Treasury reports OBEGAL surplus of NZ$414 million in year to June 30, 2015; First budget surplus in 7 years; Govt meets political target; Result a turn-around from forecast of deficit in May Budget

Finance Minister Bill English announcing a 2014/15 budget surplus on October 14 at Treasury. Photo by Lynn Grieveson for Hive News.

By Bernard Hickey

Treasury has reported the Government posted an Operating Balance before Extraordinary Gains and Losses (OBEGAL) of a surplus of NZ$414 million or 0.2% of GDP in the year to June 30, 2015.

This was the first budget surplus posted by the Government in the last seven years and meets a political target the Government has focused on since 2011.

It’s also a major turnaround in the Government’s finances in recent months, given Treasury forecast a deficit for 2014/15 in the May budget of NZ$684 million or 0.3% of GDP.

The full statement is here.

The Government’s operating balance inclusive of gains and losses was a surplus of NZ$5.8 billion or 2.4% of GDP.

Core Crown expenses grew by NZ$1.2 billion or 1.7%. The increase in spending was lower than the pace of growth in the economy, resulting in expenses easing to 30.1% of GDP, compared with over 34% four years ago.

“Returning to surplus in 2014/15 is a significant milestone. I’m proud of the steps taken across the wider public service to help deliver the surplus target while also improving the quality of social services delivered to New Zealanders,”  English said.

“Our focus must remain on steady and ongoing reductions in public debt over the medium term. That is the most prudent approach to take in a still uncertain global environment,” he said.

The OBEGAL deficit hit a high of NZ$18.4 billion o 9% of GDP in 2010/11 after the Global Financial Crisis and the Canterbury earthquakes.

Political reaction

Green Finance Spokeswoman Julie Anne Genter said the surplus had come at the cost of better health and education.

“We think New Zealanders could have got a surplus today and ensured that every hungry child had a school lunch, giving them their best chance of getting a good education,” Genter said.

“With better financial management, the Government can achieve a surplus while enhancing government services, making life better for our children, and cleaning up our air and water,” she said, pointing to the potential for a carbon tax, less road spending and solar power systems for schools.

(Updated with more detail, reaction, chart)