New Zealand: Government presents 2012 budget
May 24, 2012
On 24 May, the government presented the budget plan for the fiscal year 2012, which ends in June 2013. According to the document, the government reckons that the core operating deficit (OBEGAL) which excludes investment gains and losses reached NZD 18.4 billion or 9.2% of GDP in the current fiscal year (ending June 2012). Meanwhile, the deficit for fiscal 2012 was revised down from the NZD 10.8 billion projected in last year's Pre-election Economic and Fiscal Update to NZD 8.4 billion or 4.0% GDP. According to the Treasury, the revision reflects delayed spending, especially earthquake related, which is to be allocated in the fiscal year 2013. The government continues to forecast a return to a fiscal surplus before the end of the fiscal year 2015 (ending June 2016), when the fiscal balance is projected to reach a surplus of NZD 197 million, or 0.1% of GDP. To reach this figure, the government stated that it will hold spending near current levels, with spending totalling NZD 4.4 billion until 2016. Simultaneously, the government intends to increase tax revenues by NZD 1.4 billion over the next four years, with further increases on tobacco taxes, which are set to rise 10% each year until 2016. Consensus Forecast panellists are less optimistic than the government and anticipate that the fiscal deficit will reach 5.6% of GDP this year. However, participants share the government's long-term view and expect a fiscal surplus 0.1% of GDP in 2016.
Author: Ricardo Aceves, Senior Economist