New Zealand Government Pledges to Loosen Purse Strings If Re-Elected

by Dramelin 8:00 PM 0 comments

Steven Joyce speaks to media during the printing of the budget on May 23.
New Zealand’s government has pledged to loosen the purse strings if re-elected later this year, announcing a big boost to family incomes in its annual budget.
The government would raise the thresholds at which higher tax rates kick in and increase assistance for low and middle-income families from April next year, Finance Minister Steven Joyce said Thursday in Wellington.
The package will cost NZ$6.
6 billion) over four years, eating into projected budget surpluses but boosting spending and keeping the economy growing at a healthy clip, he said.
The ruling center-right National Party is looking to woo voters from the opposition Labour Party ahead of a Sept.
23 election, when it will seek a rare fourth term in office.
The budget forecasts the economy will sustain at least 11 years of uninterrupted growth through 2021, with annual surpluses rising to NZ$7.
2 billion by then.
“This is a budget that delivers for New Zealanders from a government that cares about people and knows how to get things done,” Prime Minister Bill English said in a statement.
“Our ninth budget shows continuing improvement in the government’s books and solid economic growth expected to average 3.
1 percent over the next five years.
” Gross domestic product will grow 3.
2 percent in the current June fiscal year and accelerate to 3.
7 percent in 2017-18, the Treasury estimated.
Growth is underpinned by exports, tourism and consumer spending, with immigration projected to take longer to decline from record levels, according to the forecasts.
Bigger Surplus The robust economy is boosting tax revenue, and will help the government deliver a NZ$1.
6 billion surplus in the year ending June 30, compared with the NZ$473 million forecast in December’s half-year update, Joyce said.
The surplus will grow to NZ$2.
86 billion in 2017-18 and to NZ$7.
17 billion by 2020-21.
Over the four-year forecast horizon, the combined surplus is NZ$2.
6 billion less than previously projected, due largely to the cost of the family package.
From April 1, the government will raise tax thresholds, increase accommodation payments and adjust family tax credits that it says will benefit 1.
3 million families by an average of NZ$26 a week.
About 60 percent of the extra income is expected to be spent on consumption.
The incomes package is forecast to result in a modest increase in inflationary pressure, and monetary policy tightening earlier than it otherwise would.
The Treasury forecasts short-term interest rates will rise from the third quarter of 2018, a year earlier than the central bank currently forecasts.
Health, Education The government also pledged an extra NZ$7 billion over four years to fund health, education, justice and social services.
It allocated NZ$11 billion for capital and infrastructure projects, and $1 billion to grow the economy in areas like research, tourism infrastructure and the film industry.
Joyce said overall capital spending by central government and agencies will be a record NZ$32.
5 billion over the next four years, some 40 percent more than in the preceding period.
Net debt is projected to decline to 19.
3 percent of GDP by 2021 from 23.
2 percent this year.
Joyce has set a target of reducing debt to 10-15 percent of GDP by 2025 to ensure the nation has the capacity to respond to natural disasters or economic shocks.
He said tax levels will stay under review under a future National administration.
“I’d like to do more over time,” Joyce told reporters.
“Our assessment is this is as far as we could go reasonably this year with the resources we had.
It’s our intention to continue adjusting tax and transfer settings as fiscal conditions allow.