The PREFU can be interpreted to support this party – or that one – but in the upshot, whatever will be will be
There was nothing new, when Point of Order checked out the government’s official website around noon, but Finance Minister Grant Robertson has posted good news since then.
At least, he shared with us the best of the news in the Pre-election Economic and Fiscal Update, released today.
He said it shows New Zealand’s economy is turning the corner with projected growth that means no recession, wages ahead of inflation and more people in work, even as the impact of challenging global conditions and the North Island Weather Events weigh on the Government’s books.
And he highlighted (after appropriate cherry-picking, presumably) these points:
“Our economic plan to support New Zealanders dealing with the cost of living while investing in building a stronger, more resilient and inclusive economy is working.”
The economy was 2.9 per cent bigger than a year ago and close to 7 per cent larger since the start of the pandemic in 2020, Robertson said, and the number of people in work had risen by 113,000 in the June year, which is 69,000 more than forecast in May’s budget.
Unemployment is forecast to remain below the long-term average of 5.8 per cent – peaking at 5.4 per cent before declining to 4.6 per cent at the end of the forecast period.
Wage growth will outpace declining inflation (according to the forecasts) meaning household budgets will stretch further.
Robertson noted the blows that had been struck by forces beyond his control:
“The economy is turning a corner, but the challenges remain very real. New Zealand continues to feel the ongoing ripples of the 1-in-100 year economic shock from the global pandemic. Earlier this year, the country also experienced its second largest natural disaster.
“This has been reflected in the Crown accounts. While core Crown tax revenue was $3.9 billion higher than last year, it was $2.9 billion behind where Treasury had forecast it to be in May’s budget. Since May we have seen a further deterioration in the global economy, particularly in China, which will continue to have a direct impact on the New Zealand economy.”
In this uncertain environment, the Government had continued to respond to ensure it met its balanced and responsible fiscal goals of a surplus in the forecast period and net debt below the limit of 30 per cent of GDP.
It had acted swiftly in response to the deteriorating economic picture through its Fiscal Sustainability and Effectiveness Programme that found a further $4 billion savings on top of the $4 billion found in May’s Budget.
The deficit is forecast to fall from a peak of $11.4 billion in the current year to a surplus of $2.1 billion in 2026/27, a year later than projected in the Budget in May.
Over the next four years, Treasury is forecasting real government consumption to decline on average by 0.2 per cent a year which will help ease inflation pressures.
Net debt is projected to peak at 22.8 per cent of GDP in 2024/25 and fall to 21 per cent of GDP by the end of the forecast period.
Robertson likes to remind us that New Zealand’s debt levels continue to compare favourably to the countries we often compare ourselves with.
According to the IMF. in 2023 net debt will reach 36 per cent in Australia, 95 per cent in the UK and 95 per cent in the US.
He said:
“Our continued focus on careful and prudent financial management is even more important as we know the North Island Weather Events will have a sizeable impact on the Government’s finances in coming years’ as we support the communities and regions affected with the recovery and rebuild. The Treasury estimates the costs of asset damage from the floods and Cyclone at between $9 billion and $14.5 billion, with half of that related to central or local government such as roads.
“Over $2 billion of support has been committed so far for the response and recovery from the North Island Weather Events. Another $6 billion in initial funding has been committed for a National Resilience Plan to focus on the longer term response, including meeting $1.7 billion in cost-sharing agreements with councils and future-proofing roads and other infrastructure such as flood protection, telecommunications and electricity networks.”
The government’s responsible financial management meant it has the capacity to meet the impacts of extreme weather events and future challenges, Robertson said.
He referenced the major credit ratings agencies crediting NZ with having debt levels among the lowest in the world and well below the Government’s debt ceiling of 30 per cent.
And he noted that Treasury’s long-term projections show surpluses are maintained on average over the period, while net debt is projected to continue declining to 9.2 per cent of GDP.
Then he brought political considerations into his statement – we owe the good news to his and his government’s economic management:
“The PREFU shows New Zealand remains resilient in the face of challenging conditions thanks to the Government’s economic plan. We are striking a balance between supporting New Zealanders with cost of living pressures and investing in strong public services and a resilient infrastructure network while carefully managing our resources to ensure the long term sustainability of the economy.”
And then some advice to voters:
“New Zealanders have the opportunity to build on the hard-earned gains of recent years with a balanced economic plan that will deliver high wages and greater economic security as we transition to a low emissions future. This is not the time to put that at risk with dubious tax promises that will fuel inflation and deep cuts in the public services that New Zealanders rely on,” Grant Robertson said.
Point of Order then turned to the contents of the PREFU, a 161-word document you can find on the Treasury’s website.
The first six paragraphs of the Executive Summary (leaving aside the table of key indicators) comprise 602 words.
The Treaty of Waitangi, a document which contains just three articles, runs to fewer than 580 words in English.
But the Treaty and the PREFU have something in common. They can be interpreted to support and/or justify whatever narratives, policies, programmes or ideologies the politicians want to promote.
The Treaty calls for a “partnership;” between the Crown and Māori, says the Hipkins Government and all others who champion the notion of a 50:50 sharing of power. This in turn calls for much greater co-governance.
No, it does not, the Government’s many critics insist.
One thing is for sure. The Treaty makes no mention of “partnership” or of co-governance.
The Pre-election Economic and Fiscal Update, published today, similarly is being brandished to uphold the contrasting election programmes and policies of the main political parties.
The headline on the press statement from Finance Minister Grant Robertson says:
The headlines on the statements from other parties say:
Point of Order is a blog focused on politics and the economy run by veteran newspaper reporters Bob Edlin and Ian Templeton
And he highlighted (after appropriate cherry-picking, presumably) these points:
- Economy to grow 2.6 percent on average over forecast period
- Treasury not forecasting a recession
- Inflation to return to the 1-3 percent target band next year
- Wages set to grow 4.8 percent a year over forecast period
- Unemployment to peak below the long-term average
- Fiscal Rules met – Net debt to peak at 22.8 percent of GDP in 2024/25 and return to surplus in forecast period (2026/27).
“Our economic plan to support New Zealanders dealing with the cost of living while investing in building a stronger, more resilient and inclusive economy is working.”
The economy was 2.9 per cent bigger than a year ago and close to 7 per cent larger since the start of the pandemic in 2020, Robertson said, and the number of people in work had risen by 113,000 in the June year, which is 69,000 more than forecast in May’s budget.
Unemployment is forecast to remain below the long-term average of 5.8 per cent – peaking at 5.4 per cent before declining to 4.6 per cent at the end of the forecast period.
Wage growth will outpace declining inflation (according to the forecasts) meaning household budgets will stretch further.
Robertson noted the blows that had been struck by forces beyond his control:
“The economy is turning a corner, but the challenges remain very real. New Zealand continues to feel the ongoing ripples of the 1-in-100 year economic shock from the global pandemic. Earlier this year, the country also experienced its second largest natural disaster.
“This has been reflected in the Crown accounts. While core Crown tax revenue was $3.9 billion higher than last year, it was $2.9 billion behind where Treasury had forecast it to be in May’s budget. Since May we have seen a further deterioration in the global economy, particularly in China, which will continue to have a direct impact on the New Zealand economy.”
In this uncertain environment, the Government had continued to respond to ensure it met its balanced and responsible fiscal goals of a surplus in the forecast period and net debt below the limit of 30 per cent of GDP.
It had acted swiftly in response to the deteriorating economic picture through its Fiscal Sustainability and Effectiveness Programme that found a further $4 billion savings on top of the $4 billion found in May’s Budget.
The deficit is forecast to fall from a peak of $11.4 billion in the current year to a surplus of $2.1 billion in 2026/27, a year later than projected in the Budget in May.
Over the next four years, Treasury is forecasting real government consumption to decline on average by 0.2 per cent a year which will help ease inflation pressures.
Net debt is projected to peak at 22.8 per cent of GDP in 2024/25 and fall to 21 per cent of GDP by the end of the forecast period.
Robertson likes to remind us that New Zealand’s debt levels continue to compare favourably to the countries we often compare ourselves with.
According to the IMF. in 2023 net debt will reach 36 per cent in Australia, 95 per cent in the UK and 95 per cent in the US.
He said:
“Our continued focus on careful and prudent financial management is even more important as we know the North Island Weather Events will have a sizeable impact on the Government’s finances in coming years’ as we support the communities and regions affected with the recovery and rebuild. The Treasury estimates the costs of asset damage from the floods and Cyclone at between $9 billion and $14.5 billion, with half of that related to central or local government such as roads.
“Over $2 billion of support has been committed so far for the response and recovery from the North Island Weather Events. Another $6 billion in initial funding has been committed for a National Resilience Plan to focus on the longer term response, including meeting $1.7 billion in cost-sharing agreements with councils and future-proofing roads and other infrastructure such as flood protection, telecommunications and electricity networks.”
The government’s responsible financial management meant it has the capacity to meet the impacts of extreme weather events and future challenges, Robertson said.
He referenced the major credit ratings agencies crediting NZ with having debt levels among the lowest in the world and well below the Government’s debt ceiling of 30 per cent.
And he noted that Treasury’s long-term projections show surpluses are maintained on average over the period, while net debt is projected to continue declining to 9.2 per cent of GDP.
Then he brought political considerations into his statement – we owe the good news to his and his government’s economic management:
“The PREFU shows New Zealand remains resilient in the face of challenging conditions thanks to the Government’s economic plan. We are striking a balance between supporting New Zealanders with cost of living pressures and investing in strong public services and a resilient infrastructure network while carefully managing our resources to ensure the long term sustainability of the economy.”
And then some advice to voters:
“New Zealanders have the opportunity to build on the hard-earned gains of recent years with a balanced economic plan that will deliver high wages and greater economic security as we transition to a low emissions future. This is not the time to put that at risk with dubious tax promises that will fuel inflation and deep cuts in the public services that New Zealanders rely on,” Grant Robertson said.
Point of Order then turned to the contents of the PREFU, a 161-word document you can find on the Treasury’s website.
The first six paragraphs of the Executive Summary (leaving aside the table of key indicators) comprise 602 words.
The Treaty of Waitangi, a document which contains just three articles, runs to fewer than 580 words in English.
But the Treaty and the PREFU have something in common. They can be interpreted to support and/or justify whatever narratives, policies, programmes or ideologies the politicians want to promote.
The Treaty calls for a “partnership;” between the Crown and Māori, says the Hipkins Government and all others who champion the notion of a 50:50 sharing of power. This in turn calls for much greater co-governance.
No, it does not, the Government’s many critics insist.
One thing is for sure. The Treaty makes no mention of “partnership” or of co-governance.
The Pre-election Economic and Fiscal Update, published today, similarly is being brandished to uphold the contrasting election programmes and policies of the main political parties.
The headline on the press statement from Finance Minister Grant Robertson says:
The headlines on the statements from other parties say:
- Labour’s economic mismanagement laid bare – National
- State of books makes clear case for wealth tax – Green Party
- Government Books Cry Out For Real Change – ACT
The advice from the Taxpayers Union was:
Maybe it has come. Maybe not.
But having waded through oodles of statistics and forecasts, Point of Order was drawn to this caveat at the end of the PREFU’s executive summary:
There are several risks to the economic and fiscal outlooks, the most significant of which includes how the economy evolves and how these flow through to revenue and spending pressures.
In other words, the Treasury’s experts are warbling something profound, which was sung by Doris Day many years ago: whatever will be will be.
And whatever that might be, it presents the greatest risk of all to the economic and fiscal outlook.
Sleep well, dear reader.
But having waded through oodles of statistics and forecasts, Point of Order was drawn to this caveat at the end of the PREFU’s executive summary:
There are several risks to the economic and fiscal outlooks, the most significant of which includes how the economy evolves and how these flow through to revenue and spending pressures.
In other words, the Treasury’s experts are warbling something profound, which was sung by Doris Day many years ago: whatever will be will be.
And whatever that might be, it presents the greatest risk of all to the economic and fiscal outlook.
Sleep well, dear reader.
Latest from the Beehive
12 SEPTEMBER 2023
The Pre-election Economic and Fiscal Update released today shows New Zealand’s economy is turning the corner with projected growth meaning no recession, wages ahead of inflation and more people in work, even as the impact of challenging global conditions and the North Island Weather Events weigh on the Government’s books.
Point of Order is a blog focused on politics and the economy run by veteran newspaper reporters Bob Edlin and Ian Templeton
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