Balanced accounts a boost for Joyce

Scott Mason.
Scott Mason.
The black line in the Crown accounts will give Finance Minister Steven Joyce some comfort as he prepares to release his first Budget on May 25.

Mr Joyce, facing his first election as Finance Minister and campaign manager, will have some room to move to sway voters, despite calling for careful spending in the past.

His statement yesterday spoke only about New Zealand being one of the few developed countries presently running a fiscal surplus.

The accounts were released by the Treasury yesterday. They reported an operating balance before gains and losses (obegal) of $1.5billion for the nine months ended March, well up from a forecast surplus of just $147million.

The higher figure was a result of higher than forecast tax revenue and lower than forecast core expenses, Jayne Winfield, from the office of the Government Accountant said in a statement.

Core tax revenue was $527million higher than forecast for the nine months and $3.7billion (7.3%) higher compared to the previous corresponding period.

Corporate tax continued to be the largest driver of the favourable result at $673million ahead of forecast.

''This increase was across both provisional and terminal tax, indicating profits in the 2016 year were higher than forecast and that it had continued into the 2017 tax year.''

GST was $145million below forecast mainly due to lower than expected residential investment.

This offset the strong corporate tax result.

The operating balance, which included the market gains made by ACC and New Zealand Superannuation fund, was nearly $11billion.

This was up from the $4billion surplus provided in December by the Treasury.

The Government is expected to make a few more pre-Budget announcements in the expectation Mr Joyce will introduce some changes to New Zealand tax thresholds to help people on low and medium incomes.

That will provide tax cuts without actually cutting the tax rate.

Crowe Horwath Australasia managing tax partner Scott Mason said the $1.5billion surplus was in many ways good for ''NZ Inc'' but a challenge for the Government.

Voters probably saw the surplus an opportunity for increased expenditure, albeit on a targeted basis.

That was where it got complicated; how to prioritise? Had the time passed for tax cuts, or how did the Government target such at a wide base to include everyone? Was increasing a social benefit a more targeted way?

In terms of actual expenditure, beyond debt repayment, everyone had an opinion, he said.

''Think of it this way. Your kid asks for a fancy new bike. If you don't have the cash available - as has been the case for some time - it is much easier to say: 'Sorry, but we just can't afford it. You'll have to settle for a second-hand one'.''

However, the household income had increased, and then you were asked the same question, Mr Mason said.

No longer could you simply brush it off with the same answer.

Now, there was a need to rationalise on the basis of all the other things you could do with the same money, such holidays, more food, debt repayment and a new car.

It was much more complicated.

''Try having that conversation with 4.4million kids all wanting a different toy. That is the practical and political challenge when you have a Government in surplus,'' Mr Mason said.

Mr Joyce said the accounts were a tribute to the hard work done by all Kiwis during the last three years.

''These accounts show if you have a strong economic plan and stick to it, you can achieve real progress.''

Neither Labour, the Greens nor New Zealand First responded to the release of the Crown accounts and the increased surplus.

 

Add a Comment