All Blacks thrash Australia, once again, retaining the Bledisloe Cup ... Read more

Govt upbeat but surplus on knife edge

Last updated 13:08 17/12/2013

The economy is now expected to grow at 3.6 per cent in 2015, faster than many of New Zealand's major trading partners.

Related Links

Govt fiscal highwire act continues House price inflation has peaked - Treasury

Relevant offers


Below the Beltway: The week in politics Jo Moir: The Maori King has nailed his colours to the mast by shunning Labour Key washes hands of soap 'joke' but has he learned his lesson? PM on prison rape joke: 'It's nothing to do with me' Another minor National bill drawn from ballot amid Opposition complaints Alice Wylie: The nonagenarian with a lifetime of political tales to tell Nick Smith is 'Milllion-dollar Minister' as average Auckland house passes $1m mark Mayoral hopeful Paula Southgate says Hamilton needs a Housing Accord Overhauling New Zealand journalism Businesses on both sides of Easter Sunday trading law coin

A roaring New Zealand economy will boost jobs and make debt levels fall sooner and further, Finance Minister Bill English says, as the Treasury delivered its most upbeat economic statement since National took office.

The half-year fiscal and economic update (HYEFU) released today showed the Government's key political target of returning to surplus by 2014-15 remains on a knife-edge, at just $85 million. However, it pointed to larger than expected surpluses in the future, along with lower unemployment and debt.

The economy is now expected to grow at 3.6 per cent in 2015, faster than many of New Zealand's major trading partners.

While the Treasury said interest rate increases were looming, English said households were now better placed than they had been for years.

"There'll be better job security, you've got more productive businesses, you've got an export sector and now a construction sector and a service sector who are more confident than they've been for 10 years," English said today.

"So, as we face the inevitability of rising interest rates in a well performing economy, for those households, it's not news. They've been reasonably, generally, been pretty careful about their debt levels, because of the likelihood that interest rates will go up, and alongside that they've got reasonable prospects for wage increases."

Treasury Secretary Gabriel Makhlouf said growth "is becoming more embedded and broad-based".

The half-year economic and fiscal update made a series of upbeat forecasts including:

- Unemployment is expected to fall to below 6 per cent in 2014/15, and down to 4.7 per cent in 2018.

- While the surplus will not come any earlier, surpluses in the following years are expected to be substantially larger than previously forecast, by about $900m in 2016 and $500m in 2017.

- Debt will fall faster and further then previously expected, dropping to 22.3 per cent of economic output in 2018.

- Net debt is now expected to peak at $65b, $5b less than it was expected to just six months ago.

- Lower than expected debt means the Government will resume contributions to the New Zealand Superannuation Fund in 2019, a year earlier than had been expected.

- The total cost to the Crown of the Christchurch earthquake rebuild falls by about $250m to $14.9b.

- The New Zealand Debt Management Office announced that it was cutting its borrowing programme by about $5b this year.

Despite the brighter picture, the Budget Policy Statement warned that there would be no return to a time when government spending rose with economic growth.

However, English confirmed that even with the current figures and projected surplus, there was expected to be room for $1b of new spending in next May's Budget.

Part of the boost has come from stronger demand driven by the fast turnaround in the numbers moving to Australia, boosting net migration figures.

The boost comes despite slightly weaker demand from New Zealand's trading partners, mainly due to a falloff in mining investment in Australia.

Ad Feedback

The 2012 half-year update managed only to maintain that the Government was on track to reach its surplus target because of an 11th-hour announcement of petrol tax increases.

This year's release came with no unexpected surprises, although the decision not to reform the way ACC charges are made on vehicle licences, as proposed by the Crown entity was crucial to maintaining the forecast.

English maintained today that it expected to cut ACC levies by $1b in 2015-16.

Labour Finance spokesman David Parker said with strong terms of trade and the Canterbury earthquake recovery underway, it was no surprise that the economy was growing, but it was not down to the Government.

Most Kiwis were missing out on the recovery, he said.

"National will just scrape into surplus next year primarily by overcharging New Zealanders for their ACC levies. Labour ran nine surpluses in a row and left zero net debt, and is committed to a return to surplus.''

''National conveniently seems to have forgotten that the overwhelming majority of New Zealanders aren't better off than they were five years ago. Wages are stagnating and job growth is lagging behind economic growth,'' he said in a statement.

- Fairfax Media


Special offers
Opinion poll

Should the speed limit be raised to 110kmh on some roads?



Vote Result

Related story: 110kmh limit moves closer

Featured Promotions

Sponsored Content