Fiscal spending compliments strong growth prospects
Bill English –
The Crown’s books show rising surpluses and falling debt.
This is on the back of an economy forecast to grow at around 3% on average over the next few years, supporting more jobs and higher incomes.
Budgets are not just an accounting exercise.
They are about achieving better results for New Zealanders and their families from almost $80 billion a year of existing spending.
And they are about ensuring that any new spending is directed to where it will make a real difference.
The Government has done that, in areas ranging from schools to child health to reducing crime and to supporting new jobs.
Budget 2016 builds on these achievements and identifies new opportunities.
This Government is ambitious for New Zealand.
We can realise that ambition with a strong economy and continued prudent management of the public finances.
Budget 2016 invests in a growing economy. In particular, it supports four significant measures.
The first is the Innovative New Zealand package – a $761 million investment that focuses on growing our science system, producing the skills New Zealand needs, and encouraging innovation and investment in regional New Zealand.
The second is a $2.1 billion infrastructure programme that focuses on transport, schools, and the investment needed to deliver a modern, flexible tax system.
The third is a Social Investment package providing $652 million more to support vulnerable New Zealanders and help them live better lives.
And the fourth measure is a significant investment in the health sector. This will receive an additional $2.2 billion over four years to ensure New Zealanders continue to have access to high-quality healthcare.
Tight fiscal discipline
The Budget delivers these measures, and more, because the government has retained tight fiscal discipline and demanded better results from public services.
We owe that to New Zealanders who go out to work every day and pay their taxes.
New Zealand’s economic outlook is positive.
Treasury is forecasting real GDP growth of around 2.9% over the coming year, and 2.8% on average over the five years to June 2020.
Over 200,000 more people are in work now than three years ago, and another 170,000 new jobs are expected by 2020.
Over that period, the unemployment rate is expected to drop to 4.6% and the average wage is forecast to rise to $63,000 a year.
Only a handful of developed economies enjoy such a positive outlook.
Strong population growth is both an indicator of New Zealand’s economic performance and a contributor to it.
For the first time in a generation, we have a net annual movement of people into New Zealand from Australia – rather than an exodus of Kiwis across the Tasman.
Consumer spending and services exports are two other key factors driving economic growth.
Further impetus is apparent in a large pipeline of construction projects, and low interest rates should continue to stimulate investment.
Certainly, times are challenging for our dairy farmers, who are finishing another season facing depressed prices.
But elsewhere, New Zealand is reaping the benefits of an increasingly diversified economy.
Total exports increased by almost $2 billion last year.
Tourism, the beef sector, ICT, wine and much of the manufacturing sector are all performing well.
Overall, nominal GDP is expected to be $17 billion higher over the five years to June 2020, compared to the Half-Year Update, and this flows into higher-than-expected tax revenue.
Bill English is Finance Minister of New Zealand. The above is an extract of his speech to Parliament on May 26 while presenting Budget 2016.
Bill English presenting Budget 2016 to Parliament on May 26. Picture: Treasury