We won’t think too badly about the deficit in the govt’s books (perhaps) if we are reminded how much worse it might have been

Finance  Minister  Grant   Robertson  is  not  averse    to  talking  up  how  well  the  NZ   economy  is  performing.  In  fact  he  positively  revels  in  it.

And,  of  course,  the  inference  to be drawn by anyone  who  listens  to  his  rhetoric  is that  we have  a  superbly  talented  Minister   to  guide  the  good  ship New  Zealand through  the rough  seas  of  the  pandemic.

This  week  in Parliament,  responding  to  a  patsy  from one  of  his  fans,  he focussed  on  the Crown accounts,  saying  they were  in better  shape  than  expected.

“For the year to June 2021, the Crown accounts show the operating balance before gains and losses—the OBEGAL—was at a deficit of $4.6bn. This was $10.6bn better than had been forecast in the Budget in May.

“Net core Crown debt stood at 30% of GDP, $11.6bn less than forecast and well below the average for advanced economies, of 90%. In addition, the cost of servicing that debt remains very low by historic standards”.

He  paused  at   that  point  for  what  one  was  left  to imagine  as  silent  cheers.

And   he then  went  on:

“With the Government’s books in better shape than expected, it does give us more options to respond to the ongoing effects of the pandemic, but we cannot afford to be complacent. We are still facing elevated levels of debt and deficit for some years to come, and we will need to invest our resources carefully in response”.

To  a  supplementary on  what  the impact  of the economy on the country’s tax take  might  be,  he  responded  that the stronger than expected economic environment saw core Crown tax revenue at $98bn for the year to June 2021, $12.9bn higher than the previous year, and $6.4bn  higher than forecast in the Budget.

This was across all tax types. With the country being in lower alert levels for much of the year, the strong labour market and consumer confidence drove these tax revenue increases.

“The focus on saving lives and livelihoods that has been the hallmark of the Government’s approach to COVID-19 has meant that the economy has bounced back better than almost anyone predicted. That strength has given us the fiscal headroom to support businesses and households when the Delta outbreak struck”.

As  for what constraints  there might   have been on the economy arising from the pandemic,  Robertson said that while the economy’s performance has exceeded the expectations of commentators and forecasters, the Delta outbreak shows that the recovery is uneven for some sectors and regions.

“Globally, the pandemic continues to disrupt supply chains, which is, in turn, affecting the NZ economy. It is appropriate that the Government continues to take a balanced approach as we work through the uncertainty, investing heavily to support wellbeing, our transition to a low-carbon economy and to improved productivity, while all the while carefully managing resources with an eye to the long-term sustainability of the economy”.

In  the  light   of that  hymn,  it  might  seem to  be   nitpicking  to note that, while  the Obegal  was  $10.6bn  better than  expected,   the  deficit  was  still  $4.6bn.

Tax  revenues might  have  been up, but  that  largely  was because  the  government  had  been pumping  in  printed  money  as  subsidies  to  businesses to  sustain wages.

Then, as  others  have pointed  out, there  was  little merit  in  the  claim  that Crown net worth had increased by 37% because this  largely stemmed from an increase in the valuation of the  state’s housing portfolio.  However  much  the  housing  portfolio is  revalued, it is not  going to make New  Zealanders  better  off  or  improve   their well-being.

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