.....but ministers aren’t slowing down with their spending announcements
Revenue growth is slowing, we learned from our Minister of Finance today.
But that’s not going to stop his ministerial colleagues from pitching for public plaudits with their spending pronouncements.
Grant Robertson’s latest cheering comments on the state of the public accounts can be found alongside four announcements that may well call for more borrowing.
We will have to wait to see all the numbers on Budget Day, before we draw firm conclusions about what spending is doing do to the Budget deficit – and to an ominously widening balance of payments deficit. But:
- Climate Change Minister James Shaw says Budget 2023 will support funding for emissions reductions with a $300 million boost to New Zealand Green Investment Finance Ltd;
- Transport Minister Michael Wood – in a statement announcing the government is committed to reconnecting Coromandel peninsula as fast as possible – said so far it has supported 400 businesses with grants up to $40,000, provided tax relief for impacted businesses, and will continue to work alongside Thames Coromandel District Council to support businesses. Rebuild costs are being finalised, but the estimated cost is $30-40 million. It is being funded through the Government’s $250 million top-up to the National Land Transport Programme fund to support the recovery.
- Defence Minister Andrew Little announced Budget 2023 will invest over $419 million to boost the defence payroll and $328 million more in upgrading our Defence Force assets and infrastructure. to ensure we can better work with our partners to meet our commitments here, in the Pacific and abroad.
- And as this article was being written, Emergency Management Minister Kieran McAnulty announced the government will step up support for those affected by flooding in Auckland following Auckland Council declaring a local state of emergency.
Latest from the Beehive
The Government will step up support for those affected by flooding in Auckland following Auckland Council declaring a local state of emergency.
Budget 2023 will accelerate the uptake of low-emissions technologies across Aotearoa and help create new jobs and opportunities.
Moderation in economic activity is being reflected in the Government’s books, although New Zealand is still well positioned to deal with the challenges ahead, including the cost of living, the impact of recent extreme weather and the uncertain global economy.
The Government is committed to reconnecting Coromandel peninsula as fast as possible, Transport Minister Michael Wood announced today.
Budget 2023 delivers the biggest pay increase in over a decade for defence personnel, and builds on the Government’s record investments in upgrading New Zealand’s military capability.
With a general election looming, ministers are apt to be striving to woo the voters and to win favourable headlines. They won’t want to be associated with anything smacking of austerity.
That goes for Grant Robertson, too. He prefers to talk of “moderation” while assuring us the books are in good shape.
Moderation in economic activity is being reflected in the Government’s books, although New Zealand is still well positioned to deal with the challenges ahead, including the cost of living, the impact of recent extreme weather and the uncertain global economy.
For the nine months to the end of March, core Crown tax revenue was $2.3 billion below forecast.
This was partly offset by core Crown expenses being $0.7 billion below forecast.
Overall the Operating Balance before Gains and Losses (OBEGAL) recorded a deficit of $3.4 billion. That was $2.5 billion higher than forecast at December’s Half Year Economic and Fiscal Update and $4.7 billion lower than for the same period a year ago.
Grant Robertson nevertheless noted:
“It’s inevitable that the government’s books will be affected as the economy cools. We are doing our bit to restrain spending and responsibly manage our finances. The upcoming Budget has required tough choices as we respond to the deteriorating economic conditions.
“We will take a balanced approach that is responsible and looks after those who are the most effected by changing economic conditions and recent weather events.”
But Robertson drew attention to pressures on the spending side of the books:
“We have already taken action to lower costs for Kiwis and ease some of the pressures they are under. Over 1.4 million people are benefiting from significant income increases, including seniors, families, workers and students. The Winter Energy Payment is providing over a million people with cost of living relief on their electricity bills. We have extended fuel tax cuts and half priced public transport fares and made childcare affordable to more families. The cost of living will be a major focus in the Budget in a couple of weeks’ time.
“The Treasury has estimated the cost of asset damage from the floods and Cyclone at between $9 billion and $14.5 billion, with half of that related to infrastructure owned by central or local government such as roads. This will require significant planning and sequencing of resources over the months and years’ ahead, but we are committed to supporting those affected through the recovery and rebuild.”
Robertson said the government’s “careful and prudent financial management” means it has the fiscal headroom to meet the impacts of Cyclone Gabrielle and the challenges ahead.
He delights in reminding us that the government’s debt levels, at 19.1 per cent of GDP, are among the lowest in the OECD and well below the Government’s debt ceiling of 30 per cent.
The improved debt has been attributed to “favourable movements in the fair value of financial assets and liabilities”, including the NZ Super Fund.
But let’s wait and see the bottom line projected in the Budget on May 18 and the extent to which the outlook has been shaped by slowing economic activity.
Point of Order is a blog focused on politics and the economy run by veteran newspaper reporters Bob Edlin and Ian Templeton
1 comment:
That 19% of GDP is based on Grant Robertson's new valuation methodology introduced last year. This new method involves offsetting assets like the pension fund and state housing against debt. The assets were also revalued so will reflect top of the boom values no doubt. The many billions that he allowed government departments to borrow independently of crown debt aren't included. Imagine a business going for a loan and netting a revalued asset against another loan and saying there is no debt.
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