Finance Minister Bill English had a big smile on this face as he presented his fifth consecutive Budget today.
The economy and tax revenue are picking up and, as a result, his forecast surpluses for the 2015 to 2017 period look achievable. This will be quite an achievement as the Government will have had six consecutive Budget deficits totalling a whopping $46.1 billion.
Crown net debt is expected to surge from just $10.3 billion to $64.8 billion over this six year period.
The Finance Minister’s positive forecasts are based on a $17.7 billion increase in tax revenue for the five years ended June 2017. The major tax increases are forecast to be;
|
Personal income tax |
$4.8b |
|
Entrepreneurial income tax |
$0.8b |
|
Company tax |
$2.2b |
|
Consumption tax, GST etc |
$3.5b |
|
Residential investment tax |
$1.6b |
|
Interest tax |
$0.7b |
|
Others |
$4.1b |
These forecast revenue increases are due to higher levels of income rather than an increase in tax rates.
As a result English is forecasting a Budget or OBEGAL (operating balance before gains and losses) surplus of $0.1 billion for the June 2015 year rising to $2.6 billion for the June 2017 year.
Budget Forecasts – Looking positive
|
June years |
Revenue |
Expenses |
SOEs |
OBEGAL |
Net Debt |
|
2017F |
79.5 |
(77.2) |
0.3 |
2.6 |
70.3 |
|
2016F |
75.8 |
(75.2) |
0.2 |
0.8 |
69.7 |
|
2015F |
72.3 |
(73.5) |
1.3 |
0.1 |
68.2 |
|
2014F |
68.4 |
(72.4) |
2.0 |
(2.0) |
64.8 |
|
2013F |
63.8 |
(71.6) |
1.5 |
(6.3) |
57.9 |
|
2012 |
60.6 |
(69.1) |
(0.7) |
(9.2) |
50.7 |
|
2011 |
57.5 |
(70.5) |
(5.5) |
(18.4) |
40.1 |
All figures in $billion.
However Crown net debt will continue to grow because capital expenditure, which is not included in operating expenses above, will exceed the OBEGAL surplus.
The increase in net debt is one of the main reasons why the current Government is determined to continue with its partial privatisation programme.
Brian Gaynor
Portfolio Manager