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Margin of error

Written By: - Date published: 10:09 am, December 19th, 2012 - 15 comments
Categories: debt / deficit - Tags:

So, National’s still on track to surplus in 2014/15, eh? A $66m surplus. Well, don’t be counting those chickens just yet. That projected Total Crown Operating Balance Excluding Gains and Losses, known to everyone as the surplus or deficit, is just 0.07% of projected Total Crown spending and revenue that year (see graph of the projected surplus beside revenue/expenditure at the bottom). That makes wafer thin look fat.

And it’s not exactly like Treasury has laser-precision accuracy when predicting 2.5 years ahead. In PREFU 2008 they were $15.9 billion out on the size of the deficit for 2010/11. In HYEFU 2009, they were $3.24 billion out on the size of the deficit for 2011/12. In other words, the surplus they’re projecting is a fraction of Treasury’s normal margin of error when projecting over two and a half years.

But there’s a bigger question: is any surplus at all better than any deficit?

I mean, last year, Treasury said the surplus would be $1.4 billion (Labour was chastised when their projected accounts showed a surplus of ‘only’ $660m). Since then, $1.3b has been lost off the forecast government balance. Would it be worse to lose, say, another $200m off that and go into a tiny deficit than losing that $1.3b but staying just just in the positive was? Of course not. The $1.3b that has disappeared from the projection in the last year means $1.3b more on the government’s debt than previously thought – an extra $200m would mean deficit, but it would have a far smaller impact on the government’s debt pile.

Besides, a billion here and there doesn’t really matter – it’s 1% of annual government turnover. And there’s nothing magical about being in surplus, as long as you’re generally on a track to getting your debt under control being in surplus in 2014/15 or 2016/17 (which is the downside scenario in Treasury’s books, and everyone else’s central scenario) is neither here nor there.

But National thinks its terribly important to be able to say they’re getting to surplus in 2014/15, even though they probably won’t be in office when it happens, because … um … they decided it ought to be. To that end, they’re putting a billion tax increase on petrol so they won’t have to borrow even more for their pointless motorways. And they’re not investing any new money in non-transport capital for years. Not to mention the grinding down of the public workforce though sub-inflation pay rounds, and the culling of staff at all levels.

Those are decisions with quite serious consequences that are being made for a very unserious reason – so that forecasts that are almost very, very wrong can say that there will be a tiny, neither here nor there, surplus in a year when the Nats are unlikely to even be in power any more.

fiscal balance projection for 201415


15 comments on “Margin of error”

  1. wyndham 1

    And the proposed extra petrol tax(es) will hit the less well-off hard. Yet there is no suggestion that the tax cuts, given earlier to the wealthy, should be reversed or even lessened.
    Another hike along to road to ever increasing social division.

    • Draco T Bastard 1.1

      Of course there isn’t. National’s purpose is to enrich the rich at everyone else’s expense which is why all the extra taxes they’ve put on since they cut taxes for the rich adversely impact the poor more.

    • Lanthanide 1.2

      “And the proposed extra petrol tax(es) will hit the less well-off hard.”
      Not sure about that. The media quoted someone saying that for every 1c in tax, it increases the average fuel cost per year by $15. So $45 spread over a whole year, $3 a month, isn’t likely to hit “the less well-off hard”. It is also the case that the “less well-off” probably drive cars less than the average, simply because they can’t afford WOF/registration/fuel/insurance in the first place anyway.

      • Draco T Bastard 1.2.1

        If they need to drive, which they probably do due to the rather poor public transport in NZ, then they will be worse off. It may only be $3/month but it’s still less than what they had and if what they had wasn’t enough in the first place…?

  2. Enough is Enough 2

    We need some clever bean counters to keep an eye on those books between now and 2014 because you can be sure of one thing, there are cook booking instructions going out to every government department right now.

    They will be moving items off the balance sheet to get the answer they simply must have going into the election.

    The problem is 90% of this country is financially illiterate so if Mr English tells them we have a surplus, they will believe him.

    • Nick 2.1

      “They will be moving items off the balance sheet to get the answer they simply must have going into the election.”
      One problem with your conspiricy theory. The 2014/15 surplus will be announced in 2015, AFTER the election..

  3. Peter 3

    So what, in your opinion, are the three main reasons the electorate should be against National aiming for a surplus?

    • One Tāne Viper 3.1

      The fact that they aren’t “aiming”, they’re aspiring.
      The fact that they’re failing.
      The fact that Labour led governments do a much better job.

    • vto 3.2

      Nothing wrong with it Peter.

      The problem is the lies and deception they use every time they talk about it.

      I mean, quite clearly, having to raise taxes to achieve it means they have not achieved it. They are just lying deceiving bastards and this is proof again.

    • bad12 3.3

      National could achieve surplus simply by adding another 1 cent to the income tax of the top 40% of income earners, the negative effect of that extra cent taxation upon those with plenty of disposable income would be ZERO,
      By loading those who have no disposable/discretionary spending  in their income, the bottom 40% of earners, with the cost of achieving surplus National are simply short circuiting 200-250 million dollars annually from passing through the local economy instead raking this into the Government coffers,
      There are 2 adverse economic effects that will ensue from this point, there will be a severe reduction in the use of petrol products and the estimated tax will not eventuate for the Government, and/or, in order to maintain their present use of petrol products those with no discretionary income in their budget will cut back on spending into the local economy which will cause the Governments tax take to shrink even further, less business to be conducted and thus create even more unemployment which is a direct cost to Government,
      The fact is that there is up to 7 billion dollars of taxation annually being evaded or avoided where Government could more than balance it’s books by ensuring all due taxation is paid throughfurther legislation and reversing the 50% staff cuts inflicted upon Government tax employees across the country,
      Any fool can see,(with the exception of Slippery and the idiot from Dipton English), that if there is no-one round to ensure taxation is paid then a lot of it won’t be….

  4. NoseViper (The Nose knows) 4

    On Bryan Crump tonight there was an interesting thing on Argentina and how it is selectively choosing statistics to bolster its financial standing. A government statistician was pushed out of her job, and can’t get any job, because she refused to change the statistical methods she had been instructed to use so that the results titled in the government’s favour. Government here might have to look at new ideas in manipulating unwelcome stats.

  5. tracey 5

    Any evidence the surplus will continue beyond 2014/15?

  6. tracey 6

    Could the media stop going to bank economists for so-called analysis… These guys have so much vested interest it would almost be funny if it werent masquerading as impartial.

    Its like asking the ceo of nzx whether he thinks our assets should be listed.

  7. tracey 7

    “New Zealand emerges from recession,” 2010 bill english

    Yet yesterday i heard him on the radio and three times he mentioned us being in recession as paet of his surplus explanation.

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