Govt books show rising surpluses, falling debt

Treasury’s latest forecasts show rising surpluses and falling debt as the Government maintains its careful management of public spending, Finance Minister Bill English says.

“This is our eighth Budget and the books are in good shape.”

“We turned an $18.4 billion deficit in 2011 into a $414 million surplus last year, but a tight rein on spending is still required to start repaying debt.”

Treasury’s latest forecasts show the Government is on track to meet its target of reducing net government debt to around 20 per cent of GDP by 2020.

Modest operating balance before gains and losses (OBEGAL) surpluses are expected in 2015/16 and 2016/17, increasing to a forecast $2.5 billion the following year, and $6.7 billion in 2019/20.

“Stronger-than-expected economic growth in 2015 plus Treasury’s positive outlook for the economy means the Government’s revenue is up considerably across the forecast period compared to the Half Year Update,” Mr English says.

“The surplus target helped us turn the Government’s books around. Now our focus is shifting to debt repayment to ensure New Zealand is well placed to deal with future economic shocks or natural disasters.”

Some spending previously earmarked for Budget 2017 has been brought forward, so net new operating spending in Budget 2016 has increased to $1.6 billion per year. This recognises pressures from higher population growth, and opportunities to invest in core public services and economic initiatives.

As in previous years, Budget 2016 includes reprioritisation of lower-value spending. An additional $480 million per year of new spending has been funded by operating savings.

In addition, the Budget 2017 allowance has also been reduced by a further $400 million per year to help repay debt.

Spending continues to be much smaller than under the previous Government, whose eighth and ninth Budgets, for example, contained an average of $4.3 billion a year of new operating initiatives.

Net capital investment in infrastructure and other public assets is $1.4 billion – less than the $1.7 billion allowance set at the Half Year Update.

However, additional new capital spending will be funded from capital recycling within the Crown’s balance sheet. As a result, total new spending on capital in this year’s Budget is $2.6 billion.

“These changes reduce Budget allowances for new spending by $1.2 billion over the next five years, helping to further reduce debt while still investing in public services,” Mr English says.

“A higher allowance in Budget 2016 means the Government can invest in public services, addressing the long-term drivers of social dysfunction to reduce long-term spending pressures.

“Helping people make lasting improvements to their lives also drives long-term improvements in the Government’s books.”