The Press WEDNESDAY, NOVEMBER 12, 1969. Interim Report

Press, Volume CIX, Issue 32143, 12 November 1969, Page 22

The Press WEDNESDAY, NOVEMBER 12, 1969. Interim Report

The half-yearly accounts of the Government are like a company’s interim report to its shareholders: making proper allowances for seasonal factors, the report gives shareholders their first indication of the likely outcome of the year’s trading. The interim report presented yesterday by Mr Muldoon shows the Government’s budgeting for the year to have been conservative —conservative, fortunately, in its estimates of revenue as well as of expenditure. Revenue is more than 10 per cent higher than in the first six months of 1968-69, although the Estimates presented with the Budget allowed for a rise of only 6 per cent. Expenditure has risen nearly 11 per cent, compared with an estimated 7j per cent The biggest rise in expenditure, both absolutely and relatively, is seen in social services; estimated to rise 7J per cent spending has actually risen 13 per cent. The increase in monetary benefits of $ll million is in line with the estimated increase of $2l million for the full year, but education spending (up $l3 million in six months compared with an estimated SI3J million for the full year) and hospital expenditure (up $8 million, compared with an estimated $lO million for the full year) have clearly risen more sharply than expected. Government expenditure on social services last year and the year before represented 17J per cent of National Income. Even if the rate of spending on these services continues in the current half of the financial year at the same rate as in the first half, the comparable figure in 1969-70 will be within a few decimal points of 171 per cent. Income tax was expected to rise 9 per cent this year; but in the first six months it has risen 11 per cent. As less than a third of the year’s income tax is taken in the first half, the figures fbr six months are by no means a sure guide. On general grounds, though, there is no obvious reason why the “ tax “ take ” for the 12 months should be less than 11 per cent higher than last year. Similarly, there is no reason to expect a decline in receipts from customs duty (up 10 per cent in the six months) and sales tax (up 14 per cent) in the last six months of the financial year. Neither the Estimates nor the half-yearly accounts give any indication of one important aspect of the Government’s accounts: how the deficit before borrowing is to be financed. Last year the deficit before borrowing was $lO9 million, but the Government borrowed $l2l million (net of loan repayments) in New Zealand, so that there was an internal surplus of $l2 million. This $l2 million withdrawn from circulation made an important contribution to stability in the internal economy and buoyancy in the balance of payments. This year the Government is budgeting for a deficit before borrowing of $136 million, and the actual figure may be higher still. Net internal borrowing should total at least $136 million if the Government is to avoid overheating the economy. Mr Muldoon’s main concern. over the remaining five months of the financial year will be to persuade savers to lend the Government $136 million—sls million more than the Government has ever borrowed before in a year. Savers, whether they are nation-wide insurance companies or wageearners, all have spending opportunities, too. Mr Muldoon will need to ensure that saving is made more attractive and spending a little less tempting.