$7.5b QUESTION

How will Finance Minister spend super surplus?

Even before Treasury revealed the super-surplus, Finance Minister Grant Robertson was facing calls to spend more. Now the chorus could become deafening.

But while Robertson said the Government is in a strong position to step in on a rainy day, he dismissed the conclusion that the day was coming.

When it comes to the Government’s books, the numbers are always vast — and often rather misleading.

Treasury revealed that the surplus in the Crown accounts was $7.5 billion in the year to June 30, $2b larger than last year and $4b larger than was expected when the Budget was released less than five months ago.

It was the biggest surplus since Treasury started using its current calculation (operating balance before gains and losses) in 2008.

The figure involves calculations which to many would sound like trickery (Robertson rejected the term “jiggery-pokery” saying they were approved by the Auditor-General).

Because the Coalition has effectively dropped the pretence that New Zealand’s rail network could run at a profit, the surplus was boosted by $2.6b.

But even if that was excluded, the surplus would have been large, even though spending has increased. Tax revenue is raining on the capital, more than $6b higher than a year earlier.

Robertson said more Kiwis were in work, earning higher wages and spending more. Companies were also more profitable, with corporate tax up 13 per cent.

The accounts show the Government is within what once seemed like an ambitious debt target, comfortably so. “The Government books are indeed in good shape,” Robertson said.

The picture painted by the books feels at odds with slowing economic growth, business confidence at decade-lows and bank economists calling for spending to boost activity.

Even though Robertson repeatedly acknowledged that the global economy had slowed (without any mention that growth in New Zealand too has slowed), he dismissed questions about whether the Government was planning tax cuts or raising benefits to stimulate an economy seen by some as vulnerable. Asked about whether, in the case that the situation turned dire, he might consider a cut in GST, Robertson said not only was it not in consideration, talk of emergency measures was misguided.

“I am not seeing any evidence that New Zealand is heading towards a recession. Clearly we are in an era of lower growth rates than we’ve seen in the past, but the New Zealand economy is still growing,” he said.

“When it comes to the need for those emergency style tax measures, I don’t see them at this point in the economic cycle.”

Almost all of the questions Robertson faced when the accounts were released were variations on the same theme. When are we getting tax cuts? Will you raise benefits? Which areas will get more money?

The finance minister gave nothing away, saying the balance of spending was right and decisions on future spending were part of the Budget process. Economists are generally more downbeat than Robertson’s presentation.

Kiwibank economists hinted this month that the Government’s selfimposed spending rules were becoming “irresponsible”, with money being retained at a time when confidence was so low.

Although the Government has claimed that it is already spending more than the previous Government and that this would stimulate the economy, ANZ economists issued a note in recent days claiming “fiscal policy is poised to drag on growth over the next few years”, based on current Budget statements.

Unusually, the governor of the Reserve Bank Adrian Orr has begun raising how much scope the Government has to spend and how it would be useful for his targets if it did.

After so many doubts about whether the Coalition could keep New Zealand’s books healthy with so many competing promises, the books are now in such a state that almost the only question Robertson is facing is why is he not spending more?