Rt Hon W F Birch
Treasurer and Minister of Finance
Programme Provides
Medium Term Fiscal Gains
"The economic and social package announced by the new National minority Government today will strengthen the Government's accounts and make our social programmes much more sustainable," Treasurer Bill Birch said today.
"By focusing on the quality of social spending and targeting assistance to those in need, rather than redistributing money to the better-off, we are able to bolster our fiscal position while putting social policies on much sounder basis in the longer term."
In 1998/99 the programme will improve the Crown's operating position by $38.2 million. The fiscal gains increase over time, and by 2001/02, the fiscal savings will be $213.2 million per annum. These figures do not take any account of revenue from potential asset sales. Sale of Contact would, for example, improve the operating position further.
"In the longer term, fiscal savings will be even greater as a result of the decision to continue to adjust New Zealand Superannuation to the Consumer Price Index. Over a 10 year period this decision alone is expected to generate nominal savings of about $2.6 billion."
Mr Birch said these savings will improve the fiscal position over that forecast in the September Economic and Fiscal Outlook.
"On the basis of these figures, this year's surplus will be increased by nearly $40 million and the deficits for the next two years will be reduced by around $130 million and $170 million respectively. As a consequence the projected deficits result almost totally from the impact of the previously announced change in accounting treatment of the ACC unfunded liability tail which is being brought onto the Crown accounts, at a fiscal impact of approximately $500 million.
"The medium term improvements to the operating position will mean that the Government is able to pay off debt more quickly, and reduce the interest costs that are payable on that debt. In turn this frees up money for the Government's priority social priorities," Mr Birch said.
Ends
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