Lower core Crown tax revenue than forecast in the Half-Year Update last month left the operating deficit before gains and losses at $2.34 billion for the five months.
This was about $400 million larger than forecast, although the Treasury believes most of this revenue difference was due to timing issues and will reverse out in coming months.
“We remain on track to surplus in 2014/15, but, as we have said many times before, this remains quite a challenge,” Mr English says.
“In particular, we need to remain focused and disciplined and now is certainly not the time to get loose with spending and fiscal policy – as some political parties are advocating.”
The latest financial statements confirm core Crown expenses are close to forecast at $29.2 billion and net core Crown debt is slightly lower than forecast at $59.6 billion.
Continued strength in world sharemarkets generated gains on Crown financial instruments of $2.8 billion in the five months, which was $2 billion ahead of forecast. This left the operating surplus $1.6 billion larger than forecast at $2.3 billion.
“Overall, we are making good progress in putting the Government’s finances on a stronger footing and in getting back to surplus,” Mr English says. “It will require responsible fiscal management well beyond our return to surplus – something this Government is committed to delivering.”
Sound fiscal management must continue and Prime Minister John Key emphasised this in his state of the nation speech yesterday:
. . . But that doesn’t mean the job’s done – in fact it’s just begun.
It’s vitally important that over the next few years we continue to build on the hard-won gains we are making as a country.
That includes a huge improvement in managing the country’s finances.
We have made careful savings, been disciplined with spending, and run the public sector far more efficiently.
That’s a lot different than the previous government, which increased spending by 50 per cent in just five years. That spending helped push mortgage rates to almost 11 per cent and crippled the internationally competitive parts of the economy.
New Zealand can’t afford that approach again.
The Government will get back to running surpluses next year. At first they will be very small but they will build up over time. There might be some room for modest spending or revenue initiatives, but the top priority has to be getting our debt down.
The Government has borrowed – on behalf of New Zealanders – around $50 billion over six years to get the country safely through a recession, the greatest financial crisis since the 1930s, and one of the most expensive natural disasters in history.
In better economic times we have to reduce that debt.
That will lift national savings, and help keep a lid on interest rate rises as the economy heats up.
We also have to lock in the improvements we are making to New Zealand’s economic settings. And we have to lock in the progress we are making in delivering better public services.
Those changes will continue to serve the country well.
New Zealand now has the opportunity to significantly improve its economic fortunes and provide a better future for New Zealand families.
We can achieve the long-term lift in economic performance that this country has aspired to for so long, providing we keep to our steady and responsible programme.
The alternative to locking in our programme of change is to go off into left field. And I really do mean left field. . . .
That’s the tax and spend left led by Labour and the Green Party.
Any utterances they’ve made show they’ve failed to learn from the failed policies of the last Labour-led government which put New Zealand into recession long before the financial and natural disasters the National-led government has had to handle.
We’re on track back to surplus but that’s only the beginning, Continuing careful management and debt reduction are necessary for the strong foundation the country needs.