Government reveals $1.8 billion surplus - with possible tax cuts ahead
Finance Minister Bill English has again dangled the possibility of tax cuts after delivering his second straight budget surplus - and unlike 2015 it is substantial.
Treasury on Thursday reported a surprisingly strong surplus of $1.8 billion for the year to June, boosted by a surge in taxes from a growing economy and high immigration.
The surplus before gains and losses (Obegal) compares to the $176 million surplus forecast in the 2015 Budget and $668m tipped at the time of the May Budget this year.
The surplus in 2015 was a relatively slim $414m.
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Tax income was up $1.6b on the 2015 forecast while expenses at $73.9b were $600m lower than expected.
Net debt had stabilised at 24.6 per cent of gross domestic product (GDP), or $61.9b.
However, the operating balance after gains and losses was in deficit by $5.4b due to actuarial losses by ACC and the Government Superannuation fund, because of falling interest rates, and losses on the revaluation of the emissions trading scheme.
English said the the economy had made "significant progress" over the last eight years and he could present "a healthy set of public accounts".
"Government surpluses are rising and debt is falling as a percentage of GDP, which puts us in a position to be able to make some real choices for New Zealanders," English said.
The emphasis in coming years would shift from managing deficits to managing surpluses.
He said the Government was committed to maintaining rising surpluses and cutting debt to 20 per cent of GDP by 2020.
"Now we are in better times we need to start repaying the debt we ran up in tougher times," he said.
"If there is any further fiscal headroom we may have the opportunity to reduce debt faster and as we've always said, if economic and fiscal conditions allow we will begin to reduce income taxes."
He said the 2017 Budget would make "positive long-term choices" to strengthen the economy and communities.
Over the course of 2015/16 wages and employment grew by 2 per cent, and an influx of nearly 70,000 migrants helped the population grow by 2 per cent as well.
Treasury's half year update of the fiscal and economic outlook will be released on December 8.
Labour finance spokesman Grant Robertson said the operating surplus was the result of hard working businesses and workers, who would be asking whether the benefits of economic growth were being fairly shared.
"It is all well and good to be pleased about a surplus, but when there are children living in cars and garages, older New Zealanders in pain waiting for operations, and school funding going backwards, the Government needs to take a long hard look at their priorities."
"Before the Government gets too carried away with self-congratulation, Bill English needs to front up about his incompetent and irresponsible management of Housing New Zealand - that sees it nearly broke when there is an urgent need for more social housing," Robertson said.
Meanwhile, English rejected headlines this morning that Housing New Zealand Corporation was "going broke", which he said had caused distress among the corporation's staff.
It was expanding strongly and as it increased the number of houses it built from 300 a year to 1000-2000 it would need more Government cash.
"No way is it going broke."