Thursday 16 May 2013

A fiscally expected Budget, yet with some nice surprises

Minister of Finance of Bill English's fifth budget reconfirmed the Government's track to a surplus of $75m in 2015.

Hon Bill English has achieved this on the back of forecast GDP growth, rising tax revenues and continued expenditure restraint.

The slower and costlier than forecast Canterbury rebuild costs have pushed the GDP growth track out further than previously expected.

Stronger forecast tax revenues has given the Government a bit more room to move in terms of additional new spending to the tune of $5.1bn over the four year forecast period.

The stronger forecast economic and fiscal position has given the Government confidence to undertake further fiscal rebalancing by reducing the stimulus applied to the economy which will free up resources for the private sector to take up the growth mantle.

The Budget forecasts more Government costs to rebuild Canterbury, increasing the Government's share of the rebuild from $13bn to $15.2bn.

New initiatives include an internationally focused growth package with $100m per year additional support for tourism, R&D and international education.

Health continues to consume ever larger amounts of Government expenditure with an extra $1.6bn of initiatives planned for the next four years.

Overall, this Budget continues to walk the fine line between a credible path to surplus and damaging growth through the rapid withdrawal of stimulus.

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