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There goes the surplus

Written By: - Date published: 8:00 am, October 18th, 2016 - 58 comments
Categories: ACC, Economy, Financial markets, national, national/act government, Politics, same old national - Tags:

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With great fanfare last week the Government announced what it wanted to suggest was a stonking big operating revenue surplus in the country’s accounts. We are finally in the black to the tune of $1.8 billion dollars. This headline was obliterated by other news released that day that Housing Corp was running out of money but the government will still be hoping that it feeds into the “National is a good manager of the economy” narrative.

I have had a read of the treasury documents relating to the release of the news and there are a few reasons why this headline is overly optimistic. And undeserved.

The good news is indeed that there is an operating surplus of $1.8 billion. The causes seem to be primarily good growth and a greater than expected tax take caused by surging immigration. Keep those people coming as our economy depends on it.

There were some areas of not so good news.

ACC had actuarial losses of $5.1 billion and the Cullen Super Fund had actuarial losses of $2 billion. Sure they are book entries and relate to actuarial losses because of a change in the discount rate applied but a similar book loss of $4.8 billion back in 2009 again because of actuarial losses related on that occasion through a more conservative formula calculating future liabilities being applied was described by Nick Smith as a financial crisis. National is lucky that Labour will not stoop to the same lows.

There was another $1.5 billion liability because of the change of the price of carbon and its effect on the Emissions Trading Scheme. The price of carbon has increased considerably and will continue to do so. The Government sheltering business from the real cost of carbon results in a cost to us all.

And net Crown debt increased by $1.3 billion.  Borrowing is still not under control.

Funny how the headline figure was the one figure that captured the headline. With net debt increasing and forecasts for ACC, the Cullen fund and the Emissions Trading Scheme worsening even talking about a tax cut is crazy.

58 comments on “There goes the surplus ”

  1. Wensleydale 1

    Blinglish is playing a shell game. He’s frantically shuffling those paper cups around, desperately hoping we don’t realise none of the cups has a pea under it. He sold all the peas to his corporate friends years ago. We’re now a pea-free nation.

  2. Jenny Kirk 2

    Colin James has a column in today’s ODT (not yet online) in which he calls the “game” the govt is currently playing – dribble politics. Dribble out a bit of dosh whenever a situation gets dicey to placate all those who want to see the govt “doing something”. Its worth reading when it comes online.

  3. ” The Government sheltering business from the real cost of carbon results in a cost to us all. ”

    Hmmm…. welfare.

    Welfare for the boys.

    Now what’s that about Junior Doctors going on strike over safety issues like doing 16 hour shifts back to back, up to 12 shifts in a row I hear ya say again , Trev ?

    Oh yes, that’s right , … silly me , I forgot ,… the reason National are starving health , education , state housing and even our prisons are to degrade them to such a point that the public will accept the corporate’s taking over and setting up private concerns to replace our publicly funded social services.

    Combined with welfare for business and withholding of tax payer funds for our social services to make way for being able to milk the NZ public even further is sound economics 101 for the neo liberals, now , …. isn’t it.

  4. Siobhan 4

    Hey, it’s not all bad news, there $1 billion set aside for more prisons/places to store the mentally unwell and poor people with addiction issues..

    .”The Government has announced plans for a growing prisoner population including double-bunking for an extra 80 beds at Ngawha in Northland, a new building at Mt Eden to take 245 extra prisoners, and possibly a new 1500-bed prison on the current Waikeria Prison site in Waikato.

    Corrections Minister Judith Collins said prison population growth required a further 1800 places.”

  5. left for dead 5

    MS…Smoke and mirrors, theirs still money in it. 😉

  6. mosa 6

    Greed is king and New Zealanders will vote for the cash instead of funding public services.
    Bill English may have just won the 2017 General election.

    • NZJester 6.1

      Most of the local business owners are stupid to take his tax cut bribe though. The profits they get from their business will fall as their customers have little money to buy their goods. They would end up with higher after-tax and operating costs profits under a Labour government even if they have to pay higher wages and higher taxes.
      More customers will have the money to buy their goods when you have healthier and better-paid workers.

      • Ch_ch chiquita 6.1.1

        It’s funny how when you sit one on one with some of these business people and explain it to them (like they are a five year old) all of a sudden it clicks. I just hope those who my parner have had a chat with will remember it come the next elections, and that we wil be able to talk to as many people as we possibly can by then.

  7. Guerilla Surgeon 7

    That picture would go well on 7 Days. “Yes, that is the size of my penis.”

  8. feijoa 8

    It is just the one word they need to get out there
    SURPLUS

    That’s all people hear
    Nothing else matters, everything else is noise
    They think National are good economic managers
    Job done, election in the bag

  9. Greg 9

    A phantom surplus or was it fraud

  10. Keith 10

    Like almost any statistic or claim put out by our government nowadays, it cannot withstand much scrutiny at all and seemingly it appears, less and less scrutiny.

    I guess National are counting on the moment of the headline, backed by rapturous applause from Mike Hosking and Paul Henry and the unquestioning mind of Liam Dann of the Herald and cheer leading from other well connected “bank economists”.

    Having said that National have not put out a surplus yet in this governments life so does it really matter or hurt them? Or maybe there was there a suspiciously conditional one last year. In haze of all the bullshit they pump out, I can’t recall.

  11. Tamati Tautuhi 11

    Don’t worry we are a “Rockstar Economy” and we are about to turn the corner.

    More good news to follow.

  12. Groundhog 12

    Housing Corp is not ‘running out of money’, and you know it. You admit yourself that the ACC and Super Fund losses are actuarial only. So, in summary, your entire case is bs. Oh, and btw, the net core crown debt as a % of gdp has been steadily declining since 2013, and is forecast to continue to decline. The current % (24.6%) is only fractionally higher than the average of 23.85% between 1972 and 2016, despite borrowing for the GFC and Chch rebuild.

    I sometimes wonder whether the left would have simply left Chch to it’s own devices, and allowed the GFC to wipe hundreds of thousands of families out, such is the stupidity of this sort of click bait commentary.

    http://www.tradingeconomics.com/new-zealand/government-debt-to-gdp

    • mickysavage 12.1

      Hmmm

      1. Housing Corp is running out of cash. They said so themselves.
      2. I did say the losses were actuarial, just like they were in 2009 when the nats went to town on it. But they do mean that we are all poorer or will be in the future. Are you suggesting we should completely ignore bad news?
      3. Net core Crown debt as a proportion of GDP is going down but in dollar terms is going up.
      4. No the left thinks that we pay off debt and store away cash so that in times of crisis the state is in a position to respond. This Government refuses to do this. And good to see you acknowledge the GFC and I thought the deficits were all Labour’s fault.

      I am pointing out that there are features of the Treasury release which are negative. Concentrating solely on the positive is something only a fool would do.

      • Groundhog 12.1.1

        1. No, they didn’t. They are actually in good financial shape, but they are about to embark on a building program that requires capital. Learn to read a balance sheet.
        2. No. I’m suggesting you are hypocritical to criticise National for doing something and then doing it yourself.
        3. The figure that matters is the % of GDP. The economy is growing at a healthy rate by global standards.
        4. Where did I say the deficits were all Labours fault? NZ enjoys ‘seasons’ of terms of trade. During the mid to late 2000’s we enjoyed excellent terms of trade. Then we had a GFC and rebuilding a major city. They are the main reasons we have had deficits. You have no evidence the government will choose tax cuts over debt repayment; that is pure speculation at this stage.

        Your piece is headed ‘There goes the surplus’. It follows a similar piece by another poster that argued there is ‘no surplus’. Balance is one thing, arguing against the prevailing facts is something entirely different.

        • mickysavage 12.1.1.1

          1. Yes they are. Treasury said so. Don’t confuse things by talking about the balance sheet. Concentrate on cash which is due to run out in February. http://www.stuff.co.nz/national/politics/85296759/housing-nz-running-out-of-cash-officials-warn-government
          2. Comparing my very gentle comment to Nick Smith’s hysteria is a joke.
          3. The figure that actually matters more is the per head of population GDP growth. It is anaemic. We are importing our growth.
          4. Just recycling typical troll comment. Glad you agree that National’s hysteria about a “decade of deficits” was just that.

          I see you did not mention the increase of liability for carbon credits which of itself pretty well wipes out the surplus. Why is that?

          • Groundhog 12.1.1.1.1

            1. Your own reference explains that a cash injection is needed to fund the governments building program. That is not ‘running out of money’.
            2. No, it isn’t. The principle is the same.
            3. Your diverting. And wrong. Growth is being driven by a range of sectors, and very much from the regions.
            4. The decade of deficits was a Treasury forecast. The 2009 deficit, left by Labour, was huge. Whether Labour were partly to blame is actually irrelevant. What matters is that this government have turned that around, successfully navigated the GFC, and rebuilt a major city.

            The liability for carbon credits is based on the price of carbon, which you acknowledge fluctuates. You predict it will rise. Perhaps. Perhaps not. The deficit is real.

            • Leftie 12.1.1.1.1.1

              Your comment is a load of crap and “the decade of deficits”came from John key.

              • Groundhog

                You have placed the comment in speech marks, indicating you are confusing the terminology with the reality. The reality is the Treasury forecast, which predicted deficits for the foreseeable future. The expression “decade of deficits” was used by a number of commentators, including Brian Fallow. It’s source is largely irrelevant. What is relevant is that that was the reality of what National inherited.

                http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10536181

                • Leftie

                  And that’s bullshit. The good financial standing NZ was left in, that National inherited, National have squandered.

            • mickysavage 12.1.1.1.1.2

              Has the English language lost its meaning?

              1. The post attacks the Nats spin about a surplus. Without an injection and with current policy settings HC will run out of cash in February. Crowing about a surplus is stupid because it is not a surplus. It is a bit of cash that should be applied to helping Housing Corp, not to tax cuts.
              2. Yes it is. The Nats went to town on it. I said “Sure they are book entries and relate to actuarial losses because of a change in the discount rate applied but a similar book loss of $4.8 billion back in 2009 again because of actuarial losses related on that occasion through a more conservative formula calculating future liabilities being applied was described by Nick Smith as a financial crisis. National is lucky that Labour will not stoop to the same lows.” I was criticising National, not the nature of the losses although you should get ready with any spare cash if you actuarial advice is that things are getting worse.
              3. Quote me some figures. Go ahead.
              4. What the … the Nats could do this because Cullen paid off all the debt and because of the Socialist EQC which the first Labour Government set up.

              The liability for carbon credits is real and will only get worse. Of course a responsible Government should do something about it, rather than offer tax cuts.

              • Groundhog

                1. The surplus is not ‘spin’. It is real. It is a surplus. Only an economic illiterate could argue otherwise.
                2. Thanks for doing again what you claimed you didn’t.
                3. “”Growth this quarter is being driven by strong domestic and export demand,” SNZ national accounts senior manager Gary Dunnet said. “Household spending was up 1.9 percent, with Kiwis spending more on going away, eating out, and furnishing their houses,” he said in a statement.” http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11710248

                4. Governments (Labour and National) have been paying off debt for decades, not just Cullen. It is the result of sound economic policy over the past 30 years, policy you generally condemn.

                No-one is offering tax cuts. They are on the table, along with a number of other options.

            • Matthew Whitehead 12.1.1.1.1.3

              LOL nobody is predicting the price of carbon credits will go down, it’s a matter of how much they will rise.

          • Groundhog 12.1.1.1.2

            1. Your own reference explains that a cash injection is needed to fund the governments building program. That is not ‘running out of money’.
            2. No, it isn’t. The principle is the same.
            3. Your diverting. And wrong. Growth is being driven by a range of sectors, and very much from the regions.
            4. The decade of deficits was a Treasury forecast. The 2009 deficit, left by Labour, was huge. Whether Labour were partly to blame is actually irrelevant. What matters is that this government have turned that around, successfully navigated the GFC, and rebuilt a major city.

            The liability for carbon credits is based on the price of carbon, which you acknowledge fluctuates. You predict it will rise. Perhaps. Perhaps not. The surplus, on the other hand, is real.

            • Leftie 12.1.1.1.2.1

              Your comment is a load of crap and “the decade of deficits”came from John key.

            • dv 12.1.1.1.2.2

              http://www.stuff.co.nz/business/opinion-analysis/9840884/New-Zealands-debt-legacy

              The government’s 2013 budget projected that net core Crown public debt in June 2015 will be $68 billion, up from a low point of $10b in June 2008.

              • Groundhog

                Meanwhile, in the real world, the country has successfully navigated a GFC and rebuild a major city.

                • Leftie

                  Bullshit.

                • dv

                  –Your comment Ground hoThe 2009 deficit, left by Labour, was huge

                  Was 10Billion, big but not NOT 68 billion which is closer to huge.

                  The current debt is 100 billion.

                  • Groundhog

                    You confuse annual deficits with accumulated debt. The current debt is less than Treasury forecast it would be in 2008.

                    • dv

                      Nope – no confusion by me., Thats why carefully I separated the last two sentences, as they ARE two different things.

                      My main point was the deficit WAS NOT huge back in 2008/ 9 as you stated compared to the deficit in 2015.

                    • Groundhog

                      “Nope – no confusion by me., Thats why carefully I separated the last two sentences, as they ARE two different things.”
                      Re-read your own post. You quoted my comment about the deficit, then talked about total debt.

                      “My main point was the deficit WAS NOT huge back in 2008/ 9 as you stated compared to the deficit in 2015.”
                      Again, you are confused. But I don’t want to embarrass you, so I’ll simply point you to this graph…http://www.tradingeconomics.com/new-zealand/government-budget. You’ll see that in 2015 we were in surplus.

                    • Gorillagrip []

                      Sniff sniff hmmm I smell whale oil

                    • dv

                      “Nope – no confusion by me., Thats why carefully I separated the last two sentences, as they ARE two different things.”
                      Re-read your own post. You quoted my comment about the deficit, then talked about total debt.

                      Yes, two ideas!!

                      “My main point was the deficit WAS NOT huge back in 2008/ 9 as you stated compared to the deficit in 2015.”
                      Again, you are confused. But I don’t want to embarrass you, so I’ll simply point you to this graph…http://www.tradingeconomics.com/new-zealand/government-budget. You’ll see that in 2015 we were in surplus

                      The stuff article was a prediction in 2013.
                      You are right it had changed by 2015.

                      But the deficit was really huge in 2011. (from you reference.

                      And I am still not confused.

                    • Groundhog

                      “Yes, two ideas!!”

                      Which you conflated.

                      “But the deficit was really huge in 2011. ”

                      But you said ‘2015’. You were wrong. And the deficit in 2011 was indeed ‘huge’. It was partly the result of the decade of deficits inherited, partly the Chch rebuild, partly the GFC. In 2016, NZ is held up as a model of how to steer through these challenges.

      • Nic the NZer 12.1.2

        2. The entire notion of being poorer or richer (as a nation) here is premised on the govt deficit/surplus being an issue for the country now or in the future. It matters not a jot as ACC and Super are entirely sustainable as an as you go payment anyway.
        3. This is the way govt debt is repaid in general. By out pacing it in growth terms. Thats why countries are still ‘paying off’ debts incurreds over WW2. Its extremely difficult to pay off debt in nominal terms as each doller of surplus equates to a doller less of non govt income/savings (and the reverse). In some countries (Greece) the nominal cuts resulted in such a fall in turnover and impacts on tax take that the govt debt to GDP ratio increased substantially (and unemployment also increased of course).

        The nations wealth is entirely encapsulated in the real side of the economy and what that provides to citizens (yes including what they can afford to purchase). Its irrelevant what in govt deficit/surplus balance is for the nations wealth.

  13. Cinny 13

    How’s that super fund? Bogus surplus.

    Wonder how things are going on the ground… massive housing costs and crime rates… trickle down? I don’t think so. Underpaid striking Jnr Dr’s, rotting schools, overworked low morale police, high crime rates, homelessness, poverty, record drug abuse, suicide etc etc.

    But hey lets boast about a fucken surplus, which appears to have been eaten up in the last 24 hrs with another prison to tackle those high crime rates. Cause that’s gonna work, SMH.
    http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11731295

    Public are over it, the out going governments pie in the sky ideal of a ‘surplus headline’ is not as effective as they need it to be.

    Reality is effective, reality is the cruel outcomes of underpaid and overworked social services, a crippling housing situation and outright poverty. Judith claims it’s all because of bad parenting, maybe she should look at the results of her own parties parenting of our country.

  14. Infused 14

    Lol and everyone here’s like borrow for super fund!!!11

    This is moronic stuff. Groundhog is the only one with a clue

    • Cinny 14.1

      No, no, you are missing the point Infused… which is… we don’t pay taxes to pay down the debt of a badly managed outgoing government, we pay taxes for social services, such as the cullen fund.

  15. ropata 15

    RWNJ’s view everything through the lens of $$$$, in their tiny minds surplus = profit, therefore Key = good, he make NZ rich!

    Never mind the fact that Key & English have liquidated, asset stripped, and profit gouged every arm of the State in order to do their accounting tricks. The Government books may be (temporarily) in the black, but the people of NZ are much worse off.

    New Zealand was supposed to be a democratic nation, and the government was supposed to empower, protect and serve “The People”. I guess I can forget that shit as the FJK regime is turning NZ into a corporation whose only goal is Profit.

  16. ropata 16

    As stated on NRT:

    The only reason we have a “surplus” is because the government’s failure – or rather, refusal – to provide those services does not appear on their balance sheet. If they did, then the trick would be laid bare: all National has done is pump up the government’s books by giving us public squalor. And now they plan to leave us that mess, and the long-term costs it entails, while letting the rich run away with the profits as tax-cuts.

    This isn’t government. It’s pillage.

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