Government holds to surplus timing

00:19, Sep 18 2012

The government is holding fast to its goal to get back to fiscal surplus, in the face of doubts from the country's leading economists.

Prime Minister John Key and Finance Minister Bill English this morning responded to a New Zealand Institute of Economic Research (NZIER) poll of leading economists which forecasts the government's books will show a deficit of $1.08 billion in 2014-5.

In May, English said the accounts would show a small surplus by then.

Key said today that National's target of a return to surplus in three years is ''the right thing to do.''

But he added: ''I've seen reports that Australia might miss its target, which is trying to get back to surplus a little bit earlier than us, because of the international environment. We really just have to wait and see.

''All the government can do, is do what's within in its control and that is push the pro-growth agenda we've got, make sure that we make New Zealand competitive. It's very hard to tell.''

However, he didn't rule out making further cuts to reach the goal.

''I think New Zealanders can see we are very genuine about what are doing. I said at the start of the's not come hell or high water. But it is very much one of our firm ambitions and we hold onto that ambition.''

Key said a halt to the government's troubled asset sales programme ''would make it worse.'' But he is confident the partial sell-off of state-owned energy companies will go ahead.

Finance Minister Bill English said budget forecasts "tend to go up and down with the mood".

"We're still focused on the surplus; we're not saying it is going to be easy...we believe we can make it. Treasury is going into another round of forecasting in the next month or two, which will give us another snapshot of whether we are on track."

He said next year's budget would be a tight one "but not necessarily a zero budget".

"There are some things like welfare reform we need to invest in."

However, Labour leader David Shearer said the slower recovery will affect the surplus.

''Every thing I've read, it looks like the growth figures are going to be down, certainly on the previous quarter. The economy is not growing, we are losing jobs.

''The government needs to be upfront and say actually, the economy is tanking at the moment.''

The NZIER report says delays to the Canterbury rebuild, the impact of the high dollar rate on exports and international risks will slow growth. This will reduce tax revenue dimming the government's hopes of returning to surplus by 2014-15. Interest rates will remain low until late next year, while the dollar will stay high.