Sticking to plan

August 20, 2014

The Pre-election Economic and Fiscal update (Prefu) shows that National has the government’s books back on track to surplus.

 
Under National we’re on track to surplus, more jobs and higher incomes. ntnl.org.nz/1w34xEk #Working4NZ

 

But it’s wafer thin and Treasury Secretary Gabriel Makhlouf was blunt about the need for continued discipline:

. . . Forecast to grow at an average of 2.8 per cent over the next four years, Makhlouf said this was “above its sustainable long-term capacity to grow”, meaning inflationary pressure on the economy was building with a strong residential housing market in Auckland and Christchurch.

“It underlines, among other things, the importance of fiscal restraint in a growing economy,” Makhlouf said. . .

New Zealand has had an unfortunate history of going from bust to short-lived boom.

Only by continuing to keep a tight rein on spending will growth be sustainable.

Labour and the Green Party are already pledging to spend $28 billion. If they’re in government there will be expensive policies from New Zealand First, Internet Mana and which ever other party or parties they need to cobble together to get a majority.

Only a National-led government will keep on track to deliver sustainable growth and provide the social and environmental dividends that will enable.

 

On track for surplus. Keep National working for New Zealand. #3moreyears


PEFU – on track to surplus

August 19, 2014

New Zealand is on track to Budget surplus this year, backed by good growth, more jobs and higher incomes under the Government’s economic programme, according to Treasury’s Pre-election Economic and Fiscal Update issued today.

“The Pre-election Update confirms New Zealanders have the opportunity to build on their hard-won gains of recent years – providing we stick with the Government’s successful programme,” Finance Minister Bill English says.

“Now is certainly not the time to put New Zealand’s good progress at risk with more taxes and sharply higher government spending.

“The forecast Budget surplus for this year is still modest at $297 million and the forecast surpluses in subsequent years are not large – and yet we already have political parties making expensive promises and commitments.

“We saw how this approach damage New Zealand under the previous Labour government, when the spending proved unsustainable and we went into deficit. The economy collapsed into recession before the global financial crisis, cost of living increases soared above 5 per cent and floating mortgage rates reached almost 11 per cent.”

The Pre-election Update confirms the outlook for New Zealand’s economy and the Government’s books have not changed significantly since the Budget in May.

“Some of the drivers of growth are expected to be a little stronger than forecast in the Budget, while others have weakened a little,” Mr English says.

The latest Treasury forecasts include:

The Government’s operating balance before gains and losses is expected to be in surplus by $297 million in 2014/15 – down from $372 million in the Budget forecasts. Surpluses in each of the following three years will be smaller than forecast in the Budget.

Core Crown expenses are forecast to fall to 30.3 per cent of GDP by 2015, down from 35 per cent of GDP in 2011.

Because residual cash deficits continue for a year longer than forecast in the Budget, net government debt is expected to fall below 20 per cent of GDP in 2020/21 – when contributions are now scheduled to resume to the New Zealand Superannuation Fund.

Annual average GDP growth for the year to March 2014 was 3.3 per cent compared with the 3 per cent Budget forecast. Growth for the year to March 2015 is forecast to be 3.8 per cent (compared with the previous 4 per cent forecast) and then largely in line with previous forecasts.

There were 83,000 more New Zealanders in jobs in the year to June 2014. Treasury’s Pre-election Update forecasts another 151,000 new jobs will be created by mid-2018. 

Unemployment is forecast to fall to 4.5 per cent by 2018 – down from 5.6 per cent in the June quarter of this year.

In the two years to March, the annual average wage has increased by around $3,000. The Treasury forecasts it will increase further by around $6,600 to $62,000 by mid-2018.

“So on all of the key indicators, the Pre-election Update confirms that New Zealand is on track and heading in the right direction,” Mr English says.

“The economy is making good progress and public agencies are delivering better services in areas that really matter to communities – such as lower crime, higher educational achievement and more New Zealanders moving from welfare into work.

“While this progress is encouraging, we have more work to do. Should we have the privilege of being re-elected, the National-led Government will maintain a busy programme of policy reform aimed at supporting more jobs and higher incomes for New Zealanders.”

The Pre-election Update is available at: http://www.treasury.govt.nz/budget/forecasts/prefu2014

Pre-election economic and fiscal forecasts

(The last column doesn’t fit the page, if you click the link at the top you’ll find it).

We have Ruth Richardson to thank for the PREFU which ensures no government can fudge the figures for electoral advantage.

The PREFU shows the country is still on track to surplus and it is on the right track with other economic indicators.

It also shows the need for a continuation of careful management with no room for big spending and anti-growth tax policies.

Staying on the right track requires the right government which is the centre-right National-led one.

A left government will put us on the wrong track and take the country backwards.


Prudence best recipe for sustainability

August 15, 2014

Trans Tasman previews next weeks PREFU:

. . . What the PREFU will highlight are Treasury forecasts on economic growth remaining robust, but “normalising” after the dairy boom last season, and on fiscal surpluses thinner than those set out in the budget.

There’s no windfall in revenue as there was in 2005 when the Govt of the day, caught by surprise, scrambled to splash out big spending programmes like Working for Families. The economic situation NZ finds itself in during this cycle is very different. Then credit growth was running at around 10%, compared with 4% now, inflation was high, and consumption was fuelled by rampant debt. This time round, the Reserve Bank Governor Graeme Wheeler jumped in early, and has got the surge in house prices under control. Inflation is subdued, wage growth is only moderate, productivity is rising, households are keeping their spending in check, and corporate balance sheets are in good shape. 

So the cycle this time will have a flatter, steadier profile, but growth will be at a sustainable pace, lasting longer. The economy is growing another “leg,” with hi-tech exports rising exponentially. For the Govt, the aim is to keep the economy running on a smooth, upward trajectory. Its eyes are on winning not just this election, but in 2017 as well. For this to be achieved, it has to deliver rising standards of living through the whole cycle. It can’t yet risk another boom-bust, of the kind which has dogged NZ over the last half century, if is to capitalise on the reputation it has sought to nurture of being the most prudent economic managers the country has had in the modern era. . .

The improving outlook for the country has been hard-won and is a result of careful management.

The expected outlook for growth at a sustainable pace and lasting longer is encouraging but it’s not assured.

We know what a National-led government has achieved and can be confident they will continue with the same prudent recipe to ensure that growth is sustainable

A prospect of a weak Labour Party leading a coalition propped up by the Green, New Zealand First and Internet Mana Parties gives no cause for confidence.

Policies announced so far are repeating the failed recipe of the past based on the toxic ingredients of  higher taxing, higher spending.


They should’ve fessed up about ACC shortfall

March 3, 2009

The Ministerial inquiry into the $1.5 billion shortfall in the ACC accounts has concluded that it ought to have been revealed in the PREFU.

The report found the shortfall in the Non-Earner’s Account was known to ACC, the Department of Labour, Treasury, ACC Minister Maryan Street and Finance Minister Michael Cullen in time for it to be disclosed as a fiscal risk in the Pre-election Fiscal Update.

“The previous government knew about the funding hole and effectively hid it. There are systems in place to protect us from this, but in this case they did not work,” Finance Minister Bill English said when issuing the report today.

The PREFU is supposed to ensure that no incoming government is faced with nasty fiscal surprises as National was in 1990, but what use are laws if they’re ignored?

According to the report, Treasury’s rules for the fiscal risks section of the Pre-Election Fiscal and Economic Update did not always reflect the provisions and intent of the Public Finance Act.

“Treasury secretary John Whitehead has advised me that Treasury accepts responsibility for the part it played in this error and is committed to acting on the report’s recommendations,” Mr English said.

Treasury accepts responsiblity, but what about the politicians? Will Michael Cullen do a mea culpe too or will he just take refuge in the lines he gave when asked about the shortfall in December:

“I’m the Treaty negotiations spokesman,” Dr Cullen said.

“I have no intention of re-engaging in those areas.”

He and Street have been named in the report. Helen Clark wasn’t but does anyone seriously believe she wouldn’t have known about this too?

Cullen and Clark are retiring from politics but Street isn’t. If she doesn’t accept some responsibility for what is effectively a lie to the public and show contrition for it how could we trust her in future?

But then how can we trust any of these people when they seem to think ethics is just a county in England?


Cullen culling himself?

February 25, 2009

A party ousted from government after three terms needs to cull some of those who’ve been there, done that and will be blamed for doing it,  if it’s to present new faces and fresh direction at the next election.

Those who don’t  go voluntarily face the ignomy of a public ousting of the dead wood, as happened with National after 1999.

The Dominion Post reports that Michael Cullen  is not waiting to be culled and is planning to step down in the next couple of months.

There is no doubting his intelligence and wit, but the latter was sometimes harsh and I think his reputation as a prudent Finance Minister was ill founded.

New Zealand was in recession months before most other countries and he must bear some of the responsbility for that because of the policies of over taxing and over spending.

He and his colleagues sqaundered the good economic years of the noughties. We’ve been paying for that with restricted growth for years and the bill will get bigger.

The ACC  blowouts ought to have been in the PREFU and he left other financial timebombs in expenditure promised but not budgeted for on top of reckless spending such as the purchase of St James Station at an inflated price which has left the Nature Heritage Fund’s coffers all but empty.

In December Bill English identified gaps in the budget he inherited including:

* $1 billion for the insulation fund agreed to with the Greens in the last few months of the last government (though this was flagged as fiscal risk in Treasury documents).

* Only $8 million was set aside in 2009/2010 as part of the ongoing $600 million promised in the budget for the growth of the Ministry of Foreign Affairs.

* Other spending had been “creatively funded” such as the $40 million to buy the St James Station which was funded by “cleaning out” the Nature Heritage Fund for the next four years.

* The need for unbudgeted government payments to ACC would also “unexpectedly” increase government debt by $1.2 billion over the next four years.

Keeping Stock reminded me of the train set Cullen bought. The multi-thousands of hecatres of land expensively purchased through tenure review and now in the DOC estate are another monster he’s created with an appetite for taxpayers’ dollars.

He apologised for the quip he made in his maiden speech about getting stuck in to farmers:

 “I’m proud of the fact that my secondary education was not paid for by the taxpayers of New Zealand but by the farmers of Canterbury and Hawkes Bay [he was given a scholarship to Christ’s College]. I ripped them off for five years then, and I shall get stuck into them again in the next few years.”

But his actions speak louder than his words. His rich prick  sneer at John Key was just one of many examples which show he resented wealth and didn’t understand wealth creation. He got stuck into not just farmers but all taxpayers and we’re all the poorer for that.


Fresh approach needed

October 7, 2008

Bill Enlgish said the figures in yesterday’s PREFU were worse than National expected.

“We are currently digesting them. However, National is not content to run a decade of deficits.

“Slamming the brakes on at this point would make things worse. The way out is to control the growth of government spending and grow the economy. That will require a fresh approach.”


The PREFU isn’t pretty

October 6, 2008

Thanks to Ruth Richardson we don’t have to wait until after the election to find out the state of the nation’s books.

She is responsible for the requirement to have a pre-election economic and fiscal  update (PREFU) so we all know that the fair weather Finance Minsiter has left the cupboard bare.

The executive summary  says:

We are now expecting weaker economic growth over the next few years, resulting in slower growth in tax revenue and higher government expenditure. Combined with increases in the costs of some existing policies, these factors lead to sustained operating balance deficits and higher debt-to-GDP ratios.

 

The economic outlook is weaker …

Imbalances have built up during nearly a decade of sustained growth, including inflation pressures, an overvalued housing market, high household debt and a large current account deficit, with implications for interest rates and the exchange rate. With the economy slowing, these imbalances are starting to unwind – as are imbalances in the global economy – but there is a long way to go.

 And who will we trust to take us there? The academics who helped get us into the mess by focussing on redistribution, or the business people with the knowledge and skills to get us out of it with policies which focus on growth.

Other views:

Keeping Stock, No Minister,  Kiwiblog and No Right Turn


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