Economists differ on deficit

Press, 14 March 1987, Page 8

Economists differ on deficit

By

BRENDON BURNS

in Wellington

The Government’s income and expenditure figures for the first 10 months of the financial year — and the Minister of Finance’s view of them — have drawn a mixed response from economists.

The figures show Government spending to January 31 to be up 21.4 per cent, tax up 19.1 per cent and a deficit before borrowing for the period of $4.3 billion, up almost $1 billion on the corresponding period last year.

That contrasts with Mr Douglas’s Budget night prediction of a deficit for the year of $2.45 billion, later revised to $2.9 billion.

Two bank economists agreed with Mr Douglas’s statement that the 10-

monthly figures show his revised Budget deficit forecast to be “tracking well.”

"From the evidence so far, I would agree with the Minister that the Budget deficit is tracking on target,” said Mr Peter Baynes, the National Bank’s economist. s

Mr Baynes said the figures for 10 months could not be taken as a guide for the final outcome, as much Government revenue came in during March. The Westpac economist, Mr lan Fitzgerald, also agreed with Mr Douglas. “The revised figure of $2.9 billion is looking reasonable,” he said. There were even some grounds for believing the final outcome may be lower.

He said the boost in Government spending was what would have been expected, with Govern-

ment departments required to pay GST. But the Opposition spokesman on finance, Mr George Gair, and an economist, Mr Len Bayliss, both saw an element of creative accounting in Mr Douglas’s figures.

Mr Gair said the Housing Corporation and Rural Bank were now conspicuously absent from the accounts. "Their absence understates Government expenditure by several hundred million dollars.”

Mr Bayliss said that with an election approaching, both parties were likely to be indulging in creative accounting, but agreed that the Housing Corporation and Rural Bank entries were now not included in deficit forecasts. He estimated this would add $6OO million to the deficit figure in a

true comparison with last year.

“If Mr Douglas did it on the same basis as last year, my guess is the deficit would be somewhere between $3.5 and $4 billion.” Mr Bayliss said that would be about 7 per cent of gross domestic product, which would be of considerable concern, being up from about 4 per cent of G.D.P. last financial year. Mr Bayliss repeated his call for proper public accounts to be established.

A spokesman for Mr Douglas said Housing Corporation and Rural Bank borrowing had been removed from the Government accounts as part of a move putting them on a proper commercial basis.

kA subsidy was in place, covering lending to existing borrowers. This was included in the accounts, he said.