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News and Updates from Bill English

07 October 2014
Crown accounts show steady improvement

The Government’s operating deficit before gains and losses narrowed for the third consecutive year to $2.9 billion in the 12 months to 30 June – down from $4.4 billion the previous year, Finance Minister Bill English says.

Net government debt increased from $55.8 billion to $59.9 billion in the latest year, but as a proportion of GDP it fell from 26.3 per cent to 26.2 per cent. This was $4.8 billion less than forecast in Budget 2013, with $2.5 billion of this driven by lower capital spending and proceeds from the Government’s share offer programme exceeding forecasts for the latest year.

“The result is further evidence that the Government’s careful fiscal management is producing consistent gains over time,” Mr English says.

“By setting a path back to surplus and running a clear economic plan to support growth, more jobs and higher incomes, the Government is providing opportunities for New Zealanders and their families to get ahead.

“New Zealand’s economic growth of 3.9 per cent in the year to June was the highest for a decade. But one or two years of growth will not change our economic prosperity - we need to stay on course over many years to really lift our long-term economic performance.

“Getting back to surplus this year and building larger surpluses into the future remains a significant challenge. It’s important that we return to surplus so we can start repaying the debt built up to support the most vulnerable New Zealanders through the previous recession and to help the people of Canterbury rebuild their lives.”

The $2.9 billion fiscal deficit for the year to 30 June followed core Crown tax revenue at $61.5 billion being lower than forecast and core Crown expenses at $71.5 billion also being a little below forecast.

“Tax revenue was $2.8 billion higher than the previous year, but it was just over $900 million lower than Treasury forecast in Budget 2013,” Mr English says. “It is possible that revenue will continue to track below forecast in the current financial year, which reinforces the need for the Government to continue controlling its spending.”

The latest OBEGAL deficit was equal to 1.3 per cent of GDP, down from 2.1 per cent of GDP the previous year, and 4.4 per cent of GDP the year before that.

“The Government will continue to focus strongly on managing expenditure tightly and stabilising and then reducing debt – including carefully managing its future capital needs,” Mr English says.

“One of these capital areas is state housing, where we will work closely with community and private providers to provide housing to New Zealanders most in need. This will allow us to draw on outside capital, rather than this being the sole responsibility of taxpayers.”

Mr English says New Zealand’s economic outlook remains positive, particularly compared with those of other developed economies.

“Growth is expected to return to more normal levels, reflecting international economic conditions and lower dairy prices.

“This reinforces our need to focus on the issues we can control, such as our own competitiveness, responsible fiscal and economic policy and delivering better public services.”

The Treasury will update its forecasts in the Half-Year Economic and Fiscal Update on 16 December, alongside the Government’s annual Budget Policy Statement.

The Crown’s annual financial statements are available at: http://www.treasury.govt.nz/government/financialstatements/yearend/jun14

07 October 2014
English attends IMF, World Bank meetings in US

Finance Minister Bill English leaves tomorrow for the United States, where he will attend the annual meetings of the International Monetary Fund and World Bank governors in Washington DC.

He will also meet G20 finance ministers. Australia, as host of the G20 this year, has invited New Zealand to attend a series of meetings as a guest alongside the G20 members.

“The meetings in Washington will provide further opportunities to assess latest global economic developments and their likely impact on New Zealand,” Mr English says.

“New Zealand remains well placed compared with many other developed economies. But we need to be prepared to carefully manage global risks and challenges.

“So I’m keen to hear directly from the policy makers and business leaders dealing directly with these issues.”

During his trip, Mr English will meet Australian Treasurer Joe Hockey, Singapore Finance Minister Tharman Shanmugaratnam and IMF deputy managing Director Min Zhu. He will also hold regular meetings with representatives of the main credit rating agencies.

The IMF and World Bank governors meeting concludes on Saturday and Mr English will return to New Zealand next Monday.

18 September 2014
Extension of Solid Energy’s remediation indemnity

Government officials are working with Solid Energy to extend the company’s remediation indemnity, which will meet the future costs of returning the company’s mining land to its pre-mined condition, Finance Minister Bill English and State Owned Enterprises Minister Tony Ryall say.

“This will extend a similar remediation agreement made in 1987. It will strengthen Solid Energy’s equity position and ensure that it can effectively rehabilitate land after its mining has been completed,” Mr English says.

“It’s clear that Solid Energy’s trading conditions remain difficult and its challenges are still significant. The Government’s decision to extend support for Solid’s remediation obligations is a further demonstration of its commitment to give the company every opportunity to become viable.

“The company’s directors are required to sign off the company’s annual accounts by the end of September and they advised us they need this indemnity for the company to remain in a positive equity position through this financial year.

“We expect this process to be completed in the next week or so – in time for the annual accounts to be signed off.”

The indemnity is a promise by the Crown to reimburse the company for the costs of remediation as and when it is carried out, and it has a present value of $103 million.

Under current forecasts, expenses covered by the indemnity will be $6 million in 2015 and $11 million in 2016.  There will be no overall impact on the Crown’s fiscal position, because the indemnity simply transfers a liability from an entity that is 100 per cent owned by the Crown to the Crown itself.

No change is proposed to the requirements or timing of the remediation work programme, which has been agreed between the company and the relevant local authorities. The only difference is that these costs will now be met directly by the Crown.

Mr Ryall says market conditions remain challenging for Solid Energy and its 700 staff.

“As we said when we announced Solid’s restructure package a year ago, the Government is not prepared to expose taxpayers to ongoing losses if the company’s core business is not considered viable,” he says.

“We also said that we are prepared to provide support for the company if there is a reasonable chance it can be made viable. The extension of this indemnity is part of that support.”

18 September 2014
Economy continues to grow, support jobs

New Zealand continues to enjoy one of the fastest-growing economies in the developed world, confirming that the Government’s sensible economic programme is taking New Zealand in the right direction, Finance Minister Bill English says.

“It’s only through a strong economy that we can provide New Zealanders with new jobs, higher incomes and opportunities to get ahead,” he says. “The Government’s economic programme is successfully delivering those things and families can now look forward to the future with some confidence if we stick with that programme.”

Statistics New Zealand today reported gross domestic product expanded by 0.7 per cent in the June quarter. This took annual growth – from the June quarter 2013 to the June quarter 2014 - to 3.9 per cent – the highest growth rate for 10 years and the highest so far reported by OECD countries. Average annual growth was 3.5 per cent.

Mr English says New Zealand’s challenge is to build on the solid foundations provided by the growing economy.

“It’s pleasing to see the good progress we have made as a country over the past few years. The economy is growing, the Government’s books are on track to surplus and another 83,000 jobs have been created in the past year. But one or two years of growth will not change New Zealand’s economic prosperity. We need to stay on course to really lift our long-term economic performance.”

Growth in the latest quarter was driven by construction activity, up 2.2 per cent, business services, up 4.2 per cent, and retail trade and accommodation, up 1.4 per cent.

New Zealand’s 3.9 per cent GDP growth in the year to June compares with 3.1 per cent in Australia, 3.2 per cent in the United Kingdom, 2.5 per cent in the United States, 2.5 per cent in Canada, no growth in Japan and 1.3 per cent in Germany. Average growth across the OECD was 1.9 per cent.

08 September 2014
National’s plan delivering a strong NZ economy

A re-elected National Government will return to surplus this financial year and stay there so we can reduce debt, reduce ACC levies on households and businesses and start modestly reducing income taxes, Finance Spokesman Bill English says.

“National’s clear economic plan is working for New Zealand by successfully supporting higher wages and more jobs, and ensuring government spending is invested wisely to deliver better results,” he said when issuing National’s Finance Policy today.

“National is working hard to ensure the economy grows sustainably into the future, supported by more savings, productive investment and exports. This will provide opportunities for Kiwi families to get ahead here in New Zealand.”

As set out in the Budget, a National-led Government will restrict average Budget allowances for discretionary new spending and revenue measures to $1.5 billion a year over the next three years. Within this allowance National will:

  • Allow around $1 billion a year for new spending, including between $600 million and $700 million a year more for health and education. This total new spending is consistent with the level of new spending in our last two Budgets and it’s well below the $2 billion to $3 billion spending increases under the last Labour government, which had little to show for them.
  • Reserve the remaining $500 million per Budget for modest tax reductions and further debt repayment, as economic and fiscal conditions permit. This portion of the allowance will be moved between Budgets and accumulated as necessary. Therefore, by the third year there will be around $1.5 billion available for tax cuts and debt repayment.

“It means that over the next four years, National will spend around $10 billion more in total, and most of that on health and education,” Mr English says.

“This is well below the $18 billion in extra spending Labour has already earmarked for the next four years, and that’s not counting the Greens and Dotcom.”

National’s five fiscal priorities for the next three years are:

1.    Return to surplus this year and maintain surpluses over subsequent years. These growing surpluses will enable us to meet the Government’s capital requirements and reduce debt.

2.    Reduce net government debt to 20 per cent of GDP by 2020, including starting to repay net debt in dollar terms in 2017/18. Reducing government debt puts New Zealand in a better position to cope with the next economic shock or natural disaster.

3.    Further reduce ACC levies on households and businesses, starting on 1 April 2016. A National Government will cut levies on all ACC accounts by an average of around 30 per cent. Subject to public consultation, this will reduce levies by between $700 million and $900 million a year – the equivalent of a tax cut for households and businesses.

4.    Begin to reduce income taxes from 1 April 2017, providing economic and fiscal conditions allow, and if the first three priorities have been achieved.  Any tax reductions will be modest, given the fiscal headroom available, and they will focus on low and middle income earners.

“We will consider the details of a possible tax package closer to the time,” Mr English says. “As the Prime Minister and I have said, we won’t be setting out a specific tax package before this election.”

5.    Use any further fiscal headroom – including from positive revenue surprises – to get net debt to 20 per cent of GDP sooner than 2020.

“Once debt gets to 20 per cent of GDP, we will begin to resume contributions to the New Zealand Superannuation Fund,” Mr English says.

“In addition, we will help to keep interest rates lower for longer for New Zealand families by reducing core Crown spending to below 30 per cent of GDP by 2017/18 from 34.4 per cent in 2008/09 under the previous government. And our focus will remain relentlessly on targeting that spending where it delivers better results for New Zealanders.”

National will continue to improve management of the Government’s capital investment programme, which totals around $24 billion over the next four years.

“That includes using the remaining $1.7 billion of proceeds from the Government share offers to reinvest in new public assets like schools, hospitals and regional roads – without having to borrow this money.”

Mr English says New Zealanders have a stark choice this election.

“They can continue to support National and its clear economic plan that is working for New Zealand. It’s delivering a strong economy, it’s getting us back to surplus and it’s getting on top of debt. Under National, we will achieve sustained growth that delivers solid increases in household incomes and new jobs through the next term.

“Or they can put all that at risk by changing course to who knows what direction.

“Under Labour, the Greens and Dotcom, the economy would stall. They would introduce five new and unnecessary taxes and create a surge of wasteful government spending.

“And they would undermine the confidence necessary for businesses to invest now so we get stronger growth later.”

National’s Finance Policy is available at: ntnl.org.nz/1tRZnrp