English flags 'challenge' to budget surplus
English is warning next month's half yearly fiscal and economic update may not forecast a budget surplus.
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Finance Minister Bill English is warning next month's half yearly fiscal and economic update from the Treasury may not forecast a budget surplus, saying that returning the government's accounts to surplus in 2015 will be "a challenge", given the decline in commodity prices and weak global inflation.
The Treasury projected a surplus of $297 million in the year ending June 30, 2015, on an operating balance before gains and losses basis in the pre-election economic and fiscal update released in August. That was reduced from a projected surplus of $372 million in the May budget.
A 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," English told an ASB business breakfast in Auckland. "This will affect farm and company incomes and we expect this to flow into the Government’s books through lower revenue."
The Treasury is scheduled to release its update forecasts in the half-year economic and fiscal update on Dec. 16 and is compiling its projections in what English called " unusual times for global economies."
“The unusual current combination of economic circumstances is likely to have an impact on these updated forecasts,” he said. "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."
Surveys showed businesses and consumers were confident about the future and indicators of activity in manufacturing and services remained strong, he said.
Also, low global inflation and a relatively strong kiwi dollar meant "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."
(BusinessDesk)
Jonathan Underhill
Thu, 20 Nov 2014
Thu, 20 Nov 2014
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English flags 'challenge' to budget surplus
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