Labour was forecasting a decade of deficits when National came to power five years ago today.
In spite of an unprecedented combination of financial and natural disasters, National has turned that round and is back on track to surplus.
Treasury’s financial statements for the September quarter, released today, show key indicators are stronger than forecast in May’s Budget:
Core Crown tax revenue of $14.4 billion was 1.1% higher than forecast, largely due to other individuals’ tax and GST ($143 million and $108 million respectively). While GST was relatively close to forecast, continued strength in gross other persons tax and lower than expected refunds have contributed to higher than forecast other individuals tax. This improved performance was partially offset by $113 million lower than expected corporate tax, due to lower than forecast provisional tax.
The total Crown’s operating balance before gains and losses (OBEGAL) was a deficit of $1.3 billion which was $382 million lower than expected, largely owing to the stronger than forecast core Crown tax revenue and lower than expected core Crown expenses.
Gains on the Crown’s investment portfolios were $781 million higher than expected, particularly the New Zealand Superannuation Fund. In addition, actuarial gains on the ACC outstanding claims liability arising from discount rate changes, resulted in unforecast gains of $812 million. The better than expected core Crown revenue and expenses result, alongside these stronger than expected gains, were the key reason for the total Crown’s operating balance inclusive of gains and losses recording a $539 million surplus, compared with an expected $1.2 billion deficit.
At 30 September, total Crown assets were $242.2 billion and liabilities were $171.7 billion. The Crown’s net worth strengthened to $68.5 billion.
The core Crown operating cash deficit was $2.8 billion. After taking account of capital expenditure during the year, there was a residual cash deficit of $3.7 billion at 30 September ($400 million below forecast). The cash shortfall was funded through additional borrowing which pushed the net core Crown net debt to $60.0 billion, equivalent to 28.2% of GDP. Gross debt was also close to forecast at $80.1 billion, or 37.7% of GDP. . . .
The Labour government that took us into deficit before the global financial crisis could not have achieved what National has.
National has the books back on track from red to black and that’s been managed without any slashing and burning.
Credit for that goes to John Key, Bill English and their colleagues who have focussed on getting more for less. Introducing whole-of- government purchasing to cut costs across the public sector is one of their initiatives.
They’ve also concentrated on reducing long term costs, such as those of benefit dependency and that will provide both financial and social benefits.
Once in surplus the government has choices and a priority must be reducing debt.