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GDP Per Capita—Budget 2011 Growth Projections

Thursday 29 September 2011 Hansard source (external site)

Douglas3. Hon Sir ROGER DOUGLAS (ACT) Link to this
to the Minister of Finance

Has he received any reports that suggest Budget 2011’s nominal and real GDP per capita growth projections are unlikely to be met; if so, what are the consequences of this?

EnglishHon BILL ENGLISH (Minister of Finance) Link to this

I have not received any such advice as yet. Treasury is currently preparing the Pre-election Economic and Fiscal Update that will be released next month. The most recent assessment of the outlook was in the Reserve Bank’s Monetary Policy Statement, released 2 weeks ago, which showed cumulative growth and inflation broadly similar to the Budget forecasts, although data for the year to June 2011 has generally been stronger than the Budget assumed.

DouglasHon Sir Roger Douglas Link to this

Given that the Budget update for the last 7 years has overestimated 2-year real GDP growth projections by 1 percentage point on average, what specific contingency plans, if any, does he have for lost revenue of $14.5 billion if future growth is also 1 percent lower than Budget 2011’s optimistic projections over the next few years?

EnglishHon BILL ENGLISH Link to this

Well, this is a Government that has always taken a pretty considered and balanced approach. We keep in mind that there is a range of outcomes from any Budget: things could turn out worse than one expected; things could turn out better than one expected. At the moment, though, I would have to say that, with the combination of performance in 2011, the economy has been doing better than expected and it is quite likely, given the international circumstances, that growth forecasts 2 and 3 years out might be a bit lower. We have yet to see from the pre-election fiscal update what that adds up to, but certainly in these uncertain times Governments should be prepared for a range of different outcomes.

DouglasHon Sir Roger Douglas Link to this

Given the Minister’s reply, could I ask him whether, if growth is 1 percent lower than projected, as it has been in the past, the Government will cut spending; or will it abandon its commitment to New Zealanders that we will be back in surplus by 2014-15?

EnglishHon BILL ENGLISH Link to this

In the Budget we showed a track to surplus for 2014-15 and it is pretty important in these uncertain times that the Government sticks to that track and achieves that surplus.

MallardHon Trevor Mallard Link to this

In light of the fact that he will have received the first draft of the pre-election fiscal update background documents now, is he as confident of his current growth forecast as he was in Budget 2010, when he promised a growth of 4.7 percent between December 2009 and today, given that the actual growth has been less than half of that amount?

EnglishHon BILL ENGLISH Link to this

As the member will know, the pre-election fiscal update, at least under this Government, is one that is produced independently by Treasury. Whether or not I have seen the documents, I would not tell the member anyway. We have yet to see what Treasury forecasts are going to show. What I can tell the member, though, is that, whatever those forecasts show, we will not revert to the damaging and wasteful economic policies of the Labour Government.