Govt accounts in good shape as global risks increase

The latest Crown accounts show the Government’s financial position and New Zealand’s underlying economic fundamentals are in good shape, Finance Minister Grant Robertson says.

The Treasury today released the Crown’s financial results for the six months to December 2018. They show revenue and expenses within 0.4% and 0.9% of the Treasury’s forecasts, respectively, and a $1.1 billion OBEGAL surplus at 31 December.

“The surplus is used for capital investments and helps us keep Government debt under control. Net core Crown debt is near forecast at 22.1% of GDP, down from 23.2% a year ago. The forecasts show the Government is on track to meet the Budget Responsibility Rule of reducing net debt to 20% of GDP within five years of taking office,” Grant Robertson said.

“The volatile global situation shows why it’s important that we are managing the Government’s finances carefully by running surpluses and keeping expenses and debt under control.

“The International Monetary Fund (IMF) recently released revised global growth forecasts as risks including the US-China trade tensions and Brexit intensified. The IMF expects advanced economies to grow on average by 2% over 2019 and 1.7% in 2020, with the Euro area and UK below 2% and the US below 3%.

“New Zealand is in a good position to handle these threats. Our latest September quarter and annual average GDP growth of 0.3% and 3.0% are similar to Australia’s readings of 0.3% and 2.8%, and are solid when compared to the global backdrop.

“Our domestic economic situation is reflected in the Crown accounts. Corporate tax receipts in the six months to December were 9.8% higher than a year ago, highlighting strong underlying business fundamentals.

“The accounts also reflect New Zealand having one of the strongest labour markets in the OECD. The Treasury says social assistance payments came in $91 million below forecast in the six months to December, due to the strong labour market resulting in lower-than-expected benefit expenses.

“The accounts show we are maintaining a disciplined fiscal approach while making the investments that matter, including in public services like health, education, housing and police.

“We are also getting on with the job of transitioning away from traditional growth drivers like housing and population growth. Policies like the R&D tax incentive, PGF investments and skills programmes like fees-free, Mana-in-Mahi/Strength in Work and He Poutama Rangatahi are helping to modernise the economy and ensure it is fit for purpose for the middle part of the 21st Century,” Grant Robertson said.