Pressure grows for export stimulus
The Government is facing calls to shift its focus away from the surplus and toward policies to lift exports after Treasury's latest update showed the deficit tracking better than forecast.
In the nine months to the end of March the Government raked in $535 million more tax than expected, helping push the Budget deficit to $4.95 billion, $273m lower than expected.
Finance Minister Bill English said the figures showed continued spending restraint was important "as we remain on track to surplus in 2014/15, as the Budget next week will confirm".
The improved tax take was driven by the recent strong showing by sharemarkets and a higher effective tax rate because of the smaller proportion of low-income workers in the workforce.
That sparked a warning from Labour finance spokesman David Parker, who said the tax revenue data was "troublesome" because it showed low and middle-income earners were the hardest hit by the Government's policies.
The internal economy was doing better than expected, but the Government has not rebalanced the economy and its promise of 170,000 more jobs was nowhere near being met.
Tight control of spending was required, but the books "will and should be back in surplus by 2014-15".
However, the Government could make changes such as a capital gains tax, universal KiwiSaver and a different monetary policy that could improve the economy without a large fiscal cost.
Green co-leader Russel Norman said the data showed the books were ahead of forecast on tax revenue, expenses, the deficit and debt.
"National's singular focus on fiscal surplus is a distraction from their wider failure to rebalance the New Zealand economy on to a more sustainable and job-rich path," he said.
The nine-month update showed expenses close to forecast at $52.2b. Under-spending on Treaty settlements and aid programmes was largely offset by higher-than- expected costs associated with "horizontal infrastructure" (wastewater, stormwater and freshwater) in Canterbury.
Strong gains by the Cullen superannuation fund ($1.7b) and ACC ($700m) pushed the Budget balance including gains into surplus by $2.5b, about $4.5b above the forecast deficit.
Gross debt was 40.2 per cent of gross domestic product and net debt was 27.9 per cent of GDP, $1.5b lower than forecast.
Meanwhile, in an update to ministers Treasury said business sentiment indicated the economy continued to grow in the March quarter.
- This story has been corrected