Bill's cash stash handy on the hustings

VERNON SMALL
Last updated 05:00 16/05/2014

Relevant offers

Opinion

Editorial: A chilling crime in London Five questions the Government needs to answer on Afghanistan raid allegations Andrew Gunn: The magical transformation of 'free' water into $3.50 a bottle Editorial: New Zealand needs a climate change plan Mike Sullivan: A father's plea on behalf of his disabled child Decriminalising abortion would be discriminating against women Wellingtonians need to start thinking about the issues that matter to the city A pragmatist signs out: Goodbye and good luck Editorial: The public deserves to know what happened in SAS raid Bill English can take his time, but must reassure public about NZ role in raids

It's restraint, Bill, but not as we knew it. The Budget is back in the black, but behind his shopfront $372 million surplus Bill English is loosening the purse strings in preparation for the election.

OPINION: The first shot in the unofficial campaign bidding war was the move to increase the new-spending provision from $1 billion to $1.5b from next year - a small stash of cash worth $1.5b over three years that can be splashed on the hustings.

At the same time National has raided Labour's policy book, including a boost to paid parental leave, to try to take the wind out of the Opposition's sails.

English said the new-spending increase was at the outer limit of what Treasury thought affordable before "material pressure on interest rates" started to emerge.

As a political line in the sand it is a clever move to try to box Labour and the Greens in. But it is unlikely that a small "transgression" of a few hundred million dollars would make any noticeable difference to inflation and hence the Reserve Bank's reaction.

In fact, English has given himself the flexibility to use more next year - or whenever the tax cut tease becomes a reality - by stipulating the $1.5b extra should be an average across the forecast period.

The $372m surplus forecast for the coming year is larger than had been expected, but gives the Government more room to breathe between now and the election update forecasts in August.

English and Prime Minister John Key would not risk the surplus, with all its potent political symbolism, evaporating before the campaign started.

The upshot of yesterday's moves and a sagging growth track, which starts at 4 per cent next year but quickly falls to 2 per cent by 2017, is a big drop in future surpluses.

In December, Treasury was tipping $10.5b in accumulated surpluses over the forecast period. That has now dropped to $7.6b and the peak of $5.6b in 2018 has dived to $3.5b. Net debt actually grows from $59.4b to almost $65b by 2018, although in relation to the size of a growing economy it falls from 26 per cent to 24 per cent.

It's debt reduction, Bill, but not as most people would see it.

Ad Feedback

- Stuff

Comments

Special offers

Featured Promotions

Sponsored Content