News and Updates from Bill English
20 November 2014 NZ performing well, return to surplus a challenge
New Zealand remains on track for solid economic growth, more jobs and
rising incomes over the next few years, but falling dairy prices and
low inflation will make returning to surplus this year challenging,
Finance Minister Bill English says.
“Businesses and consumers are confident about the future, there’s a lot of activity in the manufacturing and service sectors, and companies are employing more people and paying higher wages,” he said in a speech to an ASB business breakfast in Auckland today.
“New Zealand is performing well in a world that remains uncertain. It was clear from the G20 finance ministers’ meeting in Brisbane last weekend that growth remains elusive in Europe and more uncertainty in China is being reflected in some sharply lower commodity prices.”
The Government’s annual Budget Policy Statement, which will be issued on 16 December along with Treasury’s Half-Year Economic and Fiscal Update, is being compiled in what are unusual times for global economies.
“Falls in global
commodity prices such as oil, forestry and dairy, together with weak
international consumer price inflation, are posing challenges for
governments and central banks around the world,” Mr English said. “New
Zealand is not immune to these global trends.
combination of lower commodity prices and low inflation means that the
nominal or dollar value of New Zealand’s economic output will not grow
as fast as previously expected. This will affect farm and company
incomes and we expect this to flow into the Government’s books through
“On the other hand, the current economic outlook is positive for households. Low global inflation, a strong dollar and more jobs mean we are not seeing the cost of living increases that would usually go with the kind of real economic growth we’re experiencing right now.
“This means New Zealanders have more spending power as, on average, their incomes are rising a bit faster than the cost of living. Low inflation also means there is less pressure on the Reserve Bank to raise interest rates.”
The Government is continuing with its economic plan – through the Business Growth Agenda and other micro-economic reform initiatives – to build a stronger economy that supports more jobs and higher incomes beyond the peak of this economic cycle, Mr English said. This was reflected in a comprehensive growth strategy presented to the G20 summit last weekend.
“We’re also continuing to support the most vulnerable New Zealanders through better public services and support programmes focused on achieving better results.
“And we’re focused on controlling our spending and returning to surplus this year, as well as reducing net debt to below 20 per cent of GDP by 2020, so we can withstand the next downturn or natural disaster.”
The Treasury’s best assessment of the latest data and the impact on government revenue will be included in the Half-Year Update next month.
“The unusual current combination of economic circumstances is likely to have an impact on these updated forecasts,” Mr English said. “As we’ve said all along, returning to surplus this year will be a challenge.
“But we believe the strength of the economy and constrained government spending can deliver a surplus when the final accounts are published late next year.
“The Government has a track record of sticking to our spending plans to protect the most vulnerable and to provide certainty for public services. We won’t be changing that approach.
“The overall trend in the Government’s accounts is positive. The OBEGAL balance has improved from a deficit of 9.2 per cent of GDP in 2011 to a deficit of just over 1 per cent of GDP in 2014, and we’re on track to reduce net debt to below 20 per cent of GDP.”Tweet
07 November 2014 Economy growing but fiscal position challenging
The Crown accounts for the first three months of the current
financial year are broadly consistent with forecasts, but at the same
time highlight the challenge of returning to surplus, Finance Minister
Bill English says.
For the three months ended September 30, the operating balance before gains and losses (OBEGAL) deficit was $725 million – $79 million more than forecast in Budget 2014.
Core Crown tax revenue was $73 million (or 0.5 per cent) higher than forecast. Although GST revenue was $175 million (4.1 per cent) below forecast it was offset by corporate tax coming in $135 million (7.1 per cent) higher than expected, and other individuals tax being $79 million (also 7.1 per cent) higher. At the same time, Core Crown expenses were $123 million (0.7 per cent) higher than forecast.
illustrate what I’ve been saying recently,” Mr English says. “The
economy is growing solidly and this is supporting more jobs, allowing
wages to rise faster than inflation and keeping interest rates lower for
“But we have an unusual situation with the nominal economy – which is what drives revenue to the Government - increasing more slowly. This is partly because falling dairy prices are impacting on nominal growth.
“While it’s good for New Zealand families to have low interest rates, low inflation and less debt-driven consumption, it makes the Government’s fiscal position more challenging.
“These accounts reflect only the first three months of the financial year, so uncertainty remains regarding the outlook for tax revenue for the rest of the financial year.
“What is clear is that the Government’s spending remains on track and focused on delivering better results. The fiscal outlook has improved markedly over the past six years and ongoing responsible management is required to ensure the improvements shown in the forecasts actually occur.
“In the meantime, what’s most important to New Zealanders is that we have continuing job growth, moderate wage rises, elevated levels of confidence, a steadily growing economy and a Government that’s committed to carefully managing its own spending,” Mr English says.Tweet
04 November 2014 Next step in social investment focus
The Government remains committed to its social investment approach to improve services for New Zealanders most in need, Finance Minister Bill English says.
“The Prime Minister has made clear that in this third term the Government will further focus on issues influencing children in material deprivation and hardship. Just as there are many and sometimes inter-related causes of hardship, there must also be multiple and sometimes inter-related strands to the solution.
“The Better Public Services programme, reform of the social housing sector and the investment approach that we have developed to improve services for the people who need them most, are all part of the Government’s ongoing programme.
“In another step, The Treasury will issue a Request for Information inviting submissions from people who work with vulnerable New Zealanders as well as others whose input might help us invest to get better results.”
The Request for Information will focus on:
- Effective ways of identifying and engaging the children and families most at risk of poor education, criminal justice and employment outcomes.
- How existing services or support could be improved to deliver better outcomes for the most at-risk children and their families.
- Issues not currently being addressed that affect at-risk children and their families.
- New interventions, services or arrangements that could deliver better outcomes.
This approach builds on initiatives like Whanau Ora, Children’s Teams and Social Sector Trials, which focus on the needs of individual citizens.
Information collected will be used to identify where existing government services can be improved, or where new localised or citizen-centred services can be trialled as part of Budget 2015. Initiatives could be funded through new spending or reprioritising existing expenditure.
The Request for Information will be available from Thursday on the Treasury website. www.treasury.govt.nz/budget/socialinvestmentTweet
29 October 2014 First steps taken towards flag referendum
Cabinet has agreed on the details of the flag referendum process and every political party represented in Parliament has been invited to take part, say Prime Minister John Key and Deputy Prime Minister Bill English.
“Our flag is the most important symbol of our national identity and I believe that this is the right time for New Zealanders to consider changing the design to one that better reflects our status as a modern, independent nation,” Mr Key says.
“However, as I have also said, retaining the current flag is a possible outcome of this process and the consideration of options will be done carefully, respectfully and with no presumption in favour of change.”
Cabinet has agreed that Deputy Prime Minister Bill English will be the minister responsible for the flag consideration process.
Letters were last week sent to each of the political party leaders in Parliament inviting them to nominate an MP to join a cross-party group of MPs which will have two key tasks, Mr English says.
“The first will be nominating suitable candidates for a Flag Consideration Panel, which will be a group of respected New Zealanders who will seek submissions from the public on new flag designs and suggestions.
“The second task will be to review the draft legislation which will enable the proposed two binding referendums on the flag to go ahead. The first referendum, which will be held late next year, will invite the public to choose a preferred design from a range put forward by the Flag Consideration Panel, and the second referendum, to be held in 2016, will be a run-off between the preferred design and the current flag.
“We are today releasing the Cabinet paper which outlines the details and timeframe that Cabinet has agreed on,” Mr English says.
“This includes the principles that will guide the consideration process, the projected timeline and costs. The total cost spread across two financial years is estimated at $25.7 million, with most of that going on the referendums themselves and on the public engagement process which is required to ensure that the public is well-informed and has the opportunity to participate.”
The leaders of political parties have been asked to make their nominations by Monday, November 10. As sole MPs, ACT Leader David Seymour and United Future Leader Peter Dunne have agreed to join the cross-party group to represent their respective parties.
The Cabinet paper is available here: http://www.dpmc.govt.nz/dpmc/publications/nzflag-process
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/jun14Tweet