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The financial accounts for the six months ended December showed an operating balance before gains and losses (obegal) surplus of $9million compared with a forecast deficit of $666million. The favourable variance of $675million was largely due to the higher-than-forecast core Crown tax revenue and forecast Crown expenses.
Finance Minister Steven Joyce said a $9million surplus did not seem like a lot. But it was a significant milestone.
"This is the first time since 2008 the Government’s books have been in surplus halfway through the year."
The result was driven by a higher tax take and lower-than-expected expenditure.
"Now, I realise I only took over the portfolio at the start of December, but I don’t know how the previous finance minister [Prime Minister Bill English] made it look so hard."
It was still too early to be sure a surplus would be achieved in the current financial year, particularly given the costs associated with the Kaikoura earthquakes, Mr Joyce said.
However, surpluses were predicted to rise to $5.4billion by 2018-19 and, provided they came to pass, provided options for New Zealand as a country.
It was important those options were considered carefully. As Finance Minister, Mr Joyce said he believed it was important to focus on achieving value for taxpayers’ money in every investment made on their behalf.
In his first major speech as Finance Minister, Mr Joyce laid out four key areas he was thinking about in preparing for this year’s Budget.
Of note, Mr Joyce remained committed to reducing the tax burden and in particular, the impact of marginal tax rates on lower and middle-income earners when there was room to do so.
"It is very important to remember the money the Government spends comes from hard-working Kiwi families."
Other areas he was considering were delivering better public services, building the infrastructure needed in a growing economy and the reduction of debt as a percentage of GDP.
The Government had set a target of reducing net debt to about 20% of GDP by 2020 to make sure the country could manage any future shocks, he said.
Labour finance spokesman Grant Robertson said Mr Joyce had failed his first test with an uninspiring and empty effort in his first major speech.
"This was the opportunity for Steven Joyce to give New Zealanders some hope he had a plan for how they can get ahead. Instead we get a jumble of tired statistics and vague ideas."
The most definite thing Mr Joyce did was rule out a regional fuel tax for Auckland, even as a short-term solution, Mr Robertson said.In a statement, chief government accountant Paul Helm said core Crown expenses at $38.1billion were $303million lower than forecast.
The majority of it related to higher-than-forecast expected costs in relation to the Kaikoura earthquakes which had yet to be quantified with enough certainty to include in the actual results.
"Over time, as reasonable estimates are able to be made, these costs will be recognised in the actual results, reducing the variance."
Crown tax revenue was $313million, or 0.9% higher than forecast. GST revenue was $173million, or 1.9% above forecast and consistent with the higher-than-forecast growth in domestic consumption through the September quarter, he said.
There were net gains of nearly $6billon in the period, $2.9billion higher than forecast mainly due to gains of $3.1billion from the ACC liability.
The operating balance, which includes gains and losses, for the period was $6.1billion, $3.6billion higher than forecast.
New Zealand Taxpayers Union executive director Jordan Williams said the "healthy numbers" showed tax relief was both affordable and prudent.
"At the very least, May’s budget should adjust tax thresholds to bring them into line with inflation and changes in average income since National came to Government."
At a glance
• Crown surplus of $9 million for six months ended December
• First major speech by new Finance Minister Steven Joyce
• Tax cuts on the agenda for Budget 2017
• Labour calls Mr Joyce’s speech "a jumble"