is taxed at 31.39%. Do people actually realise this? STOP THIEF!
Tax bracket creep over the years can now afford to be fixed. Its not acceptable that someone on less than 1.5x the minimum wage should be paying such a high rate of marginal tax rate.

What should we replace the revenue with? A land tax?

The levels of surplus revenue listed this article are obscene. Taxpayers are being robbed blind. Its a scandal that labour should cancel Nationals planed tax cuts. It is surplus income which is reducing earners ability to invest, save and spend. It doesnt need replacing! No wonder business and consumer confidence is falling.

No wonder business and consumer confidence is falling.

In the case of Australia, the correlation between consumer and business confidence has a weak fit, particularly since 2012. It wouldn't surprise me if a similar relationship existed in NZ.

Credit growth is backing off, Influx of foreign capital has slowed. Government ripping money out of the economy, particularly at the lower socioeconomic end of the spectrum. Three additional factors which may perhaps correlate well with business confidence.

But isn’t that ‘surplus revenue’ just paying back the debt we accumulated under most of national’s tenure? Do you think the government should keep borrowing and never pay it back?

Do you think the government should keep borrowing and never pay it back?

A recent intelligent discussion around that topic with Steve Keen.

https://www.youtube.com/watch?v=7v-H8EcN9KU

No they shouldn't keep borrowing. Government should use overt monetary finance and spend without bond issuance. This, contrary to popular belief, would not be any more or less inflationary than deficit spending with bond issuance. Bonds are corporate welfare for financial institutions. They can park their saved cash somewhere else. Or spend it. Then you won't need the fiscal expansion in the first place.

No they shouldn't keep borrowing. Government should use overt monetary finance and spend without bond issuance. This, contrary to popular belief, would not be any more or less inflationary than deficit spending with bond issuance. Bonds are corporate welfare for financial institutions. They can park their saved cash somewhere else. Or spend it. Then you won't need the fiscal expansion in the first place.

That's one perspective. Others have suggested:

1. There's a great need to start addressing underinvestment in infrastructure and services that is in part behind the operating surplus. I.e. decent hospitals not only for those with private health insurance.

2. That the governments (all of them) should actually borrow more to carry out such investment, while it's cheap.

Others are suggesting that 2 might not be a wise idea because private debt is so high...keep the powder keg dry in case private investors fall off their own two feet and demand a bailout.

surplus paying back debt, or are you saying a Govn should never pay down its debt (in total?) so lets turn into Greece? bound to go well.

Reserve bank could just do some qe, buy back all our modest public debt, pay a bit more on reserves to manage interest rates and be done with the public debt distraction. No need to keep running demand draining surpluses to pay it off. Only if inflation gets out of control do we need to run surpluses. People don't seem to get that the mirror image of fiscal surpluses, given a cad, is an increasingly indebted private domestic sector. The surpluses create the conditions for the financial crisis.

Actually if you followed TOP's / Gareth Morgan's position, yes. Basically by taxing those not paying tax 80% of PAYE (who pay the rump of tax) would see a substantial drop in their NET tax like down to something like 20% from 30%.

It's a good point. But so is Hardly's, below.
I like the idea of increasing the income threshold for the highest tax rate, and compensating the lost revenue through something like a land tax

31% isn't really that high.

So does this make the $11b hole only $10b?

They are going to have to do some real juggling in budget as there are a lot of angry nurses and teachers out there with strikes just around the corner.

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Yes, agreed. I really have a lot of respect for the people who do the real work in this country. Add to the above, the carers, fire service, police and other essentials who get paid b@gger all and put up with minmal increases, while politicians who basically do b@gger all get the inflated salaries and perks etc. Very unfair state of affairs.

Get real. Most of the countries workers would be quite glad to get what nurses policemen and teachers get. I'm happy to see anybody get paid more but lets stop pretending on who is well paid and who is not.

Very probably. National effectively screwed down the public service for 9 years and now everything from its infrastructure to wages is not in good shape. Meanwhile ppls overheads like rates, power have been climbing "comfortably" above pay awards. So Labour is left holding the baby.....lucky Labour....

Leaving whichever party is in power aside for a moment - we should all be very very grateful that we have such a high standard of reporting of our Crown accounts to GAAP standards.

These accounts are probably one of the most accurate and comprehensive in the world.

Thanks to the Fiscal Responsibility Act and all subsequent who have stuck with such high standards - the envy of many. We really do have much to be thankful for in New Zealand.

Agree. Having lived in corrupt countries, this is not something to take for granted. This is something that - even though we may not realise it - makes a massive difference in each of our lives every day.

It is also a reason we should rage (and I really do mean rage) against the encroachment of corruption in New Zealand. We should not think a small increase in corruption is nothing to be worried about. Because corruption has such a tremendously negative impact on lives in so many ways. Having worked in poverty alleviation in the Third World it's one of the rare things I have a pathological loathing for.

New Zealand's comparative lack of corruption is something that needs to be defended.

I have also worked in countries where "corruption" is endemic. However I have softened my idealistic stance e.g. is there any difference between the PNG politician stamping "Donated by XYZ MP for ABC" on the side of a water tank destined for an electorate village to what Shane Jones is doing? At a base level, no, I don't think there is. They use other peoples money to buy votes. Lobbying is similar, if trips etc are given to attend conferences. Are countries like Japan corrupt when they give all expense first class travel paid trips to Pacific Island politicians to attend UN votes on whaling? In Asia it's more hidden, but borne out of a need to live when the Government salary is insufficient. All of that said, I would love to see a law where an authorising official is linked on a searchable database to every decision made to spend tax or rate payers money. I'd also like to see transparency in non financial influencing. I dream of a program that will source all journalist writing and put it through an algorithm to assess possible bias.

Dear Rex & Rick
Your sentiments admirable
Varying degrees of corruption in all governments around the world you know that.
NZs may only appear to be less corrupt but there’s corruption ( or kickbacks or nice directorships after leaving politics ) just the same
I enjoyed watching the lack of accountability when a well known Nat MP was found out to have overuled bureaucracy to allow in a wealthy individual NZ residency You know his new friendly beachouse neighbour.
Loved watching incompetent politicians assume plum roles in NZ Post Kiwirail Kiwibank etc
If NZ was seroius about corruption it would comb through the assets held in Trusts of all its politicians past & present.

Absolutely, we're not perfect, and we need more coverage of some of these issues. And less excusing of them by voters just because its their team.

Of course we see corruption encroaching in NZ, misspending and arguably too much influence from lobbyists - this getting worse in recent years. And we saw such behaviour as Judith Collins having her cup of tea with Oravida in China...But even in these areas, we have more robust standards and reporting around expenses etc., and the fact we've had scandals over satin boxer shorts, massages, hotel adult films and use of air force resources highlights the difference.

I don't agree that it's more hidden in Asia. Maybe for expats in gated enclaves, but at the ground level it's there every day. Public sector, private sector, everywhere.

You may argue there's no difference between elected representatives of an area successfully negotiating for development funds for the area they represent, and people taking personal bribes to award a contract to a given supplier, but if we expand the meaning of the word corruption to include anything and everything it ceases to have any meaning at all.

If you expand it to include every case of politicians making policy decisions to please groups of voters then it loses any meaning. Descending into equivalency won't help us preserve a comparative lack of corruption in NZ. A bribe for a residency visa is quite different to National promising increased subsidies to property investors if elected, surely?

(Agree with you that we should - especially as technology allows it - have more and more detailed information on where taxes are spent published online.)

With such a large surplus , how about giving a tax reduction to those earning the minimum wage ?

Well they can’t just give it to some people, they would need to lower the lowest tax rate which would give everyone slightly more money. The tax cut would have to be minute to not to get us into more debt we don’t need.

Would work out a few cents an hour, how about we pay them the living wage instead?

FFS. The COL has just announced that they are giving away over 900 million, that’s right over 900 million
Of New Zealand taxpayer money overseas
Why on earth would they dothis when they stated that the coffers were worse than they thought when they took over from National?

Interesting that Twyford has now dropped his target of KiwiBuild homes to be built over the next 3 years down from 16000 to 8000!!!!!

He also stated that not one has been built since the COL has been in power!

Full of BS and totally incompetent everyone would have to agree!

The Man - I also have some skepticism on Kiwibuild's overly ambitious targets, although I think in principle it is a much needed intervention.
However, is it not a bit unfair to point the finger in terms of no houses being built, given how young the government is?
Now, if we reach this time next year and that is still the case, then fair enough

Fritz, he hasn’t a clue and should be in the housing minister role.
The Unitec project he says will take another 6 to 12months before anything is done, they are just trying to coordinate partners etc.
There is no way that there can possibly be 4000 houses or units that are 40% Kiwibuild, some standalone houses plus some available to the public.
Ardern says a school and some retail all on this 29 hectares that has plenty of issues.
This is a load of baloney and anyone in the development or building industry know that it is impossible!
Who on earth will want to pay 600k to live in this ghetto ?
No one with any brains!

Could you do a better job?

He sure could.

The Man would buy up around 1300 existing homes with that 900 million, rent them out to all those families who don't want to own their own house, and instantly be a provider of houses for everyone. Job done - housing crisis over.

Then with a larger retirement income he could spend more time getting around and letting others know of his expert investing secrets so everyone could also get more richer for themselves and their families. Job done - poverty solved.

Vote The Man for PM 2020!

Risky, are you serious?
Most people could do a better job!
This housing minister has got no expertise at all.
He changes what he says everyday and is doing nothing of benefit.

If net debt continues to track almost 1% ahead of forecast then we could be at 20.7% by the end of the year. Over the remaining 4 years the government can spend $700m/yr more capital than they thought. With nominal gdp growth of 4% we could now increase net debt by $1.8b/yr and make a dent in the deficits this country has while still hitting 20% net debt in 2022. Let's get on with it.

Pray tell what is the COL doing that will have us achieving nominal gdp growth of 4%?

Core Crown tax revenue – $57.5 billion
Core Crown expenses – $59.1 billion
Surplus – $3.3 billion
I don't get it, it looks like a $1.6 billion deficit to me?

It's a surplus. Read the original accounts here. Page 6.

Doomster Hickey lurking in the background

Yea he kinda looks like a weird sort of financial news stalker eh?

1 billion extra surplus! Hmm what about that nice boss guy that shouted every employee a trip to Vegas. Sweet idea eh Grant!

https://www.stuff.co.nz/business/103724731/christchurch-businessman-taki...

The concern of meeting teachers and nurses pay claims will be matched by many other sectors unless local body rates are brought urgently under control. Currently it is christmas time around council tables as general rates are set at variable levels depending on what councillors have on their shopping lists. The general rate increase should be regulated by government not to exceed CPI, and all other bids be subject to stakeholder consultation

The problem for councils is central Government keeps throwing more work onto them but do not fund it. So rather than see Income tax rise rates does instead.

2nd if you like your idea so much stand for election.

Here we go. This is why you never want the Government near your Super money. Financial engineering, but the outcome is the same https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12047478

Rex Pat, the Superfund was created by Labours then Finance Minister Cullen. National never supported it. Why howl now about surpluses being spent on vital and overdue infrastructure initiatives. As far as National is concerned the Fund shouldn't even exist? For years they refused to contribute to it resulting in $billions lost.

For once, be thankful the money is there.

Because it's my hard earned money that's in it. Living with a Leftie must be like being an bar in some parts of Asia; if there's a hand in your pocket it's not usually your body they are after.

Ummmm, maybe think before you click save?

You sound like the type of person who becries socialised services on a Wednesday and then collects a pension on the Thursday.

ha-ha-ha-ha :)

RP - I think you need to stick to parroting on about the Property Market.

This announcement will work one of two ways:

1. The Super Fund takes no actual commercial patronage risk and relies on a guaranteed revenue stream from the Government i.e. taxpayers urinate in their own pockets.

2. The Super Fund takes on patronage risk and tax payers end up wearing the potential cost through diminished value in their super fund i.e. taxpayers urinate in their own pockets.

If the COL was so sure about the actual usage they would require owners/operators to take that risk. However, investors have had enough bad experiences to say yeah nah.

Rex Pat says "RP - I think you need to stick to parroting on about the Property Market"

Translation; "I am highly embarrassed - go away"