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Tax cuts pushed back as New Zealand gov't pays off debt

Xinhua, May 12, 2016 Adjust font size:

New Zealand Finance Minister Bill English on Thursday ruled out promised tax cuts in this month's annual Budget, saying the government would focus on paying down debt.

"By keeping on top of spending, we turned an 18 billion NZ dollar (12.3 billion U.S. dollars) deficit in 2011 into a small surplus last year," English said in a published speech to the Wellington Chamber of Commerce.

"The 2014-15 surplus target was an extremely effective tool. But with that target achieved, the government is focusing more on repaying debt," he said.

Net government debt increased from 6 percent of gross domestic product (GDP) in 2008 to 25 percent of GDP last year as a result of the global financial crisis and Christchurch earthquakes of 2010 and 2011.

"Although our debt levels aren't high by international standards, we could be stretched if another economic shock or natural disaster hit," said English.

"So to prepare for the future, we are working to get debt down to around 20 percent of GDP by 2020."

The improved economic outlook would be helpful to the government's tax take, but spending pressures had changed as a result of higher-than-expected population growth and opportunities to invest in better public services.

As a result, the new spending allowances for the Budgets this year and next year had been rearranged.

"These were previously set at 1 billion NZ dollars (683.4 million U.S. dollars) for Budget 2016, and 2.5 billion NZ dollars (1.7 billion U.S. dollars) for Budget 2017," he said.

"With the revised allowances, a portion of spending previously earmarked for Budget 2017 has been brought forward into Budget 2016 in recognition of the additional spending pressures," said English.

"Another portion of spending previously earmarked for Budget 2017 has been used to reduce government debt, to help reach the 2020 debt target."

While lowering income taxes, particularly for low and middle income earners, remained a government priority, these would have to wait till next year or later, he said.

English will deliver his eighth annual Budget on May 26. Endit