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.