Government predicts 'paper-thin' surplus

Finance Minister Bill English. File photo / Greg Bowker

The Government books are on track to deliver the promised surplus in 2014 - 15, but at $86 million, still a very small one despite improvements in the economy.

Finance Minister Bill English at the half-yearly update of Budget forecasts described as a "paper-thin" surplus and said it would still be a challenge.

The May Budget forecast a surplus of $75 million so the improvement is only $11m better.

But with growth forecasts set to peak at 3.6 per cent in the March 2015 year, the surpluses will grow in the following years to $1.7 billion, $3.1 billion and then $5.6 billion.

Mr English said that there was still a lot of work to do to make the forecasts a reality and the Government was this year still borrowing a net $78 million every week.

In dollar terms, net debt would peak at $64.5 billion in 2015-16.

Treasury Secretary Gabriel Makhlouf said there were still risks to the forecasts including the size of the Christchurch rebuild, net migration, terms of trade, the exchange rate, household savings behaviour, and potential global market turbulence.

According to the Household Labour Force Survey, 125,000 more jobs will be created between the September 2013 quarter and March 2017.

Mr English told reporters that New Zealand had a habit of making some progress, being energised by things like recessions and restructurings "and then as soon as there are some signs of progress in the past we have just put our feet up and decided that's good."

"Our approach is to be less drastic in policy change, more moderate but more persistent.

KEY POINTS

- On track for surplus in 2014 - 15 of $86 million.

- Surpluses in subsequent years forecast at $1.7 billion and $3.1 billion,

- Growth stronger in 2013 than expected, at an estimated 3 per cent.

- Growth expected to rise to 3.6 per cent in March 2015 year.

- Unemployment forecast to fall from 6.2 per cent to 5.8 in March 2014 year.

- Net core crown debt to peak at 26.5 per cent of gdp in 2014 - 15.

- Net debt forecast to fall to 16.9 per cent in 2019 -20