Government flush with tax cash, surplus of $5.5 billion

The Government is awash with cash, recording a surplus of $5.5 billion - $2.4 billion more than forecast. 

The 2017/18 financial books have been opened and a major tax haul of $80.2 billion has left the Government flush. 

But Finance Minister Grant Robertson is warning about risks like international trade wars and mycoplasma bovis or other biosecurity incursions which could eat into the surplus. 

The tax take is up $4.6 billion on last year and Mr Robertson isn't ruling out tax cuts.

"I don't think we're awash with cash, the situation is the Government's books are in good order... I'm not taking anything on or off the table today. I'm asking the Tax Working Group to look into tax."

To nurses and teachers who have been embroiled in tough pay negotiations with the Government, Mr Robertson maintains the Government has put fair offers on the table.

"We have made an offer to teachers that is an appropriate offer," he said.

"All New Zealanders, including nurses and teachers, can be confident the Government is managing the books carefully. It is important to have money set aside for the classic rainy day and we know, for instance, these accounts don't include expenditure for mycoplasma bovis."

Tax revenue is so high because more people are working and paying tax, more people are spending and paying GST and corporate tax revenue was also up thanks to a growth in company profits.  

News of the Government's chocka coffers comes as the Prime Minister faces increasing pressure to cut or freeze excise on petrol. The revenue from petrol excise tax is $1.9 billion and that's not taking into account the 3.5c increase that came into effect on October 1. That increase is expected to earn the Government about $100 million more and despite the books showing the Government has a wealth of cash to splash, Mr Robertson is holding the Prime Minister's line refusing to ease taxes on petrol. 

"Making a one-off decision like that I don't believe is responsible," he said.

Wages are also up - the hourly pay rate by 3 percent to $31 and unemployment is down slightly by 0.3 percent to 4.5 percent.

What you need to know:

  • 1,580,200 people are employed - up 3.7 percent
  • The average wage is $31 an hour - up 3 percent
  • Unemployment is at 4.5% - down 0.3 percent
  • Core Crown tax revenue is $80.2 billion - up 6.1 percent
  • Core Crown expenses are at $80.6 billion - an increase of $4.3 billion
  • The largest increase in core Crown expense was in the Health Sector - up $900 million.
  • Net core Crown debt decreased in both nominal terms and as a share of the economy to $57.5 billion. 
  • Nominal GDP is at $289.3 billion - up 5.5 percent
  • Real GDP grew 2.7 percent

There are some major issues the government's facing which could cut into the surplus rainy day fund. 

Risks include trade wars, mycoplasma bovis, Kiwifruit disease, Earthquake claims and firefighting foam.

The cost of the mycoplasma bovis response hasn't yet eaten into the government's surplus but Treasury is bracing to pay out from the surplus for compensation in next year's budget. It's not sure how much, according to the Financial Statements "due to the complexity and uncertainty of the amount of these claims the amounts are unquantified". 

The Government's also bracing for backlash from the kiwifruit vine disease. Around 210 growers have filed a claim against the Ministry for Primary Industries alleging it is liable for damages. The plaintiffs have not quantified their losses, but have publicly claimed it is in the vicinity of $380 million, citing total industry losses of $885 million. Court proceedings are ongoing.

Some Canterbury insurance disputes are still ongoing so the outcome of proceedings can't yet be reliably costed.

Investigations are underway into contamination from the historic use of a specialised firefighting foam around airports, Defence Force bases and fuel shortage facilities. Once a response into how to manage the impact of the foam is made, it is possible the Crown may incur costs, however the Financial Statements say these costs can't be estimated.


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