New Zealand's government said Thursday that it expects to attain a budget surplus in 2015 as the post-quake rebuild in Canterbury and recovery from the drought boost economic growth.
Presenting the Budget 2013, Finance Minister Bill English said that the operating balance before gains and losses is expected to be in a surplus of NZ$75 million in 2014-15, higher than NZ$66 million projected in December's Half Year Update.
The Treasury said the Canterbury rebuild may provide significant impetus to growth through additional residential and business investment as well as related consumption spending. The rebuild will also contribute to an improvement in the labor market and boost tax revenue.
The improvement in the surplus from the Half Year Update can mainly be explained by higher tax revenue. Core crown tax revenue is forecast to reach NZ$66.1 billion in 2014-15, higher than NZ$65.6 billion predicted earlier. Tax revenue is forecast to increase by NZ$14.5 billion over the next four years, reaching NZ$72.8 billion in 2016-17.
The budget forecasts real GDP growth to average 2.5 percent per year, a little above the Treasury's estimate of potential growth over the forecast period.
Real production GDP growth is forecast to be 2.5 percent and 2.4 percent in the years ending March 2013 and March 2014 respectively, compared with 2.3 percent and 2.9 percent forecast in the Half Year Update.
The March 2014 year growth rate is lower than in the Half Year Update primarily because of the impact of the drought on the economy, the Treasury said.
However, growth in the March 2015 year and beyond is expected to pick up as business and residential investment rise, in part driven by the Canterbury rebuild, as well as the recovery from the drought.
While growing consumption is forecast to play a major role in boosting growth, net exports are expected to be a drag on growth from 2013 to 2016 as a higher New Zealand dollar impacts on export and import demand, the Treasury said.
The budget includes a further $5.1 billion worth new spending initiatives in the current year and over the next four years, paid for by a combination of new spending and NZ$1.5 billion in reprioritisation and new tax and revenue changes.
The budget also contains measures to improve housing supply and affordability. The measures include introduction of a bill that enable the government to streamline resource consents for new housing in areas of poor housing affordability and introduction of the Social Housing Reform Bill.
The plan also envisages a record NZ$2.9 billion investment by Housing New Zealand over three years.
by RTT Staff Writer
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