The Government remains on track to report a wafer-thin
surplus in 2014-15 but economists say the Crown accounts have
little wriggle room over the next couple of years.
Despite the improved outlook, the Government has chosen not
to announce any new spending plans, instead preferring to
wait until election year, next year.
The latest forecasts from the Treasury show the Government
posting a modest operating surplus of $86 million in 2014-15.
Surpluses are then forecast to increase to $1.7 billion and
$3.1 billion in the following two years.
Debt is forecast to fall and net core Crown debt is expected
to peak at 26.5% of gross domestic product in 2014-15, before
falling to 16.9% of GDP in 2019-20.
ASB chief economist Nick Tuffley said the Treasury has
revised up its economic growth projections over the coming
The upward revisions reflected both a stronger than expected
starting point, as well as signs the New Zealand economy was
The upward revisions were concentrated in the household
sector, partly, reflecting the higher starting point for
''Improving consumer confidence and growth in residential
consumption is expected to underpin continued growth over the
The Treasury did not make substantial revisions to the amount
of residential construction it expected to take place, mainly
reflecting earthquake rebuilding in Canterbury.
However, it did push out the timing of when it expected the
bulk of the residential investment to take place to around
''We expect the Canterbury rebuild to be even more
protracted, relative to both the Treasury and Reserve Bank
forecasts,'' Mr Tuffley said.
Finance Minister Bill English said the Government still had a
lot of work ahead to make the forecasts and projections a
The Government was this year borrowing a net $78 million on
average every week, and in dollar terms, net debt would peak
at $64.5 billion in 2015-16.
''It is also important to avoid the mistakes of the
mid-2000s, when large increases in government spending and a
booming housing market drove up interest rates and the
exchange rate and eroded productivity.''
While the recovery gathered momentum, the global environment
still remained uncertain.
''In this environment, it is important to maintain clear and
credible economic and fiscal settings as this is the best way
to create new jobs, raise incomes and help families to get
ahead,'' Mr English said.
Labour Party finance spokesman David Parker said five years
on from a recession, with a $40 billion rebuild and the best
terms of trade in 40 years, it was no surprise there was
economic growth. But it was not attributable to the
National would 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. The duty of
government is to ensure all Kiwis benefit.
"The real secret of these forecasts is National has
overlooked the interests of the vast majority of New
Council of Trade Unions economist Bill Rosenberg said the
forecast growth in the economy was largely driven by a
relatively limited number of sources: commodity prices, house
building and construction and other activity in the
He queried how that would ''trickle down'' into more and
better jobs and rising wages and salaries.
Forecast wage growth after inflation was slower than forecast
productivity increases so wage and salary earners would get a
falling share of the income available in the economy.
Unemployment was forecast to fall only slowly. Employment
growth would only slowly reduce the gap opened up over the
last four years between employment growth and the increase in
the working age population.
Main forecasts 2014-15
Economic growth: 3.6%
Budget surplus: $86 million
Net core debt: Peaks at 26.5% of GDP
Reduced government bond programme: from $10 billion to
$8 billion, plus a repurchase plan of up to $3 billion of
bonds coming due over the next six months.