An early return to surplus

The combined impact of the Christchurch rebuild, high commodity prices and the proposed sell down of a minority stake in certain SOEs have provided the New Zealand Government with the leverage to get the country back to surplus a year earlier than expected,” PricewaterhouseCoopers Chairman John Shewan said.

“It is pleasing suggestions that the major tax reforms introduced last year should in part be rolled back have not been taken up. Now would not have been the right time to increase taxes even by way of a temporary levy to fund the Christchurch rebuild.

“The changes to the KiwiSaver, student loan and Working for Families schemes are being stretched over a longer period and more moderate than we expected,”

Mr Shewan said.

“We think there is a case to be made for further tightening particularly around the student loan area,” he added.

According to Mr Shewan, it was significant that the Government was projecting household incomes to grow by 4% a year over the next few years, and that the country will achieve 4% growth in GDP in 2013.

“The key question is whether those aspirations are achievable. The vulnerabilities will be a further dip in global economic conditions or a dip in commodity prices.

“The stronger than expected fiscal position, returning to surplus by 2015, is dependent on strong growth estimates in tax revenue,” he said.

In his Budget speech, Mr English forecast total tax revenue to jump by 33% over the next four years.

“The sad irony is the tragic events that contributed to the slowing of the New Zealand economy over the past 12 months are in themselves having a significant impact on the growth trajectory over the next four years,” Mr Shewan said.

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