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Kiwi surplus in doubt

Posted on 16 December, 2014

The Treasury is forecasting a deficit of $572 million, putting the government’s promise to return to surplus in doubt. In the half-year economic and fiscal update, it says weaker inflation, lower interest rates and a slump in the dairy pay-out has reduced forecast tax revenues despite an increase in the economic growth outlook. The Treasury forecasts the nominal size of the economy will be $13.2 billion lower over the next four years because of that lower inflation, which would drag on expected GST, income tax and resident withholding tax revenues from term deposits. Finance Minister Bill English says: “Although this forecast predicts a small deficit for the current year, we believe the strong underlying economy and responsible fiscal management can deliver a surplus when the final government accounts are published next October.” The final state of the books will be unknown until next October when the final accounts are published. English adds the government still wants to tax cuts in 2017 “as economic and fiscal conditions allow”.