13 Oct 2011

Doubts expressed over return to surplus by 2015

10:16 am on 13 October 2011

Economists are questioning whether the Government will be able to get its books into surplus by 2015 as planned.

On Tuesday the Government opened the books to reveal a deficit for the year to the end of June that was $1.7 billion higher than forecast in May's budget, largely because of higher costs associated with the Canterbury earthquakes.

Excluding unrealised investment gains and losses, the deficit stood at $18.4 billion in the year to June.

Council of Trade Unions economist Bill Rosenberg says the current situation must cast doubt on whether the Government can achieve its aim of returning to surplus in four years' time.

"The growth in the economy has been pretty lacklustre," Mr Rosenberg says. "The earthquake reconstruction - which was going to be a big reason for growth for next year - is late, and there's signs in the year just gone past that they were pushing pretty hard in pushing down spending and just how long that's sustainable is a big question, so there have to be some doubts there."

Westpac chief economist Dominick Stephens says a return to surplus in 2015 will require either stronger economic growth or, more likely, even more belt-tightening than was set out in May's Budget.

But Finance Minister Bill English is sticking with the 2015 target.

He says there is a lot of belt-tightening to come over the next three or four years but, along with that, the Government wants to concentrate on getting better results.

Mr English says the work it has done in law and order and welfare will start having some fiscal payoff in the next few years.