Excise hike generates 11th-hour surplus

TRACY WATKINS
Last updated 05:00 19/12/2012

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OPINION: Cynical? Bill English and John Key conjured up a wafer-thin surplus at the 11th hour yesterday by whacking motorists with a hefty rise in excise and road-user charges.

Given that the Government's re-election platform in 2014 will be built almost entirely around its holy grail of getting the books back into surplus, that's a bit like promising the biggest party ever, then sticking guests with the bill.

Mr English protests that there was no dickering with the numbers and it is impossible to cherrypick which item on the Government's books helped tip it back into surplus. He may be right.

But without Cabinet's decision to hike petrol taxes, the Half Year Economic and Fiscal Update, released yesterday, would have been a few hundred million short of a surplus.

Even after taking into account the $300 million extra that petrol taxes will raise in 2014-15, the surplus target is looking more aspirational than achievable. For instance, Treasury is forecasting unemployment to drop to 5.1 per cent by 2017, resulting in lower welfare costs.

But forecasts for growth, the driver of job creation, have been revised downward from the May Budget.

The Government's "surplus or bust" mantra may not be surprising given what else was laid bare yesterday. On most other yardsticks by which it measures itself - debt, expenditure, new jobs - it fell short.

But without the hike in excise, Mr English's repeated assurance that the Government's fiscal programme was "on track" would have been harder to stand up.

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- © Fairfax NZ News

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