Budget 2013 will focus on continuing to implement this plan.
We have set four main priorities for this term.
They include returning to surplus and reducing debt; pushing ahead with a wide-ranging programme of microeconomic reforms to create a more productive and competitive economy; driving better results from public services; and supporting the rebuilding of Christchurch.
This programme is helping New Zealanders and their families to get ahead, encouraging personal responsibility and rewarding people for hard work and enterprise.
Modest surplus
The Half-Year Update forecasts the Government posting a modest surplus of $66 million in 2014-2015, down from the $197 million surplus forecast in Budget 2012.
It also shows net core Crown debt peaking below 30% of GDP.
Thereafter, surpluses are forecast to increase and debt is forecast to fall.
Continued control over spending has allowed the Government to remain on track to surplus, despite the impact on revenue of more difficult global conditions.
Over each of the next five years, economic growth is forecast to average 2.5%, together with increasing numbers of New Zealanders in employment and a falling unemployment rate.
The global economic environment remains uncertain and this makes it even more important to maintain clear and credible fiscal settings.
This is a time for sensible and responsible policy, not for untried economic experiments.
Good management
Budget 2013 will confirm the Government’s commitment to responsible long-term fiscal management.
This will require restraint well beyond the surplus target of 2014-2015, so that we can pay down debt and build a buffer against the next global shock, while at the same time resuming payments to the New Zealand Superannuation Fund and targeting investment at priority public services.
At the same time, as getting its own finances in order, the Government is continuing to address New Zealand’s significant economic challenges, including a sustained rebalancing towards the internationally competitive sectors of the economy.
Economic reforms
A broad range of targeted microeconomic reforms currently underway through the Government’s Business Growth Agenda will help to lift New Zealand’s productivity and competitiveness.
Looking ahead, the European sovereign debt crisis and on-going fiscal debt problems in the US are risks to the global recovery.
Downgraded forecasts of global growth have been factored into the Half-Year Update.
Compared to many other countries, the New Zealand economy is in good shape.
Stronger growth
Despite our growth forecasts being slightly weaker than in Budget 2012, New Zealand is expected to grow more strongly over the next four years than the Euro area, the UK, Japan and Canada.
New Zealand has a number of positive opportunities over the next decade, including strong and growing trade and investment links with Asia, elevated terms of trade and the Christchurch rebuild, which is expected to contribute 0.7% to annual growth over the next few years.
We are in a strong position to translate those opportunities into more jobs, higher incomes and better living standards for New Zealand families.
The Government’s economic and fiscal programme is aimed squarely at ensuring this happens.
Bill English is Deputy Prime Minister and Finance Minister. He made the above comments while issuing the Half-Year Economic and Fiscal Update (of the Treasury) in Wellington on December 18, 2012.
