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As Government surplus climbs to $7.5b, PM declines to say if tax cut will be considered

A “strong surplus and low debt” is how Finance Minister Grant Robertson is describing the country’s financial state as the Government's books were opened today.

The Government’s surplus has increased to $7.5 billion for the 2018/19 year, up by $2 billion from last year and $4 billion higher than forecast.

Net debt fell to 19.2 per cent of gross domestic product (GDP) from 19.9 per cent – decreasing further below the 20 per cent target promised in the Budget Responsibility Rules.

Despite the percentage decrease, net core Crown debt increased by $0.2 billion. It went from $57.5 billion in 2017/18 to $57.7 billion.

New Zealand money. Source: istock.com

“This year is a strong result,” Treasury secretary and chief executive Caralee McLiesh told media.

“The level of this year’s surplus is partly owing to one-off positive items,” the report stated. That included changes to the way KiwiRail was accounted for, giving a $2.6 billion boost to the books, and also an increase in tax revenue.

Mr Robertson said the $7.5 billion surplus was $4 billion ahead of the forecast at the last Budget, “and the largest surplus since 2008”.

“The surplus and low levels of debt show the economy in good shape. This allows Government to spend more on infrastructure.”

Mr Robertson said a significant amount had already been spent on schools, hospitals and transport, but there was “a great deal to be done”. However, he would not elaborate on future infrastructure projects the Government would invest in.

Capital spending for the year was $6.7 billion – up $0.8 billion from 2017/18.

This included purchases of $0.9 billion of school property, $0.7 billion for defence equipment, $0.4 billion for prisons and $0.2 billion for hospitals.

Investments included $1.1 billion for state highways $0.3 billion for KiwiRail and $0.2 billion for district health boards. Contributions to the NZ Super Fund doubled from $0.5 billion in 2017/18 to $1 billion.

The tax revenue came in at 2.1 per cent higher than expected, with corporate profits, employment and wage growth also higher than forecast.

“The results show businesses are investing, employing more workers and paying higher wages,” Mr Robertson said.

“It’s important that we don’t talk ourselves into a downturn,” Mr Robertson said, in reference to continual low business confidence.

“Unemployment, interest rates and Government debt are all low, giving the economy a solid platform to keep growing and face any global headwinds.”

Nominal GDP was up $10.5 billion to $300 billion, increasing by 3.6 per cent, and real GDP went up by 2.6 per cent, driven by population growth in New Zealand.

The number of full time employees in New Zealand went up by 30,100 and the average hourly pay rate went up 3.5 per cent to $31.84.

The net core Crown debt increase of $0.2 billion resulted from the residual cash deficit in the 2018/19 year.

Residual cash is the amount of money the Government can use to repay debt or that it needs to borrow.

National has accused the Government of taxing New Zealanders "to the eyeballs" to account for the $7.5 billion surplus. 

Economic development spokesperson Todd McClay described the Government as "sitting on a big surplus while those living outside Wellington’s beltway struggle with rising living costs". 

"The Government should be looking to stimulate the economy by letting New Zealanders keep more of what they earn."

Mr McClay accused the Government of failing to invest in the adequate amount of infrastructure needs.

Prime Minister Jacinda Ardern said today's figures showed "we have been and are managing the economy in a fiscally prudent way" and the surplus provides a "buffer for the storms and the headwinds around us".

She said questions about tax cuts were not questions "for today".

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New Zealand’s surplus has climbed to $7.5 billion, officials announced today. Source: 1 NEWS