Revised estimate welcomed

Press, 19 February 1986, Page 8

Revised estimate welcomed

By

MARTIN FREETH

The revised estimate of the New Zealand fiscal deficit has been welcomed in the financial world.

The money market reacted with a sudden dip in the rates on some Government stock. The rate on 1991 stock dropped to 19.4 per cent immediately after the announcement, although it edged up again to close at 19.5 per cent. That is still lower than the 19.7 per cent average rate accepted in last Friday’s Reserve Bank tender for stock of the same maturity. Economists were generally pleased with the figure, although with some scepticism about how close it would be to the final figure after March 31. Mr Rob Cameron, of Jardens, said it was obviously the result of a careful , assessment of

Government expenditure at this late stage of the year. Mr Cameron, who had picked a year-end deficit of $l.B billion, suggested the introduction of higher charges for some Government services might have distorted the pattern of net expenditure as it showed up in Treasury figures as the year progressed. The National Bank economists who recently suggested it would not be surprising to see a final result more than $2 billion declined to comment without further analysis. Dr Gareth Morgan, of Infometrics Corporation, who predicted a similar result, said the situation had changed with the rise in debt-servicing costs being reversed in Mr Douglas’s new estimates for the year. Dr Morgan queried why the Minister had not indicated this earlier at the

time of announcing a big restructing of the Government’s overseas debts. Mr Rufus Dawe, chief economist for Westpac, said the levels of liquidity in the financial system over the last six months had been inconsistent with the view that Government expenditure was remaining in line with earlier estimates. The economists emphasised the uncertainty surrounding the size of the year-end tax flow, and its importance for determining the actual deficit result *

Mr Dawe said the Government had anyway, wide scope to achieve the deficit result it wanted by adjusting the timing of payments around the end of March.

“It can speed up or slow down payments or speed up or slow down revenue processing to help show the result it wants.”