Fast-falling debt track frees up billions for Robertson

The $2.3 billion dollar man: Grant Robertson has found an extra $2.3 billion in the last week. Photo: Lynn Grieveson.

Finance Minister Grant Robertson has indicated that billions of dollars has been unlocked for this Budget and subsequent Budgets because a growing economy and various policy tweaks have given the Government $2.3 billion a year of headroom, and nominal GDP is growing quickly.

Robertson was responding to the Treasury’s Financial Statement for the Government, which showed a surplus $910 million higher than forecast in December’s HYEFU. This is in addition to the $1.4 billion additional headroom Robertson announced last week, comprised of equal parts reprioritised spending and new revenue.

The statement shows New Zealand’s debt-to-GDP ratio tracking better than expected. Core Crown debt was 21.4 percent of GDP, below the 22.2 percent forecast in HYEFU, and suggesting the debt track would fall to the Government's 20 percent faster than the 2021/22 forecast in December.

“We’ve been looking at those monthly statements over the last few months that will all be factored in to what we announce next Thursday,” said Robertson.

Robertson indicated that these better-than-expected results would make no difference to the Government’s target of reducing the Debt-to-GDP ratio to 20 percent by 2021/2022. This means additional revenue could be budgeted for spending.

“You’ll see the final numbers that we come up with but clearly the trend has been that it will be significantly better than HYEFU,” Robertson said, “we remain committed to our debt track”.

“You’ll see where we go but we remain committed to the Budget responsibility rules,” he said.

Robertson’s mood is significantly more upbeat than many other Government ministers recently. The Government has been carefully managing expectations ahead of announcing its first Budget next week.

Health Minister David Clark said last week a $10 reduction to GP fees would be “phased in” instead of universally introduced on July 1 as promised, and Education Minister Chris Hipkins said schools need a $1.1 billion cash injection to make up for shortfalls in funding under the previous Government.