Audrey Young

Audrey Young is the New Zealand Herald’s political editor.

Surplus a start, not an end: English

Bill English. Photo / Chris Loufte
Bill English. Photo / Chris Loufte

You might think Bill English wanted to crow from the rooftops about the surplus he is about to unveil in Thursday's Budget, the first in six Budgets he will have delivered.

But the Finance Minister is cool about it. He certainly doesn't want the surplus to be celebrated as finishing something he started.

"Rather than the end of a process, we will say this is the first of surpluses."

In fact last year was more of a test of whether the surplus could be achieved in the 2014 - 15 year - the country was coming out of a severe drought and the impact on the economy was not clear.

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The half-year opening of the Government's books last December forecast the surplus to be a meagre $86 million, expanding in the following years to $1.6 billion, $3.1 billion, then $5.6 billion.

Prime Minister John Key has confirmed the first surplus hasn't shifted much from being "wafer-thin."

But Mr English said he was not hung up on the actual number.

Now people expected the surplus, this year's Budget would be more about where he wanted to go with the surpluses.

"Economically, plus or minus $500 million doesn't matter," he said.

"This year it is about what do you do with the surpluses."

Returning to surplus has been a goal since Mr English delivered his first budget in 2009 in the midst of the global financial crisis.

Back then he forecast deficits for nine years, and projected the next decent surplus to be in 2018 - 19.

But the time he delivered the Budget in 2010, the surplus had been brought forward to 2015 - 16.

It was just over three years ago, in January 2011, that the Government indicated for the first time it would move the goal posts to 2014 - 15, in a speech by Mr Key.

Several years ago, Mr English described the surplus target as "a symbol of responsibility."

This week he said it had been an important focus for the Government to get its finances under control "in a way that is reassuring for the public who have had to deal with a lot of uncertainty themselves."

"Looking ahead it is becoming less important because the focus has shifted to looking ahead to growth and opportunity from recession and deficit."

Even the Budget of Thursday will only be a forecast of a surplus in the coming financial year. Whether it is actually achieved won't be known until September 2015. That is when the final accounts for the 2014 - 15 year will be released by the Treasury.

Mr English and Mr Key have always said they were not hell-bent on keeping a forecast surplus in 2014 -15 at any cost. But that is what they were accused of in December 2012 when the Government raised the petrol excise duty by 3c a litre for three years in order to keep a forecast surplus in the half-yearly opening of the books, albeit $66m one compared to the Budge forecast of $197 million.

On the question of debt, Mr English says the Budget will set out a plan to get debt down but he will be "less fixated on a shorter term number."

"The Government accounts move around a lot so we won't continue to focus on specific numbers because you can end up driving the system around things that aren't that important in the long run."

The Government has tightly controlled Government expenditure this year and will allocate just under $1 billion in extra operating spending.

Mr English said the disciplines the Government had set in order to get to surplus had turned out to be sustainable and would help deliver debt reduction, surpluses and more choice.

"That is why we are not going to talk about it as the end of something because what we have created is a new normal - an expectation that while we are being pretty tight with spending, we are going to see lower crime rates, more kids getting through school, more money for health."

It was more a matter of saying this would be the first of any number of small surpluses: "here is the framework we have developed and we are going to keep applying that and here is the kind of thing you should expect to see."

English on the Aussie budget

Finance Minister Bill English doesn't believe the Australian economy is as bad as the doomsayers say it is.

"You've got to remember the Aussie mindset," he told a National Party audience last week. "They've been winners for 30 years. It's like they have beaten the All Blacks every year for 30 years and suddenly they start drawing and losing.

"They are used to everything going really well so they tend to be more negative than they should be."

Treasurer Joe Hockey will present his first Budget tomorrow since the Coalition was elected last September.

A pre-election opening of the books in August forecast a A$30.1 billion cash deficit in the current year and a total of A$54.6 billion in the cash deficit over four years.

But a post-election update of the books in December forecast as A$47 billion cash deficit in the current year - A$68 billion more - and A$123 billion over four year. Much of it is put down to lower growth forecasts and consequentially less revenue, but there are heated disputes over how much can be atrributed to old Labour Government management or new Coalition policies.

Australian commentators expect the budget to create a temporary deficit levy on high-income earner, increase petrol excise, introduced some new health care charges and increase the pension age to 70 over time.

Mr English said he had concerns for some New Zealand businesses hit by the downturn in Australia.

But he backed the Australians to get on top of it.

"Overall I think we should have a bit of confidence in the Aussie's confidence. You can back them to sort it out."

- NZ Herald

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