By Bernard Hickey
Finance Minister Bill English has unveiled an earlier than expected move back to surplus and lower borrowing requirements for the next four years.
The move back to surplus is partly funded by net spending cuts of NZ$1.2 billion over the next four years. They include widely telegraphed moves to halve the government’s member tax credit contributions to KiwiSaver, tweaks to Working For Families payments and slight changes to Interest Free Student Loans.
But most of the improvement in the deficit and borrowing track is driven by GDP growth forecasts for the next four years of 1.8%, 4.0%, 3.0% and 2.7%.
Over the last three years since the Global Financial Crisis the government’s growth forecasts have overestimated growth by 2-3% of GDP. See my opinion piece on how this budget is 'tweaking and fiddling' rather than fixing a structural budget deficit.
Here are the highlights from the budget:
· The budget operating deficit before operating gains and losses (OBEGAL) is forecast to be NZ$16.7 billion in 2010/11 (8.4% of GDP), before falling to NZ$9.7 billion (4.7%) in 2011/12, NZ$4.1 billion (1.8%) in 2012/13, NZ$0.7 billion (0.3%) in 2013/14 and a hitting a surplus of NZ$1.3 billion in 2014/15. This is one year earlier than expected in December and two years earlier than expected if the government had not restricted spending after the February 22 earthquake.
· Treasury is forecasting growth of 1.0% in 2010/11, 1.8% in 2011/12, 4.0% in 2012/13, 3.0% in 2013/14 and 2.7% in 2014/15.
· The government is cutting spending by NZ$5.2 billion over 5 years, but is redirecting NZ$4 billion to health and education. The net spending cuts are worth NZ$1.2 billion over five years.
· The NZ Debt Management Office plans to borrow a net NZ$15.9 billion over the next four years, which is NZ$2.5 billion less than forecast in December.
· The government plans to raise NZ$5-7 billion over 3 to 5 years from part privatization of Meridian Energy, Genesis Energy, Mighty River Power and Solid Energy, along with a sell down of the government’s stake in Air New Zealand. See Alex Tarrant's article here for more detail.
· KiwiSaver member tax credits will be halved to NZ$10/week and the minimum contribution from employees and employers will be increased to 3% from 2% from April 2013. This will save NZ$2.6 billion over 4 years. See Alex Tarrant's article here for more detail.
· The government will look at a one-off KiwiSaver automatic enrollment exercise (with an opt out arrangement).
· Working For Family tweaks will save NZ$448 million over 4 years, while Student loans changes will save NZ$277 million over 5 years. See Alex Tarrant's article with more details on Working For Families changes.
See my opinion piece on what the budget means for borrowers, savers and home owners.
63 Comments
This from the NZDMO:
"The New Zealand Debt Management Office (NZDMO) announced today details of the Government’s 2011/12 domestic debt programme. The NZDMO intends to issue up to $13.5 billion of bonds in 2011/12.
“Bond issuance has peaked with this fiscal year’s $20 billion bond programme” said Mr. Philip Combes, Treasurer NZDMO. “Pre-funding and Budget 2011 initiatives have reduced overall future borrowing programmes from 2011/12 compared to the December forecasts”.
In coming weeks the NZDMO intends to launch a new nominal 2023 bond maturity. Further details will be announced prior to the first tender of the bond.
The NZDMO remains committed to issuing a 20 September 2025 inflation-indexed bond. This would form part of the 2011/12 bond programme.
Finally, to further promote liquidity in longer bond maturities, the target tranche size for nominal bonds maturing on or after 15 December 2017 has been increased from $10 billion to $12 billion.
The target tranche size for nominal bonds maturing in April 2013 and April 2015 remains at $10 billion."
Yep, I can't see where the investment will come from to achieve these projections. We're now in the zone of requiring a substantial uplift in business and consumer confidence to deliver. The conspiracy (sorry I meant collaboration) of the polllies and banks to inspire us to go out and borrow to spend won't happen this time. Major smoke and mirrors activity expected from now until Nov 26th.
Here's a few points about our country that you will never hear on the television news;
1. Public expenditure is so huge that its totally out of proportion to our earnings.. Our Gummit begs, steals and borrows over $85 billion and yet our GDP is just $189 billion. The $85 billion budget is called a "zero" budget... hmmm. Got a calculator??
2. Governments are consumers, they produce nothing. They don't create jobs, they don't create wealth, they are a burden on our economy and society.
3. The only taxpayers that actually count are 1.7 million workers in the private sector. These workers plus businesses support the remaining 2.7 million others. If NZ were to star on the TV reality show "Survivor", just 4 people out of an island of 10 would be working to support the rest. If the island were democratic and socialist then those 4 workers would be outvoted every time they wanted change.
Dooesn't our tax money get used by governments to produce roads, health, education and so forth -- all stuff needed by private business to operate and for people to enjoy and be fulfilled by life?
In your drivel about 4 workers supporting all the others, aren't you ignoring the unpaid housework that goes into supproting those workers. How many of those 2.7 million are of working age, how many are children, how many retired?
Public health costs us 8% of GDP it fairly effectively capped in terms of cost....
in America its 18% of GDP and within a decade its going to be 36% of GDP unless its brought under control....
So sure I could pay the Govn or I could pay a private health insurer double the amount and maybe not get covered, this is frankly only something stupid ppl would agree to.
Education....it costs about $6k per annum to educate a child in a NZ public school, or I could spend $12k to $15k per annum doing so in a private school.....it makes no sense, and in fact isnt doable by a family that isnt bringine in well over $100k to do so and thats one child...
Democracy, Simple then go buy your own island and run it as you choose.
regards
Nothing in the budget for Muppets then... :-( Bit surprised really, I thought our PM was one of your lot ;-) ;-D
Re: PositiveMoney
See this comment:
Bruce Wright June 22, 2010 - 6:20 pm | Link to this commentI honestly find it hard to believe this will go anywhere. The Bank of England is at the root and center of the entire system of world wide fiat currency, which is the cause of the problem. But, I am listening, and hopeful. You’ve apparently got part of it correct. The banks should not be in charge of printing out money. But I don’t see the real issues properly addressed. Our money must be backed up by tangible assets; not created out of thin air. And, most important, it is imperative that the ‘rule of fractional reserves’ be abolished. Quite simply, those two issues are the backbone of their control over us.
I expect an announcement on a revised immigration policy ....the gates will be opened up to all and any with the loot to hit the property sector running. It will be sold as a drive to build on the numbers with skills in the building sector and related thingees. Bit of hype ,mixed with spin BS and poodle media comments to arrive at the product....
Wish I could SHORT bill english with long term puts. You would clean up and never worry about margin or the bills again....
Its a sure fire winning trade...he must be thinkin energy prices are dropping to pre 1999 prices in his faulty projections oil at 20 per barrel and petrol $1 per litre in the near future...
Without cheap plenetiful energy Bills budget is quackery economics...
Energy makes the world go round Bill not printed fiat currency.
Actually hard commodities will make the world go round, obviously this includes energy sources.
JP Morgan in collusion with the Pentagon have sent a team of bankers to Afghanistan in an attempt to secure the countries gold reserves, who would have though eh. You have the supply of opiates secured for sale of heroin and use by Big Pharma for their own profits, now bankers looking to plunder precious metal reserves.
So much for fiat currencies then hey! You can just see what direction this is has been heading for some time, and it is not one NZ can insulate itself from in any way. This includes mining, because we will not be in a strong position to negotiate royalty contracts once we are declared broke!
"...relies on strong economic growth..."
It's not even in the small print. Does anybody pay attention to what's brewing OUTSIDE of lil' New Zealand? The planet is facing the biggest monetary failure ever and the news hasn't arrived in NZ politics yet? Amongst the noise of the breakdown I already can hear the naive bunch talk down their ineptitude, "nobody could have seen THAT coming". Well, yeah, duh! They are the same specialists who were stumped by 2008. They think NZ is an island! None of them looks beyond NZ borders. Maybe too scary? Maybe too unfathomable? We rather immerse ourselves in our perpetual Kindergarten of bread and games and Kiwiana polliticking, all the while being jerked by the debt noose we sheeple are all too eager to wear, feeling almost proud to be part of the global flock. We don't want to miss out, do we? One has standards, not? Strong economic growth, growthth, yeth, -th, umm.....
Agree...
Throw in that Treasury didnt see it coming, when it was blindingly obvious, seriously under-estimated how bad, have been significantly off since then, but now oh my god expect robust growth....Like man just hang them first.......
regards
PS Bernard.....8% interest rates? that needs some recovery.....pigs might fly...
agreed
we are an insular little cesspool
The rare occasion that I watch one of our national news channels I am shocked by the smug insularity, the cheesy nationalism etc. I mean we still only bloody show the weather for NZ. How about Aus and the Paciifc? I went to the Paciifc islands last week and it was a bloody mission finding the weather forecast. We are lucky if we get more than about 5 mins international news
And the economists are no better than the pollies. They keep smugly proclaiming renewed growth seemingly oblivious to the troubles around the world
Gummy, all any thinking person wants is the facts and truth. If you expect to get it after what has been decades of lies & spin and BS globally by governments, corporations and supported by the media then you are living under a palm tree on a nice beach ;).
Seriously you say you want the facts, but just where are you going to get them from and how will you ever know you have the facts. Use of words like conspiracy etc are arrogant, as they imply that you know everything to such an extent that all others are wrong.
Sadly the truth and facts are seen as nothing more than an inconvenience to be wrapped in lies and marketed to the slaves
Kate said " who's behind the op to get rid of the IMF guy ? "
......... Are there any facts to substantiate this assertion that there is an agenda to dipose Dominique Strauss-Kahn ?
Or is it simply that he got liquored up and forced himself physically upon a hotel chambermaid .
Yes of course it could well be that he has been caught out completely this time and will be allowed to swing. It happens from time to time at the highest levels, and the protective blanket of the judicial systems designed to punish the plebs, occasionally has to be used publically against such individuals. We will see if he to what degree his protection has been removed. It’s all just chess GBH and we are the pawns.
I was not looking to answer Kates initial question, my reply to you was more find out where you intend to get the facts from, of which the answer is still pending…
Its the 'Spineless gutless budget.
Anyway I see Japan is in Trouble
http://www.telegraph.co.uk/finance/economics/8522690/Japan-plunges-back…
As are the rest of us as `greece implodes.
http://www.guardian.co.uk/commentisfree/2011/may/17/greece-debt-crisis-…
And the USA slips into the mire
comment on the USA job market...
http://scepticalmarketobserver.blogspot.com/2011/05/dynamics-of-unemplo…
Political crap at the end but otherwise its interesting...adds to the view of a recession in the US....oil price led I think....so its likely this is how the next decade (or two) will play out....oil price goes high, result recession, oil priice drops on weak demand, recession drop corrected after huge Gov stimulus and does a slow recovery...oil price shoots up and back down again...rinse and repeat....and repeat....
and JK thinks we will recover.....its a bad gamble IMHO.
regards
National digging the hole left by Labour. Now you know why Labour doesn't want to take office. Making promises to win power was the big 08 mistake. Clark and Cullen have all but escaped the blame for the shite left behind.
Sorry, but Treasury are smoking the green stuff on this 'growth projection' game. The govt has rushed to cling on to this puff of smoke. The chances of success are remote at best.
So you had best place your bets knowing now what is most likely to happen.
Meanwhile English has dragged out the 170ooo new jobs promise for a second go.....it's all bullshit. Exports are running at max right now on a commodity boondoogle Bernanke cooked up to save the US banking corruption...the piigs are set to bugger the euro.....beijing is in the middle of inflation and bubblemania....the aussie property collapse is underway.....
While I mostly agree Wolly, HC etc cant take a lot of the blame when thats what voters wanted.......what conventional "wisdom" read right wing ideology said was good....and if HC etc didnt agree we git a downgrade....simple....
I agree on Treasury being crack adicts btw.....they need cleaning out of their ppl who cant think for blinkers....if Treasury thinks it will take 8 to 10% of its resources to dell off the SOE's simple, when Labour gets in, first off decimate them and keep the SOE's...
regards
For F's sake! What the voter wanted!!! What does the voter want? Bread and games and they don't even realize that they are a NY chamber maid.
Clark was the biggest traitor on NZ economical sovereignty by signing for the big boys the FTA with China. The short-sightedness of Labour (and Nats are not better) will cost NZ dearly in years to come. The little production base we had is going going gone. All is left is being a supply farm for their masses of peasants, dragging us down to their level.
And the grading is synonymous with the grading of sheeple. The rating agencies are the agents of the bankster elite. Gosh, we are so happy that we are graded useable for the shear.
George Soros sells his gold George Soros, the hedge fund investor who called gold "the ultimate bubble", has sold almost his entire holding of the precious metal, leading to fears that the price is about to fall. http://www.telegraph.co.uk/finance/personalfinance/investing/gold/85245…
And on the Greek troubles
jonlivesey 3 minutes ago "The European Central Bank has threatened to stop lending to banks using Greek
government bonds as collateral if Athens changes the terms of the debt.."
Just a bit of pedantry here, but it's actually worse than this. It's not just "Greek
government bonds" that the ECB would refuse to accept, but also Greek Government *guaranteed* Bonds.
In the past year, the Greek Banks have been in the habit of issuing Greek Government guaranteed Bonds and then lodging them with the ECB to obtain liquidity. In the past twelve months Greek Bands have issued E87bn of these Bonds which are *in* *addition* to debt issued by the Greek Government itself.
These Greek Government guaranteed Bonds have thus become the main source of funding for Greek Banks. Without them, we'd have seen a run on Greek Banks that would probably already have brought the Greek Banking system down. If the ECB refuses to accept them as collateral in the future, the Greek Banking system really will collapse, so this is a very potent threat. It is a gun to the head of the Euro area. It's the ECB spelling out the consequences of a default.
And for what it's worth, Irish Banks have been raising liquidity in the same way, and the ECB has been accepting Irish Bonds as collateral while ignoring their rating. Normally the ECB accepts bonds only if they have an investment grade rating, but it made an exception for Irish Bonds. So the same gun is pointing at Ireland's head if it follows Greece to default. http://www.telegraph.co.uk/finance/economics/gilts/8524454/European-Cen…
I see the Euro debacle used and trumped up by American interests. Without the mire in Euroland the US dollar would have long collapsed by now.
But Euro is supported by Chinese interests who dump their dollar reserves into Euroland. It'll all wash back. The $ chicken are returning to roost. The pen will Hyperinflate.
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