By Bernard Hickey
Finance Minister Bill English is set to reveal a slightly looser Budget for 2013/14 at 2pm, including discretionary net new spending up to an expected cap of NZ$800 million.
This contrasts with the last two 'zero' budgets where the government funded any new spending from savings in other areas as it battled to hit its targeted surplus by 2014/15.
Economists expect English will be able to forecast a surplus of around NZ$1 billion for the 2014/15 year, thanks to a firming growth outlook as the Canterbury rebuild kicks in and a new Auckland housing boom helps boost consumer spending and tax receipts.
The housing surge is set to be a focus of the budget with English hinting in recent days the budget will include fresh measures to try to control housing inflation in New Zealand's biggest city, which the Reserve Bank has warned could force it to hike interest rates sooner and create risks for financial stability.
"We believe this economy will not benefit from 12-15 per cent compound house prices in Auckland and it will be bad for the New Zealand economy, so we want to do what we can to minimise that," English told reporters as the budget was being printed in Petone yesterday.
Many of the smaller measures to add spending have already been pre-announced, including NZ$70 million over the next four years for dementia care, NZ$21.3 million for steps to fight rheumatic fever, NZ$158 million for tourism promotion and NZ$80 million for youth education. See the full list of pre-announcements here.
Housing Minister Nick Smith this week announced plans to spend NZ$377 million over the next three years extending state houses with pre-fab bedrooms.
Prime Minister John Key has also indicated "practical measures" to fight child poverty would also be announced in the budget.
The government is also expected to signal a more upbeat economic outlook, including expectations stronger tax revenues will help reduce the deficit in the current 2012/13 year to less than NZ$7 billion. See the Treasury's latest budget and economic forecasts from its Half Year Economic and Fiscal Update in December.
Meridian Energy float?
The other focus for investors will be an expected government decision to proceed with the float of Meridian Energy in October, before a Genesis Energy float next year.
It would raise around NZ$3 billion from the sale of 49% of the shares, almost twice as much raised in the Mighty River Power float.
Fears are growing, however, that it may be more difficult to raise the full NZ$3 billion through an open sale in one lump of the shares to individual and institituional investors in New Zealand and offshore. Stuff's Hamish Rutherford reported the government may choose to sell a smaller 24.5% stake this year and the rest next year, or sell via installment receipts.
Demand for the power generator shares have softened since the Labour/Green announcement in mid-April they would create a single power buying agency if they were elected into power in November 2014, effectively reducing profits and dividends. Mighty River's float price of NZ$2.50/share was less than originally expected and has edged down in recent days, closing at NZ$2.56 on Wednesday.
We will be publishing the key details in Budget 2013 shortly after 2pm as I am in the 'lock-up' in Wellington.
2 Comments
I predict that BE will make a less than significant contribution to more housing.
I suggest the elephant in the room is really a mal-distribution of ownership between investors and home owners. He will do absolutely nothing to shift the occupier ownership from 59% or less back to the 80% level that was satisfying to the population 25 plus years ago.
I would be interested in an economic analysis that removed the earthquakes' insurance proceeds (and the flow-on effects such as slashing the number of unemployed). That would give a better idea of the Government's fiscal management.
What I see is an unexpected windfall of $25-$35 billion being pumped into this country's accounts by the reinsurers over a decade or so. There are extra costs, but that $5 billion the government is footing can be seen as "advanced maintenance" for the country's second-largest city to be rebuilt and restructured, economically and socially.
Without Canterbury the rest of New Zealand would be a dead duck: the quakes came at just the time the GFC would have really started to hurt this country.
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