Editoiral: Cost of a return to surplus
Those who will be stung by increased petrol taxes and road user charges, to help pay for the Government's "Roads of National Significance" programme and other road developments, have good cause to question the timing of the announcement. That's most of us, because transport operators will pass on their higher taxes to their customers.
The revenue will enable work to begin on the Rangiriri and Tamahere-Cambridge sections of the Waikato Expressway. That seems laudable.
But the increased taxes were announced the same day as the Half-Year Economic and Fiscal Update was published, and the update shows the Government remains on track (only just) to produce a Budget surplus by 2014/15.
The "surplus" evaporates each time it is freshly projected and now has been reduced to just $66 million. But without the hundreds of millions to be collected by higher petrol taxes and road user charges, Finance Minister Bill English admitted, there would be no surplus.
Would the economy be harmed if no surplus showed in 2014/15? Not really. It is a political target, artfully used to justify austerity measures including asset sales, the paring of public services and substantial layoffs of civil servants.
But let's not be distracted by increased petrol taxes. Much more critical is the growth outlook projected in the HYEFU. The Treasury has revised down its GDP growth forecasts, the unemployment rate sits above 5 per cent until 2017, and the current account deficit widens from around 5 per cent of GDP to 6.5 per cent in 2016/17. Each annual deficit expands the country's overseas debt.
Those trends are contrary to the thrust of Budget 2010, which - Mr English confidently declared then - "drives the New Zealand economy forward, moving away from debt and consumption while increasing investment and exports". Canterbury's rebuild and overseas reinsurance flows are part of the explanation for the discrepancy between the 2010 rhetoric and subsequent performance. But the HYEFU forecasts show our export growth will average 1.7 per cent a year over the next five years whereas our trading partners' economies will be growing at an average 3.7 per cent. Earthquake repairs do not explain our inability to make the most of export opportunities.