This Budget Policy Statement (BPS) is the new Government’s first action in preparing Budget 2018. It sets the broad fiscal parameters within which details for the Budget will be determined and states the Government’s priorities for the Budget. The BPS also summarises the Treasury’s updated economic and fiscal forecasts based on current prospects and policies, as set out in the Half Year Economic and Fiscal Update (Half Year Update).
The Government will lift the incomes of families to reduce child poverty, protect the environment, create more jobs and build more affordable houses, while running surpluses and reducing net debt. We are committed to building a strong economy, to being fiscally responsible and to providing certainty to the public and markets. There will be a clear focus on sustainable economic development, supporting regional economies, increasing exports, lifting wages and reducing inequality.
This BPS reaffirms our commitment to operate within the Government’s Budget Responsibility Rules. These rules include running sustainable operating surpluses across the economic cycle, reducing net debt to 20 per cent of GDP within five years of taking office and keeping government expenditure as a percentage of GDP in line with historic trends.
The BPS confirms operating allowances of $2.6 billion per year in Budget 2018 and $1.875 billion per year in Budgets 2019 to 2021. Capital allowances have been set at $3.4 billion for Budgets 2018 and 2019, $3.1 billion for Budget 2020 and $2.7 billion for Budget 2021. Major investments will be made in housing, health, education, police and infrastructure to address the social and infrastructure deficits that have emerged in New Zealand.
The operating balance before gains and losses is expected to be in surplus of $2.5 billion in 2017/18 (0.9 per cent of GDP), rising to $8.8 billion in 2021/22 (2.5 per cent of GDP). These surpluses help ensure net core Crown debt reduces to 19.3 per cent of GDP in 2021/22.