Any pleasant “surprises on the upside” in the December Economic and Fiscal Update are unlikely, says Finance Minister Bill English.
Unveiling the Crown Accounts for the June 2010 year this afternoon at the Treasury, Mr English said the last two December updates had contained some upward revisions for both growth and the government’s operating balance.
“I think you can assume the half yearly update this December is unlikely to contain any positive growth or revenue surprises.”
The forecasts for the December update have yet to be completed, he said.
The accounts for the year to June, released today, show both core government spending and core revenue slightly down on forecasts.
The operating balance for the year (before gains and losses) was a deficit of $4.5 billion, against a forecast deficit of $5.7 billion.
Mr English emphasised the government is continuing to increase borrowing over the next few years and the debt will not peak until 2015 or 2016 to buffer the effects of the downturn and also to invest in assets such as infrastructure.
In cash terms, the New Zealand government has moved form a cash surplus of $2 billion in the 2007 year to a cash deficit of $13 billion this year.
Net debt is currently around $16 billion but it is “rising rapidly to over $60 billion. By international standards that is relatively low and should peak out slightly under 30%, all other things being equal.” It is currently 14.1%.
On the flat economic data released earlier today for the retail, housing and manufacturing sectors, Mr English said in many ways it was not a surprise, given the changes in New Zealanders’ financial behaviour over the past year.
New Zealanders now have a much more cautious attitude towards debt and are using any extra funds to pay off debt or save, he said.
The extent to which this has happened has been surprising.
“If you had asked me a year ago I would have said this sort of turnaround would be impossible.”
“But it does help explain that sense of flatness in the domestic sector,”