The first highlighted item – in a press statement from Finance Minister Grant Robertson after the release of the Pre-election Economic and Fiscal Update – is that the economy is doing better than forecast.
Similarly, Robertson today was taking comfort from better-than-forecast GDP figures which show GDP fell 12.2% in the June quarter from March and plunged the economy into recession.
“This result was better than the Treasury forecast of 16% released yesterday and at the lower end of other commentators’ expectations,” Grant Robertson said.
Next in descending order on his list of highlights from the PREFU yesterday were the expectation unemployment would peak at 7.8%, down from 9.8% forecast in the Budget; year-to-June accounts showed tax revenue, debt and OBEGAL better than forecast; global forecasts have been downgraded because of COVID-19 uncertainties; and “balanced plan to support critical public services, manage debt and reduce the deficit caused by COVID-19” (his balanced plan, we presume).
Further down, we learn something about the debt that is being amassed:
“Net core Crown debt was 27.6% of GDP at 30 June, compared to the Budget forecast of 30.2%, and the OBEGAL deficit of 7.7% of GDP at 30 June was lower than the 9.6% forecast.”
The PREFU’s long-term projection model shows debt reducing to 48% of GDP by the end of the projection period.
Robertson noted that the difference between debt of 56% and 48% at the end of the projection period represents $46 billion less debt than if debt just remained at its peak.
“Because the Government can borrow for 20 years or longer at rates below 1%, it makes sense to lock these in now to fund the response before interest rates rise. Because the Treasury has already been able to secure more funding at lower rates, and because the Government’s cash position has improved since the Budget, the Treasury today announced it has reduced its debt programme over the next four years by $10 billion.”
Meanwhile Robertson’s colleagues were feverishly spending the borrowed money:
- Transport Minister Phil Twyford released the final Government Policy Statement on land transport (GPS) 2021 which outlines a $48 billion investment in services and infrastructure over the next decade. The upper range of funding for state highway maintenance has been lifted by $510 million; rail gets a $500 million boost; $10 billion is being invested in the Road to Zero strategy.
- $19.7 million of Jobs for Nature funding is being invested in kiwi conservation, including increased predator control, more dogs trained in kiwi avoidance and the Operation Nest Egg programme.
- The Provincial Growth Fund will provide $11.88 million to fund fencing and waterway projects nationwide to improve the environment and create “more than 100 jobs” nationwide. Work will start within the next two months.
- Ōtaki will receive $1.4 million in Government funding for two projects . The Māoriland Charitable Trust will receive a $900,000 Provincial Growth Fund grant to upgrade the Māoriland Hub building to house the Centre for Māori and Indigenous Film and Creative Excellence, and the Ōtaki Civic Theatre (which hosts the Maoriland film festival) will receive a grant of $500,000 for a refurbishment.
- Three research programmes aimed at lifting New Zealand’s advanced energy technology research capability over seven years will each receive a share of $40.7 million investment from the Strategic Science Investment Fund.
- Auckland is getting an immediate boost from the $39.7 million over four years aimed at supporting the educational needs of Pacific learners and families in the regions hardest hit by COVID-19. The Pacific Education Support Fund – launched today – with 2020/21 funding of $3.5 million is now open to Auckland Pacific community organisations and Pacific providers.
Past spending decisions were reflected in Fletcher Tabuteau, Under-Secretary for Regional Economic Development, enthusing about two community initiatives that were officially opened in Murapara – a new digital hub and development centre.
Commerce and Consumer Affairs Minister Kris Faafoi was preoccupied with post-Covid economic recovery issues, too.
These had been triggered by the Retirement Commissioner’s three-yearly review into New Zealand’s retirement income policy delivered to the Government late last year.
Covid-19 (not surprisingly) has affected the government’s ability to fully assess and respond to the review’s recommendations, he said.
Faafoi outlined the government’s response to the review in several key areas (although his language was uninformatively vague) –
- The Government is committed to working closely with the Commissioner to consider the review’s recommendations, especially those that aren’t already being addressed under existing work programmes.
- The Government supports the Commissioner’s efforts to deliver a more collaborative focus on retirement policy issues and intends to continue to work with the Commissioner on this, including reinvigorating the National Strategy for Financial Capability.
- Many of the recommendations will be considered alongside the Government’s existing work programmes.
Faafoi also ticked off action taken on two of the review’s recommendations: a recommendation to establish “a new employment connection service” resulted in the launch of the Keep New Zealand Working online recruitment tool, which connects job seekers directly to employers.
The recommendation to make prescribed investor rates tax refundable was translated into the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 to accommodate people using incorrect tax rates.
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