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Treasury sees lower budget surplus in 2014/15 due to slower economy; delays restart of NZ Super Fund contributions by a year to 2020/21

Treasury sees lower budget surplus in 2014/15 due to slower economy; delays restart of NZ Super Fund contributions by a year to 2020/21

By Bernard Hickey

Lower dairy prices and more subdued consumer spending is dragging on the Government's tax take, reducing the amount of room in the budget outlook for tax cuts after the election and delaying the resumption of contributions to the New Zealand Superannuation Fund by a year to 2020/21.

The lower budget surplus track from 2014/15 was detailed in the Treasury's Pre-Election Fiscal Update, which sets the budget framework upon which the political parties can place their election policies.

Treasury forecast an Operating Balance before Gains and Losses (OBEGAL) of a surplus of NZ$297 million for the current 2014/15 year, down from the NZ$372 million forecast in the May budget.

It reduced the cumulated surpluses by NZ$0.7 billion over the four yeasr to 2018.

Finance Minister Bill English said he did not expect National to announce a tax cut package before the election.

"It's important that the Government does not over-commit itself because as these figures show, there is limited fiscal headroom," English told a briefing for analysts and journalists.

The Treasury update slightly increased the Government's forecast net debt track in a way that meant net debt did not fall below 20% for another year.

Treasury said this meant the Government would not be able to resume Super Fund contributions until 2021, one year later than forecast in the May Budget.

Political reaction

Green Co-Leader Russel Norman issued an analysis from BERL which it said showed the Government was reducing real funding for Health, the Environment and Education by NZ$3.8 billion over the next three years because spending was not keeping up with inflation in the sectors.

"National's election promises are being underwritten by major cuts to health, education and environment spending," said Norman.

English rejected BERL's analysis.

"If I was Russel Norman, I’d ask BERL to cancel the invoice for their latest report on behalf of the Greens,” English said.

“The forecast health and education numbers they quote for future years exclude allocations yet to be made from future annual operating allowances for discretionary spending and they also exclude capital investment allocations," he said.

Labour Finance Spokesman David Parker said the PREFU predicted a halving of growth and a drop in exports as a share of GDP.

"Their promise of increasing exports to 40 per cent of GDP is nothing more than a pipe dream," Parker said.

“At the same time too much capital goes into housing speculation rather than productive businesses. New Zealand will never get rich selling houses and farms to each other or to foreigners," he said.

Economist reaction

Economists said there were few surprises in the PREFU and were relaxed about the political approaches of the main parties to the budget, although noted there was little room for fiscal relaxation.

"Mainstream political parties appear committed to the working assumption of a $1.5 billion new initiative cap for subsequent Budgets. That’s still tight historically, but critical if projections are to be met," said ANZ Chief Economist Cameron Bagrie.

"The projections give little scope for fiscal largesse as pork barrelling season ramps up immediately prior to the election," he said.

(Updated with more details, background, reaction)

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Updated with more detail on budget surpluses.




That John Key is doing a really crappy job for sure. Why anyone would vote for him I don't know.

Core crown expenses forecast to be 30.3% in 2015, down from 35% in 2011.

Economic growth for this year now forecast to be 3.8%.

Budget forecast unemployment forecast to be 4.5% by 2018.

Average annual wage forecast to increase by $6,600 to $62,000 by 2018.

Household disposable incomes rose 7.1% last year.


Where's this economic growth you're talking about?   Most folks I'm tazlking about are starting to sweat because business is tight.  the only ones seeming to do well are from government policy changes.

Unemployment prediction is 3 years away??

annual wage increase is likely from changes government forced by minimum wage effects

disposable income links to previous line, but GST and costs have significantly increased, and cost of finance (which affects many people) has increased too.

So basically costs have increased, government spending is down but savings not passed back to the private economy yet, and we're still losing ground (pun haha) to foreign markers.


At the end of the day, people can see that this reduced budget surplus is a smear campaign by Nicky Hager....


The projected budget surplus is down by $75 million. Run for the hills!


An oldie, updated.

To the tune of ‘Clementine’. Y’all enjoy, now.


1. In an office, at the Treas’ry

hoping not to hit the wall

Sat Bill English, Kiwi wingless,

and his offspring OBEGAL



Oh my darling, oh my darling,

Oh my darling OBEGAL

You are lost and gone forever,

Dreadful sorry, OBEGAL.


2. Light she was, her numbers leery,

And ninth floor did twist them all,

Then came Nicky , ever tricky,

Scandals did for OBEGAL


3. LabGreen pollies promised plenty

But their taxes gave us pause,

Larger Germans, preaching sermons

Egged the voters to their cause.


4. Winnie's lips just above water,

Blowing bubbles through his caul,

But alas, he was no swimmer,

Neither was our OBEGAL


5. Listen fellers, heed the warning

Of this tragic load of bawl,

Lower taxes, better praxis

Could have saved my OBEGAL


Odd there was no commentary on EQC liabilities (as per Campbell Live tonight) - a big question mark in terms of accurate forecasting. And as the Prefu states, "Because the net claims liability is large, small percentage changes in the liability can have a material impact on costs and forecasts".


One could take from the The Campbell Live piece that claims are being settled slowly so as not to expose the already known under-estimate in the acturial assumptions. 





National election promises - $1.89b

Labour election promises - $6.7b + Greens promises + Internet/Mana promises + Winstons promises

Where's it going to come from...  your pocket.  But hey, I'm sure Cunliffe will spend your money wisely, what right so you have to it anyway...


Don't forget that National borrowed a hell of a lot of money over the last two terms.


@Andrewj , just look at where the National Government spent the money, it did not spend any of it on extravagant items . 

1) Social welfare for people who lost their jobs in the GFC , when unemployment shot up from 6% to bewtween 9 and 12% depending on who you believe

2) Bailing out the Finance Companies under the Bank G'tee scheme put in place by Helen Clarke and Michael Cullen

3) The Christchurch Earthquake

4) Ensuring the Aluminium Smelter workforce were kept off the dole queue

5) Solid energy losses , which was another Pie - in- the- sky ill-conceived Labour idea that National inherited


Given all these unforseen items , we have come out pretty well .


@Boatman - you have a way to go to explain the rise in new debt under National - I would also like to point out National extended the deposit guarantee scheme to wantonly include SCF. And ChrisJ has many examples and evidence of government money not spent in Chch.

Graphic government debt levels.


Actually its pretty easy I suspect. Im pretty sure its mostly Govn tax take collapsing necessitating borrowing to keep the public sector working and hence our economy afloat.




Boatman, you forget that Solid Energy's problems are clearly a manifestation of National Party direction/policy in encouraging all SOEs and Solid Energy in particular to increase their gearing AND to deliver unreasonable dividends - based not on market conditions, but rather on National's wish to make them "more efficient" (lol).  Read the very words from Simon Power;…


So they did just that - invested using debt in a bunch of speculative new energy industry projects which all turned sour on them.


I believe the financial management direction that Solid Energy took as a direct result of government direction mirrors the approach to our country's financial management that National took. It was far less than prudent - rather it was target growth based around new debt. 





Thanks Kate ,to be objective ,  Solid Energy was truly a shambles handled badly by Government ,  a spectacular destruction of our wealth and waste of taxpayers money




I appreciate your thanks. My main objective is to get NZers out of this left/right dichotomy in terms of the way they view society and hence, politics. I'm really annoyed that Key is repeating and repeating and repeating and repeating and repeating and repeating this "left-wing consipracy" theory at the moment. This is brainwashing - this is an attempt by him to keep the population stuck on this historical dichotomy. The world's problems are too urgent for such partisan models. We need to stop thinking "them and us" and start thinking "we".  


#5 Actually if you look at how Solid Energy's board acted, ie buying into dodgy alternative schemes thinking that the consumer could pay no matter what the cost, its hard to say that is Labour's fault at all.  It is gross mis-management by the company executives, following broken economic models and having their "spines stiffened" by National over the last 2 terms IMHO.

#1~4 not so much (or just) payouts as tax take collapses.




Come on, your better than that. 




Christchurch Earthquake

Both these things could have been paid for from govn savings accumulated in the golden years 2001 - 2007 but, unfortunately, the Labour govn didn't save a dime in all those boom years leaving National no choice but to borrow.