Govt non-committal on asset sale plans

Press, 28 July 1989, Page 4

Govt non-committal on asset sale plans

By

PATTRICK SMELLIE

in Wellington

The Government is avoiding committing itself to any particular asset sales in the year ahead, despite announcing its biggest Budget surplus forecast so far. The $3,099 billion surplus announced in last evening’s Budget relies on $2.5 billion from the proceeds of assets sales. However, the Minister for StateOwned Enterprises, Mr Rodger, said the Government would not issue a list of potential assets for sale, and officials warned journalists off describing the $2.5 billion figure as a target. "We are not going to set restrictive financial targets,” he said. “We have no intention of opening the Government to the situation where there is pressure to sell merely in order to reassure markets that Budget-night projections will be met “The sales process must be a commercial one, with the Government retaining flexibility, so that it can sell on terms and conditions that guarantee the best possible retio for the taxpayer,” he said.

The Budget also produced a projection of the Government’s smallest financial deficit so far. The financial defict excludes asset sale and S.O.E. debt repayment receipts,, and is expected to come in at $729 million in 1989-90. This is equal to 1.06 per cent of gross domestic product, meeting the target set by Mr Caygill when he became Minister of Finance last December. However, the result relies for $3lO million of its success on a change in the tax rules which will see employers paying PAYE to the Government two weeks earlier than would otherwise have been the case. The change makes PAYE payments fortnightly instead of monthly, and starts next May — just in time to allow the Government to rake up a dollop of tax which would otherwise have been paid in the next financial year. Without the $3lO million from this source, the financial deficit would have been almost unchanged from the previous year’s $1,044 billion result That "gtich small changes can

make such big differences to the deficit are testimony to how small it has become. It was 7 per cent of G.D.P. in 1984. Mr Caygill reaffirmed the Government’s commitment to a financial surplus in next year’s Budget, which would see New Zealand finally matching its spending with its revenue. He also committed the Government to reducing public debt onethird by the end of 1992. In addition, the Government would not repay overseas debt in the year ahead, but would use proceeds of the Budget surplus to reduce domestic debt. However, desite debt reductions, the Government is projecting an increase in its debt servicing costs from $4,492 billion last year to $4.72 billion this year. Tax revenue is forecast to rise about $3 billion, or 13.4 per cent over last year, with total collections of $25,935 billion. Policy changes account for $995 million of the growth, tax base growth associated with economic upturn is forecast at $1.49 billion,