Simply subtract ACC from ABEGAL and add an x for the Christmas miracle of a surplus (but not for a few more years)
Finance Minister Nicola Willis put a brave face on things – aided and abetted by the deft application of accounting cosmetics – after the publication of the Half Year Economic and Fiscal Update this afternoon.
She issued two statements, one of them to say that lifting the productive capacity of the economy is the key to realising the country’s potential, the other to announce the Government is adopting a new financial indicator and a new approach to capital allowances.
The Taxpayers’ Union seized on the second announcement to declare:
Now we know why Nicola Willis’s office seem to have worked with Treasury to change the criteria of experts able to attend the HYEFU lock up: it seems she didn’t want the CTU, the Taxpayers’ Union, or other experts who would normally attend these things holding her to account for a Grant Robertson-style sleight-of-hand in how OBEGAL is calculated.
RNZ reported:
The opening of the books at Treasury on Tuesday revealed a bleak economic outlook, and a convenient new measure to improve that picture.
Finance Minister Nicola Willis has adopted a new financial indicator to measure the operating balance before gains and losses (OBEGAL). The result is the Crown reaching a surplus sooner than it will under the current measure once it removes ACC deficits from the picture.
In her media statement, Willis said:
“Since 2008, governments have used OBEGAL to communicate their short-term fiscal strategy operating targets.
“However, in recent years, this picture has been increasingly coloured by ACC’s deficits, which reached $4.1 billion in 2023/24.”
The ACC was a long-term insurance scheme set up mostly to be fully funded, supported by a current asset base of around $50 billion, Willis noted.
Its annual financial results were not relevant to government tax and spending decisions in the near term.
“Therefore, the Government has decided to establish a new operating balance measure – OBEGALx – that is based on OBEGAL but excludes ACC revenue and expenses. This is to avoid incentivising unnecessary and unhelpful short-term decision making.
“Ministers should not be raising taxes or reducing public spending to compensate for ACC deficits in pursuit of a short-term surplus target.”
The OBEGAL result will continue to be reported alongside OBEGALx and other fiscal indicators in the Treasury’s economic and fiscal updates and financial statements.
Willis’ explanation for another OBEGAL measure was among several new ministerial statements posted on the government’s official website in the past 24 hours
The Taxpayers’ Union seized on the second announcement to declare:
Now we know why Nicola Willis’s office seem to have worked with Treasury to change the criteria of experts able to attend the HYEFU lock up: it seems she didn’t want the CTU, the Taxpayers’ Union, or other experts who would normally attend these things holding her to account for a Grant Robertson-style sleight-of-hand in how OBEGAL is calculated.
RNZ reported:
The opening of the books at Treasury on Tuesday revealed a bleak economic outlook, and a convenient new measure to improve that picture.
Finance Minister Nicola Willis has adopted a new financial indicator to measure the operating balance before gains and losses (OBEGAL). The result is the Crown reaching a surplus sooner than it will under the current measure once it removes ACC deficits from the picture.
In her media statement, Willis said:
“Since 2008, governments have used OBEGAL to communicate their short-term fiscal strategy operating targets.
“However, in recent years, this picture has been increasingly coloured by ACC’s deficits, which reached $4.1 billion in 2023/24.”
The ACC was a long-term insurance scheme set up mostly to be fully funded, supported by a current asset base of around $50 billion, Willis noted.
Its annual financial results were not relevant to government tax and spending decisions in the near term.
“Therefore, the Government has decided to establish a new operating balance measure – OBEGALx – that is based on OBEGAL but excludes ACC revenue and expenses. This is to avoid incentivising unnecessary and unhelpful short-term decision making.
“Ministers should not be raising taxes or reducing public spending to compensate for ACC deficits in pursuit of a short-term surplus target.”
The OBEGAL result will continue to be reported alongside OBEGALx and other fiscal indicators in the Treasury’s economic and fiscal updates and financial statements.
Willis’ explanation for another OBEGAL measure was among several new ministerial statements posted on the government’s official website in the past 24 hours
Latest from the Beehive
17 December 2024
The Government is adopting a new financial indicator and a new approach to capital allowances, Finance Minister Nicola Willis says.
Lifting the productive capacity of the economy is the key to realising New Zealand’s potential, Finance Minister Nicola Willis says.
Associate Justice Minister Nicole McKee has welcomed Cabinet’s decision to undertake public consultation on the rewrite of the Arms Act 1983.
The Government has today confirmed a 50 per cent reduction to the annual charge for forest owners participating in the forestry Emissions Trading Scheme (ETS), Forestry Minister Todd McClay announce
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The wider disability community will have their say early next year on how the Government should deliver disability support services that are fair, consistent, transparent, and sustainable.
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The adult minimum wage rate will increase by 1.5 percent to $23.50 an hour from 1 April 2025, Workplace Relations and Safety Minister Brooke van Velden announced today.
Health Minister Dr Shane Reti is again reminding New Zealanders that violence against patients, visitors and health workers won’t be tolerated, with additional security for hospital emergency departments across the country this summer.
16 December 2024
It will soon be easier to get things built in New Zealand due to the actions delivered by the Government as part of our Quarter Four (Q4) Action Plan, Prime Minister Christopher Luxon says.
The Government has agreed to reforms that refocus local councils on delivering essential services and core infrastructure, spending responsibly, and operating under greater scrutiny.
Besides introducing another OBEGAL measure, Nicola Willis has changed the Multi-Year Capital Allowance.
She recalled that the rolling four-year MYCA had been introduced by the previous government in 2019 to give governments more flexibility to move funding forward or back between Budgets to support a longer-term view of capital investment.
But instead of supporting more considered investment decision-making, this had created opportunities for Ministers to make large annual increases to the MYCA and immediately commit them.
“In Budget 2023, for example, the previous government topped up the MYCA by $17.6 billion and committed $17.4 billion in that Budget alone, leaving only $3.1 billion in the MYCA to cover new capital investments in the following three Budgets.”
This Government has, therefore, decided to discontinue the MYCA framework. It will set capital allowances for each Budget in the forecast period, with flexibility to vary them according to the circumstances at the time.
But the Taxpayers’ Union focused on the OBEGAL change in a statement headed
Now We Know Why Nicola Willis Didn’t Want Experts In The Room: Changes OBEGAL Calculation To Appear Less Irresponsible
“This is the Finance Minister equivalent of cooking the books,” says James Ross, Policy and Public Affairs Manager at the Taxpayers’ Union.
“Nicola Willis is guilty of manipulating the fiscal indicators in the same way then Opposition Finance Spokesperson Nicola Willis jumped up-and-down about when Grant Robertson changed the way Net Core-Crown Debt was calculated to make the numbers look better in 2022. But at least Grant Robertson had the excuse of coming into line with international precedent.”
“The fact is, despite the Government being elected on a platform of cutting spending, Nicola Willis continues to spend even more than Grant Robertson, and kick the fiscal can down the road. Changing measures, or banning those pointing out the elephants in the room, doesn’t avoid the fact Nicola Willis is not doing what she was elected to do.”
RNZ headed its report
HYEFU revealed: Nicola Willis deploys convenient new measure amid bleak books
The report said Willis pointed out that, if OBEGALx had been adopted before this year’s Budget, earlier forecasts would have shown a $166 million surplus in 2026/27.
That is not achievable so the government is pushing its OBEGALx surplus out to the 2027/28 financial year.
Willis has defended the surplus being pushed out saying: “the hill we have to climb is steeper than it was a year ago”.
She attributes this to unrealistic and overly optimistic outlooks by Treasury, which are now being unwound.
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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