Govt delays plan to cut deficit by nearly $500M

Press, 10 January 1987, Page 3

Govt delays plan to cut deficit by nearly $500M

PA Wellington The Government has abandoned for this year its secret and commercially-sensitive plan to cut the deficit by nearly $5OO million, says the Minister of Finance, Mr Douglas. The Minister revealed on December 9 he had a new method in mind to control the blow-out of the deficit to $2.9 billion, and speculation at the time suggested he might issue shares in one of the Petrocorp assets, the Development Finance Corporation, or the Bank of New Zealand. Instead, the. ...ojie-off move will be postponed until the next financial year. .. "While these proposals are still expected to : eventuate in the 1987-88 year, they do not affect the current forecasts,” said Mr Douglas. In an announcement that no further Government stock tenders were planned for this financial year, Mr Douglas said compensation had already been made for most of the $460 million blow-out in the forecast deficit announced in December. Changes in the estimates of the timing of liquidity adjustment, the influence of the Reserve Bank and lower than expected redemptions of retail debt had helped. Reserve Bank injections of cash into the economy were estimated to have declined S9SM. The main reason for this was because it was no longer expected that funds in the income equalisation account at the Reserve Bank would be withdrawn to farmers by March, and that withdrawals from other accounts at the bank would also be lower.

than expected. ' Net public sector injections to primary liquidity were now expected to total $4.69 billion — an increase of only S3OM from the October 9 estimate. As the 10 stock tenders held so far. had raised $4.718, forecast net public sector injections for the financial year had already been fully funded. The timing and liquidity adjustment had declined $265M mainly as a result of changes in currency realignment and in the interest on Treasury bills adjustment. Redemptions of retail debt had been SSOM lower than anticipated in the December quarter and were now projected to be correspondingly .'lower over the whole financial year. Mr Douglas emphasised that the Government re-

mained committed to its policy of fully funding the deficit. Any forecast errors in net public sector injections over the remainder of the financial year would be temporarily offset by Reserve Bank moves and then corrected The Leader of the Opposition, Mr Bolger, said Government expenditure running at 30 per cent more than last year showed Mr Douglas was unable to control spending. He said the increase in the deficit before borrowing was huge compared with the same period last year. “Month by month we have seen the same pattern emerging: administration spending has been consistently up 38 per cent this year, with total net expenditure up at least 20 per cent.”