Surplus unlikely as Govt books in red

Finance Minister Bill English (Simon Wong/ 3 News)
Finance Minister Bill English (Simon Wong/ 3 News)

The Government's surplus celebrations will be short-lived with Treasury predicting a $400 million deficit in the next financial year.

But Finance Minister Bill English says the forecast deficit shouldn't be dwelled on with Treasury also saying the books are broadly balanced.

"The 2014/15 surplus demonstrates how things can change in such a short time, with a $572 million forecast deficit at Half-Yearly Economic and Fiscal Update (HYEFU) last December turning into a $414 million surplus by the end of the fiscal year."

Mr English said the Government had reassessed its fiscal goals.

"This does not signal a change in direction - we will continue to focus on keeping a tight rein on spending, running surpluses and paying down debt."

But with the books looking broadly balanced they would not cut spending any further just because a small deficit was forecast.

"We don't intend to alter our spending plans in response."

And despite the books looking like they will head into the red, the Government is loosening the purse strings - increasing their capital allowance for next year's Budget by $1 billion.

Mr English says some of that may come from the sale of surplus crown land in Auckland, but the Government might have to borrow some money.

"We're willing to incur a bit more debt as the Future Investment Fund has run out."

Looking forward into the next financial year, Treasury is predicting slow economic growth in the first half of the year.

While El Niño had previously been identified as just a risk to the economy, Treasury is now assuming it will have a negative impact.

Treasury secretary Gabriel Makhlouf said the agricultural sector would likely suffer as would hydro-electric production.

That means more bad news for dairy farmers although it is expected dairy prices will recover modestly.

"The New Zealand economy is not just about dairy," he said.

The Green Party says instead of aiming for a surplus, the Government should have been focused on fixing the economy, creating jobs and cutting pollution.

"Whether or not the Government is in surplus doesn't really mean a lot to most families, who are more worried about being able to afford a decent home or joining the 151,000 New Zealanders who can't find a job," co-leader Metiria Turei says.

While capital spending was the right way to improve the economy, it needs to be targeted at the right things including the Auckland City Rail Link and to build foundations for a low-carbon economy.

Labour's finance spokesman Grant Robertson believes the Government hasn't properly tackled the unemployment rate.

"The number of additional jobs forecast in the budget for this financial year has been slashed from 42,000 to just 7000. All the while wages will remain screwed down for most New Zealanders." Mr Robertson says now the "surplus sideshow" is over, National should put people first.

"No one can declare our economy a success when the Children's Commissioner tells us today that one third of children live in poverty.  We must put poverty eradication as a core economic and social goal of the Government."

3 News