Robertson’s golden run continues
Each time Treasury opens its books, Finance Minister Grant Robertson’s job seems to get a little bit easier.
Yesterday, the department released the halfyear economic and fiscal update, a kind of halfyear progress report on the Government’s balance sheet.
While National struggled for years to get the books back to surplus after the Global Financial Crisis, Robertson’s biggest challenge may become fending off raids on the increasing pool of money at his disposal.
Despite ongoing weak business confidence and continued fears of damage to trade from both a trade war between the United States and China, and the shambolic Brexit process, the outlook is still getting brighter.
Even though the economy is expected to grow slightly more slowly over the next couple of years than Treasury predicted in May, and the surplus is expected to be much smaller in 2019 than in 2018, the amount of money at Robertson’s disposal in the coming years is forecast to be higher.
Over the next five years, the annual tax take is forecast to climb by more than 30 per cent, or an increase of roughly $5 billion per year.
That does not include any possible revenue from any new capital gains taxes, should they materialise.
While some of that will be eaten up by inflation, and a growing population creates never-ending spending pressure, the net impact is that Robertson will have about $2b more at his disposal over four years than he thought a few months ago, even though migration is falling slightly faster than expected.
This creates a strange dilemma which Robertson may have to grapple with as the 2020 election approaches.
Not only is the Government on track to meet its target of cutting debt to below 20 per cent of gross domestic product by 2022, debt is forecast to start plunging in the following years.
Treasury has forecast that the Crown will post a surplus of $7.6b in 2022 and $8.4b in 2023.
It is hard to imagine such figures will ever eventuate though, with such vast sums likely to lead to huge pressures for some type of tax relief or additional distribution.
There is also a sense of the unreal in the figures. In 2018, Robertson posted a $5.5b surplus – not because he planned to but because a series of projects which the Government planned to start did not get under way.
Treasury is now assuming that all of those projects will start in the current year and none will have to be pushed into next year.
But the reality is, with unemployment at about 4 per cent, the economy is suffering capacity constraints.
As much as the Government wants to spend more money, it is becoming increasingly difficult to find people with skills with any time on their hands.
If anything, there is surely a risk that more projects will be pushed back and that Robertson will see more larger than expected surpluses, because his colleagues will struggle to get their programmes under way.
Not only is the Government on track to meet its target of cutting debt to below 20 per cent of gross domestic product by 2022, debt is forecast to start plunging in the following years.