CONTINUEThis site uses cookies. By continuing to browse this site you are agreeing to our use of cookies. Find out more.
  1. Front Page
  2. News By Topic
  3. New Zealand Determined To Return To Surplus

New Zealand Determined To Return To Surplus

by Robert Lee,, London

01 May 2012

New Zealand's 2012 Budget will aim at ensuring the government remains on track towards securing a budget surplus in 2014/15, a challenge which will require tight control over spending for the foreseeable future, the Finance Minister Bill English has said.

In a recent speech to the Wellington Employers’ Chamber of Commerce, English said that: “It’s important that we return to surplus because New Zealand is one of the most indebted countries in the world as measured by our net international investment position." He added that the country must rebuild a "buffer" in anticipation of a further global crisis, emphasizing that "surpluses give us choices we simply don’t have while we’re running deficits.”

English explained that preliminary Budget estimates received by ministers have highlighted the scale of the challenge facing the government. The estimates revealed a NZD1bn (USD822m) deterioration in preliminary forecasts of the operating balance before gains and losses in 2014/15, compared to the government's own Budget Policy Statement. The result is a predicted CAD640m deficit, rather than the CAD370m surplus projected by the government in February. Lower revenue expectations and the impact of lower global growth are contributory factors in this downward revision, together with higher than expected finance and earthquake costs.

In spite of these issues, English stressed that "ministers remain focused on staying on track to surplus in 2014/15... They are making decisions to achieve that. As a country, we can’t afford to spend money we don’t have.” To this end, the government will run "very close to a zero Budget", with little new net government spending to 2014/15. Existing expenditure will be reprioritized, to ensure better public services, and revenue-enhancing measures, such as fairer tax treatment of employee benefits, new rules for mixed-use assets such as holiday homes, and a new approach for livestock valuation, will be continued. NZD1bn of public sector savings will be made over the next three years, beginning on July 1, 2012.

English also signalled that the Budget will propose changes in the Public Finance Act, to introduce more checks and balances on ministers’ spending decisions and their long-term effects. He said that while the current Act, which is designed to ensure a high degree of public reporting and transparency, has served New Zealand well, the global recession has pointed to the need for a broader focus. The proposed changes would require the government to consider the impact of their fiscal strategy on the broader economy, in particular interest rates and exchange rates, and to set out their priorities for revenue, spending and the balance sheet, rather than focus narrowly on debt as is currently the case. In addition, governments will in future need to take into account the impact of fiscal policy decisions on future generations and report the successes and failures of past fiscal policy.

“So you can see that this government is serious about getting back to surplus by 2014/15", English concluded.

TAGS: tax | fiscal policy | public sector | budget | New Zealand

To see today's news, click here.


Tax-News Reviews

Cyprus Review

A review and forecast of Cyprus's international business, legal and investment climate.

Visit Cyprus Review »

Malta Review

A review and forecast of Malta's international business, legal and investment climate.

Visit Malta Review »

Jersey Review

A review and forecast of Jersey's international business, legal and investment climate.

Visit Jersey Review »

Budget Review

A review of the latest budget news and government financial statements from around the world.

Visit Budget Review »

Stay Updated

Please enter your email address to join the mailing list. View previous newsletters.

By subscribing to our newsletter service, you agree to our Terms and Conditions and Privacy Policy.

To manage your mailing list preferences, please click here »