The Government has pulled off its promised surplus for the 2014/15 year after Crown accounts released today confirmed a $414 million surplus - a turnaround from the forecast deficit in May's Budget.
It is the National Government's first surplus since coming into power in 2008 during the global financial crisis. Since 2011, National has campaigned on returning to surplus in the 2014/15 year. Today's news will come as a relief after the Budget forecast a $684 million deficit for the year. However, Mr English was reticent when asked if he expected to deliver another surplus in the year ahead, pointing to the low inflation, low growth environment.
The final accounts for the year to the end of June showed the Government was in surplus as a result of higher than expected tax revenue and lower than forecast Government spending. Core Crown tax revenue was $5.1 billion more than the previous year while Government spending was up by $1.2 billion - less than expected. The OBEGAL (operating balance before gains and losses) was $414 million.
Comment: 'Bill English has had his day'
Finance Minister Bill English said it was a "significant milestone" as the surplus had been the Government's top fiscal priority since 2011.
It reversed a $18.4 billion deficit following the global financial crisis and Canterbury earthquakes.
He put that down to "careful stewardship" over the Government's day to day expenses - a process that has included significant trimming down of the public service. He was still hopeful of delivering tax cuts after 2017 - but said the surplus would not result in a celebratory spending splurge. Instead the Government's focus would be on reducing debt to below 20 per cent of GDP by 2020. "That is the most prudent approach to take in a still uncertain global environment."
The financial statements showed total Crown revenue was $95 billion - of which $66.6 billion was tax revenue. Total spending was $94.3 billion - close to the Government's target of pegging core Crown spending to below 30 per cent of GDP.
Net debt rose to $60.6 billion but fell as a percentage of GDP to about 25 per cent. The Government goal is to reduce that to below 20 per cent of GDP by 2020 Treasury's statements showed GDP growth increased by 3 per cent over the year as a result of "robust growth" in construction, especially in Christchurch, and in household consumption and tourism.
Labour Party finance spokesman Grant Robertson said the Government had promised a significant surplus but had produced a "rounding error".
He said the surplus was "just one black drop in a sea of red" because gross debt was more than $86 billion and interest payments were costing $10 million a day.
National had only reached the target by "manipulating the books", he said, pointing to underspends in health and education, a delay on Canterbury rebuild spending and overcharging by ACC.
Mr Robertson said New Zealanders would expect the books to be back in black at the peak of the economic cycle.
"With the economy running out of steam, National's promises of a string of surpluses are extremely unlikely to become a reality."
He said the last time growth was at 3 per cent the previous Labour Government produced a surplus of $7 billion and an unemployment rate of 4 per cent, compared with $414 million under National and 5.8 per cent unemployment.
Green Party finance spokeswoman Julie Anne Genter said the achievement of a surplus was a good step, but it had come at the cost of social services and the environment.
She said school children were going hungry, police stations were closing, and the country's air and water were becoming more polluted.
Ms Genter said it was possible to achieve a surplus while improving government services, cleaning up the environment and improving the livelihoods of families and communities.
A hint that a surplus was in the offing despite the Budget forecasts came in June when the accounts showed an unexpected surplus of $448 million for the 10 months to the end of April.
Financial statements: key figures for year ended June 2015
Operating balance before gains and losses (OBEGAL)
Actual: $414m (first surplus since 2008)
Forecast in Budget 2015: $684m deficit
Core Crown revenue
Core Crown tax revenue
Core Crown expenses
Operating balance (excluding minority interests)
Forecast: $634m deficit
Actual: $60.6b (25.2% of GDP)
Forecast: $61.7b (25.7% of GDP)
Real GDP growth
- Additional reporting from Isaac Davison