News and Updates from Bill English
18 December 2014 Economy grows solidly in September year
New Zealand’s economy remains one of the fastest growing in the developed world, confirming that the Government’s economic programme is taking New Zealand in the right direction, Finance Minister Bill English says.
Statistics New Zealand today reported gross domestic product expanded by 1.0 per cent in the September quarter. This took annual growth - from the September quarter 2013 to the September quarter 2014 - to a revised 3.2 per cent. This is the same as annual growth to June 2014, and equals the highest annual growth rate since September 2007. Average annual growth was 2.9 per cent.
“We are in the unusual but encouraging situation where we have solid economic growth, more employment and higher wages, but few pressures on inflation,” Mr English says. “This suggests New Zealand’s economic growth potential before inflation sets in - essentially the speed limit of the economy - is higher than expected previously.
“Although lower inflation, and the consequent lower tax revenue, is making it more challenging for the Government to return to surplus this year, it is good for businesses and families who are facing lower price increases than would normally be expected at this point in the economic cycle.
“Strong economic growth benefits all New Zealanders. Around 72,000 jobs have been created in the past year, and the average full-time wage is forecast to rise by $8,000 to around $64,000 by mid-2019. But long-term improvement in New Zealanders’ fortunes will occur only if we stick with our successful economic programme,” Mr English says.
Growth in the latest quarter was driven by agriculture (up 4.7 per cent), mining (8 per cent) and manufacturing (2 per cent).
New Zealand’s 3.2 per cent GDP growth in the year to September compares with 2.7 per cent in Australia, 3.0 per cent in the United Kingdom, 2.4 per cent in the United States, 2.6 per cent in Canada, 1.2 per cent Germany, and a 1.2 per cent decline in Japan. Average growth across the OECD was 1.7 per cent.Tweet
16 December 2014 Government focused on surplus in 2014/15
The Government believes an OBEGAL surplus is achievable this financial year, despite Treasury’s latest forecast today predicting a $572 million deficit (0.2 per cent of GDP) for the year to 30 June 2015, Finance Minister Bill English says.
“These forecasts emphasise the unusual conditions the New Zealand economy is experiencing,” Mr English says. “Treasury is predicting solid growth, growing employment and low interest rates, which help New Zealanders to get ahead. But at the same time, falling dairy prices and low inflation are restricting growth in the nominal economy and government revenue.
“This is making it more challenging for the Government to achieve surplus in 2014/15. However we remain on track to reduce debt to 20 per cent of GDP by 2020.
“Although this latest Treasury forecast predicts a small deficit for the current year, we believe the strong underlying economy and responsible fiscal management can deliver a surplus when the final government accounts are published next October,” Mr English says.
Previous forecasting rounds show the outlook can change significantly between the Half Year Update and the final accounts being published. As recently as 2012/13, the final OBEGAL deficit was $2.9 billion smaller than the previous HYEFU forecast.
“The Government has a track record of sticking to our spending plans to protect the most vulnerable and to provide certainty for users of public services. We won’t be changing that approach,” Mr English says.
“Despite the lower than expected revenue forecasts, the Government’s ongoing commitment to spending restraint means the public finances continue to improve significantly each year.”
The OBEGAL deficit has shrunk significantly from a peak of 9 per cent of GDP in 2010/11. Net core Crown debt is expected to peak in the current fiscal year at 26.5 per cent of GDP and then reduce to 19.1 per cent of GDP in 2020/21. A residual cash surplus is now expected in 2017/18, a year earlier than forecast previously, which is also when the Government intends to start repaying debt in dollar terms.
The Budget Policy Statement released today confirms that allowances for Budget 2015 and Budget 2016 have each been reduced to $1 billion. The allowance has been re-phased over three years to provide a $2.5 billion allowance in Budget 2017.
“This will allow us to consider modest tax cuts and/or additional debt repayment in Budget 2017, as economic and fiscal conditions allow,” Mr English says.
Treasury’s forecasts suggest that New Zealand’s economic growth potential before inflation sets in - essentially the speed limit of the economy - is higher than estimated previously.Read full article
10 December 2014 Below forecast revenue highlights challenge
Government revenue continues to grow more slowly than forecast in the Budget, again highlighting the challenge of returning to surplus this year, Finance Minister Bill English says.
For the four months ended October 31, the operating balance before gains and losses (OBEGAL) deficit was $1 billion - $260 million larger than forecast in the Budget Economic and Fiscal Update in May.
Even though Core Crown tax revenue was $1.5 billion (or 7.9 per cent) higher than at the same time last year, it was $97 million lower than forecast in the Budget.
“This emphasises the unusual conditions the New Zealand economy is experiencing,” Mr English says. “We have stable growth, growing employment, and low interest rates, which are helping New Zealanders to get ahead. But at the same time, falling dairy prices and low inflation are impacting on the nominal economy and government revenue.
“This is making it more challenging for the Government to achieve its fiscal targets as quickly as it would like.”
The Government accounts for the four months to October show GST revenue was $200 million (3.5 per cent) below the Budget forecast and source deductions were $75 million (0.9 per cent) below forecast. These shortfalls were partially off-set by corporate tax revenue being $129 million (4.6 per cent) above forecast and other individuals tax being $70 million (5.3 per cent) higher than forecast.
“Treasury advises that these tax trends have been taken in to account in the Half-Year Economic and Fiscal Update forecasts that will be released next week.”
Core Crown expenses for the first four months of this financial year were $118 million higher than forecast – due largely to the one-off indemnity cost associated with Solid Energy. Excluding that cost, core Crown expenses of $24 billion were just $15 million over Budget.
“This shows the Government is generally doing a good job of controlling its own spending. The challenge is coming from revenue, which the Government has much less control over.”
Although core Crown tax revenue was weaker than forecast in the Budget, it was higher than anticipated by the more limited set of forecasts available in Pre-Election Fiscal Update in August.
However, Treasury says that due to sharply lower dairy prices and ongoing low inflation, the current rate of revenue growth is unlikely to continue over the rest of this financial year.
“The HYEFU next week will provide a fresh set of forecasts on the fiscal situation, on New Zealand’s economic growth and job growth, as well as wages and unemployment.”Tweet
26 November 2014 Household savings rate positive for five years
New Zealand households have together saved more than they spent over the past five consecutive years – the first time this has happened since 1989-94, Finance Minister Bill English says.
The latest revised annual National Accounts (Income and Expenditure) compiled by Statistics New Zealand show aggregate household savings – which includes the impact of debt repayment - totalled $2.8 billion in the year ended March 2014.
This represents a positive savings rate of 2.1 per cent of household disposable income.
The revised figures show that before 2009 – the year after the National Government was first elected - the household savings rate had been negative in all but one year since 1995.
“This news is the latest in a series of results that show households are getting ahead and that the economy is steadily rebalancing towards higher savings and away from borrowing and consumption,” Mr English says.
“Combined with average hourly earnings growing more than twice as fast as inflation, a sustained period of historically low interest rates, falling unemployment and good economic growth, the household savings data adds to a picture of New Zealanders making sensible decisions to strengthen their own balance sheets.
“The Government, which has also kept tight control over its own spending during the same period, has made changes that have encouraged New Zealanders away from debt-funded consumption in favour of a more sustainable and secure position.
“Households have been nudged towards this by a combination of factors including the 2010 tax package which lowered taxes on income and savings and increased tax on consumption and property speculators.
“The Government has also pursued initiatives that have made investments more attractive, including the government share offer programme which helped stimulate New Zealand’s capital markets. At the same time, we’ve tidied up the finance company sector to help protect depositors, and made KiwiSaver more affordable.
“Many low-income households are still finding things tough . However, the overall picture supports a rebalancing of the economy away from the debt-fuelled consumer binge that occurred under the previous Labour government, to a growing culture of saving and investing.
“While this helps households get ahead, low inflation and restrained consumption contributes to government revenue being lower than it otherwise would be, again reinforcing the challenge of getting back to surplus.”Tweet
26 November 2014 Iwi members appointed to Whanau Ora group
“These iwi representatives are well-placed to contribute to the work of the group,” says Mr English.
The representatives, nominated by the Iwi Chairs Forum, are Raniera (Sonny) Tau, Naida Glavish, Rahui Papa, Sir Mark Solomon, Dr Hope Tupara, and Richard Steedman.
“We are delighted with the depth, wisdom, and iwi connections that these appointees bring,” says Mr Flavell.
The Whanau Ora Partnership Group is a forum of ministerial and iwi representatives. The group determines the Whanau Ora outcomes that Commissioning Agencies need to achieve and identifies opportunities that the Crown and iwi can contribute to, that support the aims and aspirations of whanau, hapu and iwi, in relation to Whanau Ora.
The Partnership Group consists of equal members of iwi leaders and ministers. The Minister for Whanau Ora Hon Te Ururoa Flavell will chair the group. He will be joined by five other ministers: Finance Minister Bill English, Education Minister Hekia Parata, Health Minister Jonathan Coleman, Social Development Minister Anne Tolley and Economic Development Minister Steven Joyce.
The group will develop strategies that ensure whanau and communities who can benefit from Whanau Ora, have that opportunity. It will hold its first meeting next month.Read full article