Expected surplus election fuel

Nick Tuffley.
Nick Tuffley.
Voters will get their chance today to see how the promises being made in the election campaign will be paid for when the Treasury opens its books.

A month out from the election, the Treasury will present the Pre-Election Fiscal Update (Prefu), essentially an update on Budget 2017 forecasts.

With billions of dollars having already been pledged a month out from polling day, the Prefu will take into account current economic conditions.

The book opening is designed to give all political parties transparency over the state of the Crown financial positions and gives parties a realistic basis for assessing the financial feasibility of their policies.

ASB chief economist Nick Tuffley said since Budget 2017, the fiscal position had been favourable.

Tax revenue had come in about $1.1 billion higher than forecast for the year to May.

''If this trend continues, we expect the unfettered Treasury estimates are likely to show an operating surplus for the 2016-17 year in the vicinity of $2.8 billion, or 1.1%.''

For subsequent years, ASB expected the forecast could be as much as $2 billion higher than those forecast in the May Budget, he said.

If the forecasts were correct, the post-election government would have the luxury of choice, in contrast to the restraint needed after the Global Financial Crisis and Canterbury earthquakes, which triggered large deficits.

Whether the choice came in the form of tax cuts, boosts to welfare, more infrastructure spending or some combination of all remained to be seen, Mr Tuffley said.

''So watch for the size of the forecast surpluses. The bigger they are, the more choices you are going to be presented with as the final month of the election campaign roars into life.''

BNZ senior economist Craig Ebert said given the election was looking tighter by the day, it would be worth looking for any new policy announced with the Prefu - just in case.

At the least, there might be more allocation of money to specific ends, rather than it being left as a general provision.

Generally speaking, the Prefu would be a platform for the Government to reiterate its Budget initiatives, including the significant Family Incomes Package planned to start April 1, 2018.

It was also an opportunity for Opposition parties to say how they would manage the surpluses differently.

With respect to the outcome of next month's election, although the polls had been lurching around, with a noticeable resurgence in support for the Labour Party, the central message remained the same, Mr Ebert said.

Neither National nor Labour was looking likely to command a majority in the House.

New Zealand First was increasingly laying claim to the balance of power and the pundits were increasingly split as to which way it would go.

One view was the friendship of NZ First's Winston Peters and Shane Jones with Labour's now deputy leader Kelvin Davis would swing NZ First to Labour, he said.

''The other is that Peters is, at heart, and from historical fact, more politically aligned with National and he will go with the party with the most seats in the House - still likely to be National.''

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