The plan is working

Critics of the government keep saying it doesn’t have an economic plan.

They’re deliberately not listening to the oft-repeated message on export led growth encouraged by higher savings, less debt and healthier government finances.

That has always been the plan and the Crown’s annual financial statement show the plan is working.

Higher tax revenue, lower core Crown expenses and a large fall in annual Canterbury earthquake expenses helped to halve the Government’s operating deficit before gains and losses to $9.2 billion in the year to 30 June 2012.

The Crown’s annual financial statements published today show the Government is continuing to manage its finances responsibly and getting on top of debt, Finance Minister Bill English says.

“It was important that we helped New Zealanders through the recession by maintaining government programmes and public services,” he says. “It was also important that we provided the financial resources needed to help the people of Canterbury after the earthquakes.

“That has meant running large deficits in recent years. However, that could not continue indefinitely. The consequences of too much government debt are all too clear in Europe and the United States, where we are seeing big cuts to public services and pensions, and higher taxes.

“The National-led Government does not want that for New Zealand. That’s why we’re running a balanced programme to build a competitive economy, to reduce the unsustainable growth in government spending of the previous decade, and to get back to surplus.

“The latest financial statements show the Government is making good progress, with the economy continuing to recover and public finances improving.”

In the year to 30 June, tax revenue increased by $3.5 billion from the previous year, as the recovering economy underpinned consumption and wages.

Core Crown expenses fell by $1.4 billion due to a number of factors, including costs associated with the Emissions Trading Scheme and the weather tight homes financial assistance package.

Outside the core Crown, as reported previously the value of KiwiRail’s rail-related assets was written down as a result of the company’s restructure. Some $1.4 billion of the $8.6 billion devaluation was recorded as an impairment expense in the latest operating statement.

Labour made several stupid decisions in its last term. Purchasing KiwiRail at a vastly inflated price was the most expensive and one for which we will all be paying for a very long time.

Overall, the operating deficit before gains and losses of $9.2 billion for the latest year compared with $18.4 billion the previous year.

When earthquake costs are excluded, the OBEGAL deficit was $7.3 billion in 2011/12, compared with $9.3 billion the previous year.

Net Crown debt increased to $50.7 billion (24.8 per cent of GDP), from $40.1 billion (20.3 per cent of GDP) the previous year.

“In the uncertain global environment, it’s important that the Government continues to focus on controlling its spending and improving the quality of existing spending so we deliver better public services to New Zealanders,” Mr English says.

“As I’ve said before, we have less control over our revenue – particularly with other parts of the world still struggling with high levels of debt and sluggish economies. This will have an impact on New Zealand.

“That is all the more reason for the Government to continue with the economic programme we set out at the last election,” Mr English says. “We are focused on taking New Zealand forward by building a more competitive economy based on higher savings, less debt and healthier government finances.

“That’s the only way we can create the jobs, higher incomes and opportunities for New Zealanders here in this country.”

In spite of what the Opposition might say, we can’t spend our way out of debt nor can we make matters better by meddling with the currency.

There are no quick fixes but higher savings, lower debt and continued restraint on public spending are the plan and that is, albeit slowly, leading us back to government surplus and economic growth.

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