Budget 2014: Ready to Rise

Despite carefully managed pre-budget expectations, Budget 2014 has delivered two surprises; a surplus of $372m in 2015, appreciably higher than the wafer thin surplus expected; and when taken over a four period, higher planned new spending in health, education and welfare than was expected.

The higher surplus despite extra spending comes as a result of a forecast of strong economic growth of 3% in 2015 rising to 4% in 2016.

On the back of that strong economy the Government has announced it will increase new spending in future budgets at around $1.5bn a year, half a billion dollars a year more than the 2014 budget allowance of $1bn.

Budget 2014 forecasts rising surpluses over the next 4 years reaching $3.5bn in 2018. These surpluses are committed to future capital and infrastructure expenditure.

Net debt peaks at $65bn and then is held their while the economy grows. As a result, net debt is forecast to have reduced to the Government’s target of 20% of GDP by 2020.

“We welcome the return to surplus and the forecast of future surpluses.” PwC Chief Executive Officer Bruce Hassall says. “This enables New Zealand to reduce our debt load and rebuild buffers against unknown future shocks”.

“New Zealand business will welcome a stable fiscal outlook that will allow the economy to grow in a controlled fashion without creating too much pressure on inflation, interest rates and the exchange rate.”

“New Zealanders will also welcome further assistance targeted at those who need support.”

“Budget 2014 strikes a good balance between fiscal prudence and Government spending in an economy that is ready to rise” concludes Mr Hassall.

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