Better Crown accounts but restraint still needed - English

Finance Minister Bill English. Photo / Rotorua Daily Post.

A slight improvement in the Crown accounts is good news but Finance Minister Bill English says ongoing restraint is still vital.

Labour finance spokesman David Cunliffe said his party had played a role in the recovery.

Treasury today released figures for the five months ended November 30 that were better than forecast. It also said that December accounts to be released on February 19 will have extra tax revenue from a settlement of a tax dispute with four major banks.

So far the Government has recognised $1.4 billion of revenue from the dispute but a settlement for $2.2b was announced late last year.

The operating balance for the five months to November 30, taking out unrealised investment gains or losses, was a deficit of $3.71b, or 15.4 per cent better than the $4.38b forecast.

Treasury said the improved deficit was largely because of higher corporate and GST revenue, and reduced expenses.

The net operating balance was a deficit of $1.41b, $1.1b better than forecast, due to higher investment returns.

Net government debt stood at $22.73b, largely in line with forecast, or 12.3 per cent of gross domestic product.

The Government's net cash position, the difference between all income and spending - operational and capital - was a deficit of $5.28b compared with a forecast deficit of $5.12b.

Cunliffe said Labour's 2008 budget played a role in stimulating the economy and pulling back the fiscal deficit forecast of six years from a decade.

"In contrast, budget 2009 was essentially a holding operation, just deferring key decisions and throwing the full costs of future superannuation onto younger Kiwis."

Cunliffe said the finance minister had a dilemma.

"He wants to make deeper cuts to new spending and must convince Kiwis to forgo services at the same time that a strong recovery is under way.

"He will therefore be tempted for political reasons to play down the strength of the rebound and overstate the impact of the recession, but doing so will risk undermining the confidence New Zealanders need to invest and build for a brighter future."

English said the reality was the Government still faced another six years of budget deficits and was borrowing about $240m a week and that was expected to be required for the next four years.

"The best way - in fact, the only way - of getting on top of this significant fiscal challenge is to get the New Zealand economy growing and giving businesses the confidence to invest and create higher-paying jobs."

The Government was working on reducing red tape, was investing in infrastructure and would improve the tax system.

"Budget 2010 will clearly set out the next steps of that plan, so that the economy grows faster and creates opportunities for families to get ahead."

The accounts showed better-than-expected investment performances by the New Zealand Super Fund, ACC and EQC.

Cunliffe said the latest accounts showed the Government made the wrong decision to defer payments in the super fund.

"Figures revealed by the fund just last week show it has grown 17.44 per cent already this financial year.

"The Government's decision has cost us tens of millions of dollars, even without taking into account the cost of having to borrow in the future to pay for New Zealand Super because of what National hasn't put aside."

English made it clear there were no immediate plans to resume contributions to the fund or pull back from ACC levy increases.

"Monthly variations in the Crown's finances can reflect timing differences that are later reversed - and they need to be seen in the context of net core Crown debt rising from $17b in 2009 to a forecast $65b in 2014.

"The recession will continue to be felt on the Government's finances for some time. Anything we can do to shorten that process and get the economy growing faster will make a significant difference."

NZPA