Surplus swells to $7.5 billion as Government collects more in tax on wages

Finance Minister Grant Robertson is describing the economy as "in good shape" as the Treasury announced a surplus of $7.5 billion - the highest since 2008.

The surplus is $4 billion ahead of the forecast in Budget 2019, but the variation is largely due to one-off factors that are not likely to continue over time, such as $2 billion from the revaluation of rail assets.

The Crown accounts for the year to June 2019 show the Government's books are up $2 billion from last year due to strength in the economy and a change in the way KiwiRail is valued.

The Government's books also show corporate profits, employment and wage growth were higher than expected in Budget 2019, with tax from wages up 7 percent.

This contributed to tax revenue coming in 2.1 percent above forecast.

"It's important that we don't talk ourselves into a downturn just because it suits some people's negative narrative," Robertson said on Tuesday.

"Unemployment, interest rates and Government debt are all low, giving the economy a solid platform to keep growing and face any global headwinds."

Robertson said the prospect of tax cuts for New Zealanders is a decision for the next Budget and looking ahead to the 2020 election.

"I am not seeing any evidence New Zealand is heading towards a recession... the New Zealand economy is still growing."

He said he doesn't see any need for "emergency-style tax changes".

Where the Government is struggling is in district health board (DHB) deficits, and general high expenses for state-owned enterprises (SOEs), but those expenses are almost balanced out by higher revenue growth.

These contributed to a $3.6 billion increase in expenses. 

The Finance Minister said the Government's books show "businesses are investing, employing more workers and paying higher wages, while at the same time reporting stronger profits".

He said it's a "timely reminder" that New Zealand's economy is growing faster than the likes of Australia, the UK, Canada and the European Union.

KiwiRail, a state-owned enterprise, now has its assets valued based as a public benefit entity, taking into account the benefits that it provides at a community level, rather than a purely profit-oriented entity.

"A valuation for the rail freight network that only reflected its cash-generating potential was no longer appropriate," the Treasury said in its Financial Statements.

The change in the way KiwiRail is valued has meant it's now worth $2.3 billion more, resulting in a $5.3 billion increase in the rail freight network's value.

KiwiRail was given a $1 billion boost in Budget 2019.

What you need to know:

  • Surplus - $7.5 billion, up $2 billion compared to 2017/18.
  • Net debt - 19.2 percent of GDP, down from 19.9 percent
  • Tax revenue - 2.1 percent above forecast
  • Unemployment - 4.1 percent, down 0.3 percent
  • Inflation - 1.7 percent - up 0.2 percent
  • Average pay - $31.84 per hour - up 3.5 percent
  • Real GDP grew 2.6 percent