Good news, but let's make it even better

The Government has "opened the books" this morning, and although the economy is still far from healthy, there has been a significant improvement.

And in his media release accompanying the detailed stuff, Bill English says:

Higher tax revenue, lower core Crown expenses and a large fall in annual Canterbury earthquake expenses helped to halve the Government's operating deficit before gains and losses to $9.2 billion in the year to 30 June 2012.
The Crown's annual financial statements published today show the Government is continuing to manage its finances responsibly and getting on top of debt, Finance Minister Bill English says.
"It was important that we helped New Zealanders through the recession by maintaining government programmes and public services," he says. "It was also important that we provided the financial resources needed to help the people of Canterbury after the earthquakes.
"That has meant running large deficits in recent years. However, that could not continue indefinitely. The consequences of too much government debt are all too clear in Europe and the United States, where we are seeing big cuts to public services and pensions, and higher taxes.
"The National-led Government does not want that for New Zealand. That's why we're running a balanced programme to build a competitive economy, to reduce the unsustainable growth in government spending of the previous decade, and to get back to surplus.
"The latest financial statements show the Government is making good progress, with the economy continuing to recover and public finances improving."
In the year to 30 June, tax revenue increased by $3.5 billion from the previous year, as the recovering economy underpinned consumption and wages.
Core Crown expenses fell by $1.4 billion due to a number of factors, including costs associated with the Emissions Trading Scheme and the weather tight homes financial assistance package.
Outside the core Crown, as reported previously the value of KiwiRail's rail-related assets was written down as a result of the company's restructure. Some $1.4 billion of the $8.6 billion devaluation was recorded as an impairment expense in the latest operating statement.
Overall, the operating deficit before gains and losses of $9.2 billion for the latest year compared with $18.4 billion the previous year.
When earthquake costs are excluded, the OBEGAL deficit was $7.3 billion in 2011/12, compared with $9.3 billion the previous year.

Whilst what has been announced today is a step in the right direction, especially the more than 20% fall in the OBERGAL deficit (after making allowances for earthquake-related costs), there is still much to be done. The high value of the dollar is hurting exporters, but that has more to do with the cash-strapped US economy than with ours. And the recovery from recession is still lukewarm. As retailers, we are not expecting a bumper Christmas.

A radical change of course however is the last thing that New Zealand needs. Our economy is out-performing those of many developed countries, and for that we should be guardedly optimistic. Getting back into surplus remains a priority for the Government, and that should be applauded. 

We are headed in the right direction, and whilst there is still much to be done, today's results are better than most analysts were expecting. That is good news, but it can and should get better yet.