Finance Minister Grant Robertson is talking down rosy Crown account numbers, cautioning they might not remain as upbeat in coming months.
The Treasury’s financial statements for the Government in the 11 months to May 31 paint a picture of healthy Crown books.
At $73.5 billion, tax revenue was $300 million above forecast and the Government’s surplus came in at $400 million higher than the projected $5.2 billion in May.
The Crown Accounts showed net core Crown debt was $57.5 billion – $1.1 billion lower than had been forecast.
This works out to be 20.1% of GDP – just 0.1% higher than the Government’s 2022 target.
Although pleased with most of the numbers, Robertson is cautious.
“We have to be a little bit careful with those projections – there can be some reversing back and [they] may increase a little bit in future months depending on the amount of revenue and the amount of expenditure that the Government has,” he told reporters.
In the House, he said the Treasury noted the figures had some variants within the sources due to a “timing issue.”
“[These are] set to reverse out in June, putting the accounts back in line with Budget forecasts,” he said.
On debt, Robertson said the Government had no intention of revising its target, regardless of how close it is to 20%.
As net debt is measured as a proportion of GDP, it is possible for the Government to take on more debt and stay on track to meet its target. GDP just needs to continue to increase.
The economy is expected to continue growing at an average of 3% per year, according to the Treasury, meaning the Government could have some extra money to spend.
And what would the Government do with this extra money? Robertson has indicated the focus would be infrastructure.
“We have a lot of things we want to do over the coming years, particularly in terms of significant infrastructure expenditure,” Robertson said.
According to the Global Infrastructure Hub, New Zealand is facing an annual shortfall of almost 0.3% of GDP on infrastructure investment in transportation, telecommunications, electricity and water services.
This is expected to translate into a cumulative gap of 9.5% of GDP by 2040.
“That is the kind of thing we should be using debt for is to help improve our productivity. Infrastructure is an incredibly important part of that,” Robertson said.
17 Comments
There has been a significant drop in confidence in the past few weeks, businesses are nervous, the banks are nervous. This will flow through to consumers. With fewer transactions flowing through the financial system, profits fall, and bad debts rise. Most of my business associates see similar activity. I suspect this will be reflected in further business confidence reports that are published over the coming months.
Fundamentally Yvil, business does not like uncertainty. The CoL through major policy changes are doing this in spades.
Just yesterday I met with a major bathroom renovator to do some work on our home, expecting that they would not be able to do the work until later this year. They have no work, and can start next week.
Auckland prices falling, equates to a massive reduction in domestic activity. How long that goes on is anyone’s guess.
Whether the CoL know it, they are likely the only ones stimulating the economy. Whether this is KB, infrastructure build, or whatever.
Most economies ramp up public works during recession. The CoL may very well have created an “own goal”, and imposed a rescession on the nation.
I’m not losing sleep, we have a solid bs, and will park cash for a rainy day. Not sure everyone can do this.
This is repeating, not reporting. As Kane02 (alias John Galt?) notes upthread, business has considerable latitude to move expenditures and timings around. The Hon FM is just perhaps getting an inkling of what Falling Confidence can actually do to those scrambled-together Projections.
To continue the series:
TWI - 72.52, Treasury BEFU assumption 'around 75'
WTI - 73.90 Treasury BEFU assumption 'around 60'
With due respect to Mr Robertson, it is goi g to be very difficult for Grant to manage the country’s finances as he has no real experience with finances!
Think we should go easy on him as there is no one else in the government that has any experience as far as I Know that could do any better.
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