“Boring” fiscal conservatism takes a deserved front seat
Budget surplus predicted to return in 2015 – as long as the forecast holds
Today’s Government Budget has mirrored the “new normal” in terms of global trends – relatively “boring fiscal conservatism” – but that’s not such a bad thing, according to Deloitte managing tax partner Thomas Pippos.
Mr Pippos says the Government should be commended for not opting for short-term election measures, and taking a moderate, fiscally responsible approach that starts to wean us away from Government dependency.
“Finance Minister Bill English avoided the temptation of an election year lolly scramble, delivering a fiscally austere and pragmatic Budget 2011 and the partial privatisation of certain SOEs could easily be an opportunity for many ordinary New Zealanders to benefit from equity participation in the future,” Mr Pippos says.
“It was boring but that’s good in the current climate. If you look at some of our competitors elsewhere, this approach is clearly in line with a worldwide trend towards conservative fiscal management.
“And we’ve been fortunate to have escaped some of the harsh measures that countries such as the UK have had to introduce.”
The series of cost-cutting measures have been designed to start correcting the country’s debt path, and bring the Government’s books back into surplus by 2015, but actually it’s a lot better than that. The last big deficit is projected for 2013 at $4.1b, before moving to a $700m deficit in 2014 and a $1.3b surplus by 2015. Australia’s last big deficit is 2012, so we only stagger behind a year, he says.
In saying that, in the near term, 2012 remains pretty anaemic with the substantive growth to commence in 2013, so to a large extent “it is about believing the forecasts” when so may variables remain.
“The Government has however started delivering the country a reality check, saying that there is no silver bullet; we simply can’t continue to live beyond our means. It has started to wean taxpayers from welfare as those at the top end of Working for Families say adios to their welfare handout – a long time coming.
“What’s also a little surprising is that dinosaurs are making a comeback,” Mr Pippos says. “While 30% of personal income tax is still anticipated to come in 2012 from 5% of the population, there are anticipated to be 23,000 more taxpayers earning over $100,000 from 2011 – those that do the heaviest lifting from a personal tax perspective.
“The jury is out till the forecasts hold but it could have been a considerably bleaker day than what it actually was.”