Today the Government opened the books. It is required to do this by law. The law was introduced in the early 1990s after the outgoing Labour government hid the true state of the crown accounts, and the fact that the then government-owned Bank of New Zealand needed a bailout. The incoming government received a shock when it realised the true state of the books.
This law showed its worth in 2008. The Budget in June 2008 painted a rosy picture of economic growth and ongoing surpluses. However, by October it was a different picture. We learned in the 2008 Pre-Election Fiscal and Update (Prefu) that in fact the economy had been in recession all year, and that the ongoing surpluses had been replaced with a decade of deficits.
The news got even worse two months later when Treasury did its December Economic Forecast Update (Defu). The decade of deficits had become a structural deficit that would have seen New Zealand ending up in a similar situation to Greece if no changes were made. Gross crown debt as a percentage of the economy was forecast to hit 57 per cent in 2023, or if the global economy continued to worsen, possibly as high as 76 per cent. At that stage you are like Greece, and the interest on the debt is so high that massive cuts in spending on welfare, health and education are necessary to be able to make the interest payments. …
If there is no change of fiscal policies, then the Government is still forecast to achieve a surplus again in the 2014-15 fiscal year, which should also be the year when net debt peaks at 29 per cent of GDP. It’s a much better outlook than three years ago.
There’s also some interesting stuff on how our trade with the US and China has changed over the last decade.