The Government has set a new medium-term fiscal target of reducing net debt to between 10 and 15 per cent of GDP by 2025, Finance Minister Steven Joyce says.
“We have made great progress in our immediate target of reducing net debt to around 20 per cent of GDP by 2020,” Mr Joyce says. “Net debt is expected to be at 24.3 per cent of GDP by the end of this financial year. Now it’s time to set a new target for net debt out to the middle of the next decade.”
Mr Joyce says that it is appropriate that any new debt target helps provide the capacity to absorb future shocks when they come along.
“We have learnt from the Global Financial Crisis and the Canterbury earthquakes that shocks can come along at any time, and sometimes they come in pairs.
“In taking the decision to support New Zealand’s most vulnerable people through the GFC, and to support Canterbury after the quakes, we had to borrow significant sums of money. All up we borrowed the equivalent of around 20 per cent of our GDP.
“That was the right thing to do. It allowed us to spread the cost of both events and allowed the economy to recover without extra taxes and without slashing entitlements, as was variously recommended by critics on the left and the right.
“But now it is the time to get net debt down – to make sure we have the capacity to absorb and respond to the next challenges New Zealand will face.”
Mr Joyce says there will always be future shocks and the most important protection against those shocks was to run a strong and vibrant economy.
“We are a geologically young country, and we are also a small country in an often turbulent world – so there are plenty of shocks ahead of us.
“With a strong economy and low net debt, we will be able to respond to whatever the future has in store for us. With net debt at around 10-15 per cent of GDP, New Zealand will have the capacity to absorb not just one but a couple of big shocks at once if we need to, as we had to last time.
“That’s what true resilience is all about. And we owe it to our future to take that decision.”
The Government will allocate $11 billion in new capital infrastructure over the next four Budgets in addition to spending already included in agency baselines, Finance Minister Steven Joyce says.
“We are growing faster than we have for a long time and adding more jobs all over the country,” Mr Joyce says. “That’s a great thing, but to keep growing, it’s important we keep investing in the infrastructure that enables that growth.”
Mr Joyce says that the focus will be on the infrastructure that supports growth, with capital investment in Budget 2017 being increased to $4 billion, including $812 million for reinstating State Highway One, north and south of Kaikoura.
“We are investing hugely in new schools, hospitals, housing, roads, and railways. This investment will extend that run-rate significantly, and include new investment in the justice and defence sectors as well.
The capital commitment in Budget 2017 will represent the biggest addition to the Government’s capital stock in decades.
“To put that into context, the net new capital allocated in the last four Budgets was $4.8 billion, of which $4.1 billion was funded through the proceeds of the mixed ownership model programme,” Mr Joyce says. “In Budget 2016 we were forecasting just $3.6 billion in new capital spend between Budget 17 and Budget 20 compared to $11 billion now.”
“The $11 billion is additional spend on top of investments already planned by the Government.
If you add the Government’s budgeted new capital investment together with the investment made through baselines and through the National Land Transport Fund – the total is around $23 billion over the next four years, or an average of nearly $6 billion per year.
“And we want to extend that further, with greater use of public-private partnerships, and joint ventures between central and local government and private investors.”
“Details of how the first tranche of that money will be invested will be laid out in the Budget” Mr Joyce says. “But in anyone’s language, this is a very big capital spend over the next four years.
“As a country we are now growing a bit like South-East Queensland or Sydney, when in the past we were used to growing in fits and starts,” Mr Joyce says. “That’s great because we used to send our kids to South East Queensland and Sydney to work, and now they come back here.
“We just need to invest in the infrastructure required to maintain that growth. Budget 2017 will show we are committed to doing just that.”
Note for editors: Revised capital allowances for Budget 2017 to Budget 2020
Thank you John and Peter and the Wellington Chamber of Commerce.
Special guests, Ladies and Gentlemen. It’s a pleasure to be here.
Budget 2017 is now just under one month away and preparations are continuing.
I have four key areas I am thinking about in getting ready for this year’s Budget.
First, delivering better public services for a growing country – providing all New Zealanders with the opportunity to lead successful independent lives.
Second, building the infrastructure we need in growing a modern economy.
Third, we need to keep reducing debt as a percentage of GDP.
And finally, we remain committed to reducing the tax burden and in particular the impact of marginal tax rates on lower and middle income earners, when we have the room to do so. We need to always remember that every dollar the Government spends comes from hard working Kiwi families.
That’s a lot of things to work on. And at the same time we need to make sure that we continue to build a strong economy. It’s only by having a strong economy that we get to consider these four priorities.
Today I intend to focus on two of these key budget areas, the importance of building infrastructure, and why it is important to reduce debt.
The good news in preparing the Budget is that our economy is performing well because of the Government’s strong economic plan. And that is a real tribute to my predecessor in this role, Prime Minister Bill English.
As a result of his economic leadership New Zealand is now one of the strongest performing developed economies since the Global Financial Crisis.
We have had positive growth in every quarter but one over the last six years.
That is a good performance in any one’s books. But it is even stronger when you compare it with our peers across the developed world. Over the last few years, New Zealand has on average grown faster than the US, the UK, Australia, the EU, Japan and Canada. Last year we were the 5th fastest growing economy across the whole of the OECD.
Consistent economic growth translates into jobs and higher incomes for Kiwis. We have one of the highest employment rates in the whole of the OECD, wages have been growing faster than inflation and as of December, for the first time, 2 ½ million people are employed in this country at any one time.
New Zealand’s Employment Rate stands at 66.9 per cent, while Australia’s is at 60.9 per cent. Furthermore, 74.6 per cent of the New Zealand labour force is in full time employment, compared to 64 per cent for Australia.
The Reserve Bank is forecasting solid economic growth at an average of 3 per cent over the four year period to 2020. If those predictions come to pass, New Zealand will have been growing almost continuously for a decade.
Of course, the next four years haven’t happened yet and predictions are just that – predictions. What is important is we understand what is driving this growth and that we take the right steps to ensure it continues rather than slipping back to our more traditional also-ran status.
This Government’s recipe for economic growth is pretty clear.
First, is trade. Much has been made of the massive growth of middle-income consumers across Asia. But it has been New Zealand companies, supported by a trade-friendly government that have been converting those opportunities to actual trade, making New Zealand steadily wealthier. And our exports have continued to grow despite the dairy downturn.
Second, our working-age population is growing, and becoming more highly skilled. That means our companies can hire the people they need to keep growing. Our education system is delivering more graduates with the right skills, our immigration system is providing the necessary skilled migrants, and our flexible labour market is encouraging businesses to add more jobs.
Third, New Zealand firms are becoming more innovative. We are building a strong innovation ecosystem of high-tech companies across the health sector, agri-tech, fintech, software as a service, edtech, govtech, and so on. Our programmes encouraging business research and development are achieving real success – Business R&D was $356 million higher last year than it was in 2014.
Fourth, we are actively encouraging more private sector investment in new businesses and in growing existing businesses especially in regional New Zealand. That includes attracting new international investors whose capital can provide more jobs for Kiwis. At the same time we are working hard to balance the economic needs of our regional communities with our all-important goal of improving environmental outcomes.
Finally, we are building the public infrastructure needed to support growth, including roads, rail, broadband, schools, houses and hospitals. In some parts of New Zealand, including Auckland – you can’t move for road cones at times – which is frustrating – but a strong sign of how we are building for further growth.
The Government’s plan is called the Business Growth Agenda. Blended with sensible, conservative fiscal policy, and successful orthodox monetary policy and you have a recipe for a steadily growing economy that provides more job opportunities and growing incomes.
One of the biggest risks in the New Zealand economy at the moment is the more insular economic policies being pushed overseas, and by our opponents domestically. Many politicians, even those in New Zealand, want to be more protective on trade, slash immigration, reduce foreign investment, institute radical new environmental regulation, centralise wage bargaining, blow up our R&D incentive system or stop much needed roading being built. And increase taxes. That’s the opposite of a recipe for growth – that’s a recipe for stalling growth.
New Zealand’s stronger economic performance continues to flow through to the Government's books.
For the first eight months of the year, tax revenue was nearly 4 per cent ahead of Budget 2016 predictions and 7.7 per cent ahead of the same period last year. Our surplus in the eight months to February was $1.4 billion. That’s more than $900 million more than was predicted at the Half Year Update.
A growing and more resilient economy allows us to meet some of the pressing needs that the Government is faced with from time to time.
The most recent opportunity was the pay equity settlement in the Terranova case. I’ve yet to meet anybody who doesn’t feel that that was a fair settlement for a group of 55,000 hard-working mostly female New Zealanders who have been trapped in an outdated view of the value of their work for a very long time.
One of the distinctive elements of the case of the residential care-givers is that the majority of the sector’s funding comes from Government. It is also one of the positives of this government’s economic stewardship that this year and at this time we have the resources to address this longstanding issue.
The settlement of the Terranova case will cost the Government around $2 billion over five years. We took a decision to put aside funds that will meet 90 per cent of those costs in the fiscal track at the half-yearly update. While the settlement will cost taxpayers in real terms, we have decided to treat it as outside the operating allowance for Budget 2017 – given the unique size of the settlement.
Some unions and other commentators are already talking up the potential for the Terranova settlement to lead to a number of other large settlements across both the public and private sectors. However the barrier is rightly set high, because a flow-on to other sectors would mean going back to the old relativities that these workers have just won the right to get away from.
The Government is proud to be able to solve a long standing issue and lift the wages for this group of New Zealanders as part of our quest to ensure that everyone benefits of steady economic growth.
Another pressing need has been the response to the Kaikoura earthquake.
When the quake happened, the Government immediately moved to provide support to the affected towns, with the earthquake job subsidy, primary sector and tourism support packages, extra housing assistance through MSD, additional health sector support, and grants to help with the restoration of important local infrastructure, including the Kaikoura Harbour.
The biggest challenge created by the earthquake is the reinstatement of State Highway One and the rail line both north and south of Kaikoura. It’s a massive job – but I can report today that the entire project is not expected to cost as much was originally estimated.
The current expected range for re-instating the road and rail corridors is now $1.1 to $1.3 billion dollars, down from the previous estimate of $1.4 to $2 billion.
Both the road and rail corridors will be able to be largely re-instated where they were previously – except for 2.5 kilometres of new alignment north of Kaikoura.
The Kiwirail share of the corridor rebuild is estimated to be up to $400 million, the largest part of which will be covered by insurance. The Government has put aside a capital contingency for the balance of the rail costs.
The rebuild of the state highway is now expected to cost between $800 and $900 million dollars. So today Transport Minister Simon Bridges is announcing the Government will commit $812 million to the State Highway One rebuild as part of the capital budget in Budget 2017.
The New Zealand Transport Agency and Kiwirail both continue to expect their respective parts of this crucial transport corridor to open before the end of this calendar year.
The reinstatement of the transport corridor around Kaikoura is the biggest but by no means the only large cost that will be paid by the Government and taxpayers for the Kaikoura earthquake.
The Government will be assisting the local Kaikoura, Hurunui and Malborough District Councils with the reinstatement of their lifeline utilities. That cost is expected to run to $60 million and will be included in government baselines in Budget 2017.
We have also made an additional $2 million contribution to the Kaikoura District by forgiving their loan for the new medical centre, and today Minister Brownlee is announcing an extra $1.8 million of new operating funding to the town’s water infrastructure costs as part of Budget 2017.
The costs to EQC of the Kaikoura earthquake sequence are now expected to be $550 million. This will be met from EQC’s current cash position, but EQC will have very few funds available of its own after this event and the Edgecumbe floods.
The Government of course stands behind EQC, and the organisation carries billions of dollars of reinsurance to cover a major event, but the Kaikoura earthquake hastens the need to finalise decisions in relations to EQC’s future operations. Minister Brownlee and I intend to announce decisions on the EQC review in the next two to three months.
The total cost to government of the Kaikoura earthquakes continues to evolve – but currently is still expected to be in the order of $2 to $3 billion.
Infrastructure for a Growing Country
Yesterday I had my first drive along the 22km Kapiti Expressway. That is an impressive piece of infrastructure which is reducing journey times and connecting communities on the coast and across the lower North Island. It’s the first stage of a multi-billion dollar development which includes Transmission Gully and the Otaki expressway. And nine years ago it wasn’t even on the drawing boards.
Earlier in the day I travelled down the newly widened North-Western motorway in Auckland, and through the widening of SH20 in Mt Roskill, and through the new Kirkbride Road link to Auckland airport. I’ve also recently visited and travelled over the new motorways and expressways in the Bay of Plenty, Waikato, Christchurch and Dunedin.
This Government is New Zealand’s infrastructure government. Our investment in roads, rail, broadband, schools, electricity transmission and hospitals has been unprecedented. And we are increasing it further.
At the half-year update the Government decided to increase the new capital spend for Budget 2017 from $900 million to $3 billion. We have reviewed that figure again as we prepare for Budget 2017 and our total new capital spend for each year over the forecast period.
Today I can announce that the Government has decided to invest $11 billion in new capital infrastructure over the next four years including $4 Billion in this year’s budget alone.
To put that into context, the net new capital allocated in the last four Budgets was $4.8 billion, of which $4.1 billion was funded through the proceeds of the mixed ownership model programme.
In Budget 2016 we were forecasting just $3.6 billion in new capital spend between Budget 17 and Budget 20 compared to $11 billion now.
The $11 billion is additional spend on top of investments already planned by the Government.
If you add the Government’s budgeted new capital investment together with the investment made through baselines and through the National Land Transport Fund – the total is around $23 billion over the next four years, or an average nearly $6 billion per year.
Details of how the first tranche of that money will be invested will be laid out in the Budget on May 25th. But in anyone’s language, this is a very big capital spend over the next four years.
And we want to extend that further, with greater use of public-private partnerships, and joint ventures between central and local government, and private investors.
This is the level of investment we need to make in a country that is growing strongly and one that we want to have grow further, and with it grow more and higher paying jobs, in the years ahead.
Another of the Government’s key fiscal goals is its net debt target. We have set a target of reducing net debt as a proportion of GDP to about 20 per cent by 2020.
And that’s all about resilience.
Resilience has become a bit of a buzzword in this country in recent times. Recent earthquakes and flood events have placed emphasised the importance of resilient buildings, resilient infrastructure, and resilient communities.
But the most important resilience we need to have is to be a resilient country. A country that has the ability and capacity to respond to the needs of the most vulnerable people and communities in the face of a natural disaster.
We have direct experience over the last eight years of how important this capacity is.
When the Global Financial Crisis hit, the world economy plunged and New Zealand with it. The combination of Labour’s spending, a 50 per cent increase in five years, and the impact of the GFC meant that our new Government was faced with Treasury’s prognosis of a ‘decade of deficits’ with net debt expected to climb to more than 60 per cent of GDP.
We took the decision to protect the support for more vulnerable New Zealanders through the GFC and immediately started to rein in some of the previous Government’s more wild spending plans.
Then New Zealand had the second big shock – the Canterbury earthquakes.
These two major events meant we had to borrow significant sums of money. Firstly to cushion vulnerable New Zealanders from the worst effects of the GFC, and secondly to rebuild Christchurch.
Net debt grew rapidly. We expected it to peak at 30 per cent of GDP. It actually peaked at 26 per cent.
The deficit grew – reaching $18 billion.
The important point is that to manage New Zealand through those two shocks meant borrowing the equivalent of about 20 per cent of our GDP.
That was the right thing to do. It allowed us to spread the cost of both events and allow the economy to recover without extra taxes and without slashing entitlements – which critics on the left and right were calling for at the time.
But now it is the time to get that debt down – to make sure we have the capacity to absorb and respond to the next challenges New Zealand will face.
There will always be future shocks. We are a geologically young country, and we are also a small country in an often turbulent world – so there are plenty of bumps in the road ahead of us, whether they are natural disasters or from international events.
The Kaikoura earthquake was tough for Kaikoura, for Waiau, and Seddon in particular. But it would have been much tougher for New Zealand if it had been centred a bit further north in Wellington.
It’s important we start to save now for our next rainy day. The most important protection against future shocks to run a strong and vibrant economy. Lowering debt levels gives us the capacity to do this.
That’s why the Government has set the target to reduce debt to around 20 per cent of GDP by 2020 – and we are determined to maintain the progress to that target in this budget, both by growing the economy and reducing debt. And 20 per cent is just a staging post.
In Budget 2017 the Government will set a new medium-term fiscal target of getting net debt to between 10 and 15 per cent of GDP in another five years – by the middle of next decade.
At 10 to 15 per cent, New Zealand will have the capacity to absorb not just one but a couple of big shocks at once if we need to, as we had to last time.
That’s what resilience is all about. And we owe it to our future to take that decision. And we’ll be able to do it while making the level of capital investment I talked about earlier.
The Government’s budget is about balancing competing concerns, and that is always the challenge.
Whether in deficit or in surplus there are many alternative uses for the available resources.
The Government has set four priorities for Budget 2017 – boosting public services, building new infrastructure for a growing country, reducing debt, and seeking to lift family incomes.
However the biggest priority is the one that pays for the other four. It is only through having a strong economy that we can tackle the others, and provide for the income and security of New Zealanders.
Building and sustaining a strong economy therefore remains the Government’s most important goal.
It is only through having a strong and prosperous economy, that we can deliver a prosperous and successful New Zealand.
The Crown accounts for the eight months to 28 February posted a $1.4 billion operating surplus before gains and losses, $912 million better than expected at the half yearly update, Finance Minister Steven Joyce says.
“Higher tax revenues and lower than forecast expenditure mean the OBEGAL surplus is better than expected,” Mr Joyce says.
Tax revenues from the last year are 3.8 per cent ahead of Budget 2016 expectations and 7.7 per cent ahead of the same period last year, with all categories of tax growing.
“The Government has collected $3.5 billion more in tax in the first eight months of this year compared to last year,” Mr Joyce says. “That’s one of the dividends the country obtains from a consistently growing economy that is responding to a strong economic plan.”
Core Crown expenses were $395 million below forecast.
The $1.4 billion OBEGAL surplus compares to Treasury’s Budget 2016 forecast of a $568 million surplus for the eight months to February at the start of the fiscal year.
“While, the expenses outturn will continue to move around a little, it is good to see the trend of growing tax revenues continue as we head into Budget 2017, Mr Joyce says.
“It’s also good to see us making progress on our debt target, with net debt currently at 23.5 per cent of GDP,” Mr Joyce says. “Reducing net debt to around 20 per cent of GDP by 2020/21 will improve the resilience of the New Zealand economy to future shocks.”
Finance Minister Steven Joyce has welcomed the release of the Productivity Commission’s report Better Urban Planning.
“The report is a comprehensive study of the workings of New Zealand’s current urban planning regime and it proposes major changes to it. The issues raised in the report cross over a significant number of ministerial portfolios,” Mr Joyce says.
“The Government shares the Commission’s view that well-planned urban areas and cities that function effectively are hugely important to the wellbeing of New Zealanders. Ministers will carefully review all of the recommendations and opportunities identified in the report.”
The Commission’s report makes 105 findings and 64 recommendations, including:Replacing the Resource Management Act and other statutes with a single new planning law that governs both the built and natural environment Clearer central government stewardship of the planning system Using statutory principles to set expectations for fair, efficient and proportionate planning decisions Making greater use of targeted rates and alternative infrastructure funding tools
“As New Zealand becomes more economically successful and our population grows we need better and more responsive planning for growth and more investment in the infrastructure that supports that growth,” Mr Joyce says.
“The Government has made a number of changes to existing planning and funding tools over recent years. These include the National Policy Statement on Urban Capacity, the proposed Urban Development Authority legislation, the Housing Infrastructure Fund, and the current round of RMA reforms, all of which progress some of the areas of work the Productivity Commission identifies.
“However in this report the Government asked the Productivity Commission to take a blues skies approach and provide a longer term view at what a future planning system could look like.
“The Government will respond formally to the Productivity Commission’s recommendations in due course. We would like to acknowledge the Commission’s time and effort in considering this issue, and the wide engagement it has had with individuals, local authorities and firms throughout New Zealand and Australia in the inquiry,” Mr Joyce says.
The full report is available here.
Leading credit rating agency Moody’s Investors Service has reaffirmed New Zealand's highest possible Aaa sovereign credit rating with a stable outlook, highlighting the country's high economic resilience, effective policy making and very strong fiscal position.
"The latest Moody's credit rating statement is a very positive endorsement of New Zealand's economic performance and the Government's policy settings," Finance Minister Steven Joyce says.
"Moody's expects that New Zealand will be one of the fastest-growing Aaa rated economies over the next few years. It notes that New Zealand's strong population growth, including through immigration, lifts the country's economic potential.
“The Agency also notes that New Zealand's number one world ranking for ease of doing business supports the country's robust growth outlook.
"Moody's draws attention to New Zealand's targeting of and subsequent achievement of a Budget surplus in 2014/15 as evidence of the country's effective policy making.
"Finally it notes that the Government's focus on preserving strong public finances provides New Zealand with the room to buffer the economy from any future economic shocks or natural disasters."
Mr Joyce says the Government will continue to implement its strong economic plan, focusing on building better public services and infrastructure, steadily reducing net debt, and ensuring the benefits of economic growth are shared with Kiwi families.
"This latest report from Moody's underlines the benefits of all the work New Zealand has done over the last few years to strengthen our economy and our country's finances. It's a tribute to the hard work of all Kiwis and a position we can all take real confidence from,” Mr Joyce says.
Moody’s credit analysis of New Zealand is available here.
Finance Minister Steven Joyce, and Tertiary Education, Skills and Employment Minister Paul Goldsmith have welcomed the release of the Productivity Commission’s report New models of tertiary education.
“We would like to acknowledge the Commission’s time and effort in considering this issue, and the wide engagement of the tertiary sector in the inquiry,” Mr Joyce says.
“We share the Commission’s commitment to further improving the way that tertiary education delivers relevant skills for New Zealanders, and will review the recommendations and opportunities identified in the report.”
“The Government will carefully consider the Commission’s recommendations over the coming months. We have work underway on some of the matters raised such as improving the accessibility of information for prospective students,” Mr Goldsmith says.
The Commission’s report is wide-ranging, and makes 49 recommendations. These focus on:Improving information and its use across the tertiary education system, Improving regulatory settings, particularly around quality assurance, Reforming how Government purchases tertiary education, Ensuring the “system architecture” supports clear roles, accountabilities, and expectations to drive better, and more innovative, tertiary education performance.
“The Government will keep an open mind on all of the recommendations, with the exception of the Commission’s view that interest should be reintroduced on new student loan borrowing.
“The Government is committed to retaining interest-free student loans for borrowers residing in New Zealand,” says Mr Goldsmith.
“We do not want to see young people starting their working lives with unmanageable debt. We know that for those who stay in New Zealand after graduating, half will have repaid their loan in under six and a half years.”
“Tertiary education provides students with the skills and qualifications to get good jobs and good incomes, contribute to the country’s economy, and be part of an innovative and successful New Zealand,” Mr Joyce says.
The Government will respond formally to the Productivity Commission’s recommendations in due course. The report will be tabled in Parliament at 9am today, and can be found on the Commission’s website www.productivity.govt.nz.
The construction and services industries drove New Zealand’s economic growth in the December quarter as some other sectors eased back, Finance Minister Steven Joyce says.
Statistics New Zealand reported Gross Domestic Product grew by 0.4 per cent in the December 2016 quarter. This took annual growth to 3.1 per cent (2.7 per cent higher than the December 2015 quarter).
“Our economy is successfully navigating a still challenging international environment, and growing the prosperity of New Zealanders,” Mr Joyce says.
“While growth has softened in this latest quarter, the continuing trend is consistent ongoing growth ahead of most other developed countries.
GDP per capita has grown 0.9 per cent over the last year, and real gross national disposable income has grown 4.1 per cent over the year.
“We have seen particularly impressive growth in construction and services partly offset by a fall in primary production and the related manufacturing sector,” Mr Joyce says.
Construction activity grew 1.8 per cent in the quarter and 10.5 per cent in the calendar year – the highest rate of growth since 2004.
Other industries with strong quarterly growth include:
• health care and social assistance (up 1.3 per cent)
• professional, scientific and technical services (up 1.6 per cent)
• accommodation and food services (up 1.0 per cent)
• Arts and recreation services (up 5.5 per cent)
The Current Account deficit released yesterday is down to 2.7 per cent in the 2016 year. Our net international liability is down just below 60 per cent. This is the lowest on record.
“This week’s statistics on economic growth and our external accounts show the benefit of the Government’s sensible, consistent economic management,” Mr Joyce says.
“We will continue to provide the economic conditions that encourage businesses to invest and grow jobs to the benefit of Kiwi’s and their families.”
The Government’s books are better than expected, with a $1.1 billion OBEGAL surplus for the seven months to January, Finance Minister Steven Joyce says.
“Stronger tax revenues as a result of a healthier economy are flowing through to the Government’s financial performance,” Mr Joyce says.
Tax revenues year-to-date are 3.8 per cent more than they were predicted to be in Budget 2016.
“Company tax in particular is higher than expected, and that reflects the good performance of New Zealand companies in what is still an uncertain world,” Mr Joyce says.
The $1.1 billion OBEGAL surplus compares to Treasury’s forecast of a $517 million surplus at the start of the fiscal year.
Core Crown expenses for the seven months to January were $234 million lower than the Budget forecast, reflecting the Government’s ongoing commitment to prudent spending.
Mr Joyce says that a number of variables made the final out-turn for the full financial year hard to predict.
“The biggest variable at this stage is the cost of the Kaikoura earthquake and how those are allocated between this year and next year,” Mr Joyce says.
“The good news is that this Government’s strong economic management means we can afford to step in to help these communities and support them when they are most in need.”
Progressively lifting the age of entitlement to New Zealand Superannuation from 65 to 67 is the responsible and fair thing to do for New Zealand, Finance Minister Steven Joyce says.
"Average life expectancy is increasing by around 1.3 years each decade and more older people are staying in the workforce,” Mr Joyce says.
“Greater life expectancy is of course positive but it does drive up the cost of NZ Super. While New Zealand has a more affordable scheme than most countries, the increasing costs would require future trade-offs – either restricting spending increases in areas like health and education, or increasing taxes.”
The Government intends to increase the age of entitlement for NZ Super by six months each year from July 2037 until it reaches 67 in July 2040. This means everyone born on or after 1 January 1974 will be eligible for NZ Super from age 67.
Other settings such as indexing NZ Super to the average wage and universal entitlement without means testing will remain unchanged; and the age that KiwiSaver funds can be accessed will remain at 65.
“Making a change over a reasonable timeframe will give future generations of New Zealanders more choice as to how they allocate their government spending,” Mr Joyce says.
"While others have called for an earlier transition, the Government's view is that giving 20 years’ notice balances timeliness with being fair to current generations of working New Zealanders.”
Average life expectancy in New Zealand has increased by 12 years over the past 60 years, including by four years since 2001, when the age for NZ Super was increased to 65.
“When the age was set at 65 in 2001, a retiree could expect to spend about a fifth of their life receiving NZ Super. That has since increased to around a quarter,” Mr Joyce says. “Following this change, those eligible for NZ Super at 67 in 2040 can still expect to receive it for a quarter of their life on average.”
Mr Joyce says the Government’s previous position of not changing the age of eligibility was appropriate in the aftermath of the Global Financial Crisis, when New Zealanders were looking for certainty at a time when the Government’s finances were under pressure.
The Government is also proposing to double the residency requirements for NZ Super so that applicants must have lived in New Zealand for 20 years, with five of those after the age of 50. People who are already citizens or residents will remain eligible under the existing rules.
The Government intends to introduce legislation to make these changes early in 2018. The residency changes will cover people who arrive in New Zealand after the legislation is passed.
"These changes are important and need to be politically durable,” Mr Joyce says. "Scheduling the legislation in this way gives all political parties the opportunity to discuss their position with the public before it comes before Parliament."
The proposed changes to the age of eligibility and the residency requirements are estimated to save the Government in excess of 0.6 per cent of GDP or $4.0 billion annually once the changes are fully in place.
Included in the legislation will be provision for parliamentary consideration of any need for any temporary transition requirements in 2030.
"It is not possible yet to determine what, if any, temporary support will be needed for people who are unable to continue working beyond the age of 65,” Mr Joyce says.
“Considering any requirements in 2030 will give a future parliament the opportunity to consider current information on health and labour market trends of different groups as the age change approaches."