Labour claims surplus a fake!

Stuff reports:

Labour has questioned whether the Government is keeping money from Canterbury’s earthquake recovery to improve this week’s budget. 

The Government has already confirmed just under $1 billion of new spending will be included in Thursday’s budget, as well as a small surplus.

However, Labour leader David Cunliffe told Radio New Zealand he understood the surplus would be achieved only with “smoke and mirrors”. 

He queried whether funds meant for Canterbury’s earthquake recovery had been held back to make the Government’s books look better than they were.

This shows a high level of both paranoia and economic illiteracy.

The surplus that will (I presume) be projected on Thursday is not for the current year. It is for the 2014/15 financial year.

If there have been delays in spending money for Canterbury earthquake recovery, then it will reduce next year’s surplus, not increase it. The surpluses are about future projections. Hence to maximise them, you’d actually want as much Canterbury spending as possible to take place in this current financial year – rather than next year.

Also if some Canterbury spending is capital, not operational, then the impact of when it is spent on the Budget is minimal – depreciation only – if applicable.

So basically overall the claim is nonsense.

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