$467M surplus beats forecast

Press, 6 May 1988, Page 1

$467M surplus beats forecast

By

OLIVER RIDDELL

in Wellington

The Government has achieved its promised Budget surplus and at $467 million (0.8 per cent of gross domestic product) it is a good deal higher than was expected. The Minister of Finance, Mr Douglas, nonetheless warned that the figures were provisional until checked against the audited Public Accounts for the 1987-88 year. A surplus of $379 million was predicted in the 1987 Budget but this was revised downwards to $229M last December. Mr Douglas said it was the first Budget surplus in New Zealand for 35 years. He said the 1988-89 result should be about the same as for 1987-88 but that details would have to await the 1988 Budget, due in late June.

He was attacked by the Opposition spokeswoman on finance, Miss Ruth Richardson, for achieving the result from excessive taxation and for failing to impose financial discipline on

the Government. Mr Douglas said that the surplus was not the most important indicator of the Government’s economic management. More significant was the financial balance because that showed the savings made by the Government. The financial balance for 198788 had been in deficit by $1323 million (2.2 per cent of estimated gross domestic product). He expected a similar deficit for 198889 But this was well down from the 7 per cent deficit in 1983-84. It was slightly higher than the Budget-night forecast of a deficit of $1271 million. The results were a strong signal that the Government was committed to a course of fiscal responsibility and of managing its way out of debt, Mr Douglas said. The improvement in 1987-88 had been, a result of less Government spending and more tax, but that equation had to improve further. Mr Douglas said that net ex-

penditure was $268 million under forecast, tax revenue had been S2BOM ahead and other revenue had been S3O9M down compared with the December revision. Debt servicing had cost the Government $4970 million during 1987-88 — one dollar in every five that the Government spent. Debt servicing was equivalent to 44 per cent of personal income tax receipts, or 35 per cent of total spending on health, education and social services, Mr Douglas said. It cost the Government $95 million a week to service debt. In 1984, the Government accounts were in deficit by $B6O million before debt servicing; in 1988, the accounts were in surplus by $5438M before debt servicing. Miss Richardson scorned Mr Douglas’s claim of a fiscal surplus. The facts gave no comfort to businesses or exporters because Government expenditure was continuing to show real increases — up 10 per cent in 1987-88.