By Nick Mann | 16 May 2013
New Zealand will post a $75m Budget surplus in 2014/15 and reduce its debt to 20% of gross domestic product by 2020, finance minister Bill English said today in his Budget speech.
One of the government’s key priorities is ‘responsibly managing’ the finances, he added. Although a $6.2bn deficit is forecast in the year to the end of June, rising tax revenues and continued spending restraint mean this is expected to fall to just over $2bn in 2013/14 before returning to surplus as planned the next year.
‘The fiscal outlook has improved markedly as a result of the government’s sound management and we are on track to post a surplus in 2014/15,’ English explained.
He added: ‘We are achieving this while still spending $5.1bn on new initiatives in the current year and over the next four years in Budget 2013 – funded, in part, by reprioritising existing spending.’
Additional new spending will now be $900m in 2013/14, and not the $800m forecast in last year’s Budget, but theallowance for new spending will then be $1bn in 2014/15, and not $1.2bn as originally planned. It will then increase by 2% of GDP a year.
‘This change to future allowances will mean bigger surpluses and a greater ability to pay down debt, English said.
‘In addition, new capital spending in this and the next three Budgets will continue to be funded from the Crown’s balance sheet, including from the proceeds of the government’s share offer programme.’
Government spending, which peaked at 35% of gross domestic product two years ago, is expected to fall to 31% in 2014/15 and then remain well below that level.
Debt, meanwhile, is expected to peak at 28.75% of GDP in 2014/15, but then fall to 17.6% by 2020/21, in line with the government’s target.
‘This is a remarkable turnaround in the books,’ English said. ‘Projections in Budget 2009, for example, showed that if the government had maintained the spending track it inherited, and hadn’t made policy changes, net debt would exceed 60% of GDP by the early 2020s.
He noted, however, that a ‘lot of work’ was needed to make the forecasts a reality. While New Zealand’s debt was still well below most of the countries it compared itself with, it was still increasing by $130m a week.
‘So the government is firmly focused on capping, then reducing, its debt,’ he said. ‘And, alongside debt reduction, future surpluses will also give us more choices. These choices will include, for example, investing in public services, reducing costs on businesses, and helping families get ahead.’
