16 Oct 2020

Factcheck: Did Labour turn a $6bn surplus into a $1bn deficit?

6:33 am on 16 October 2020

By David Williams for AAP FactCheck

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Act Party leader David Seymour. Photo: RNZ / Dom Thomas

The statement:

"Can they [Labour] really get on top of the debt when they took, I think it was a $6 billion surplus to a billion-dollar deficit in only two years before Covid happened."

David Seymour, ACT Party leader, October 11, 2020.

The analysis

ACT Party leader David Seymour has been buoyed by positive polling in the days leading up the New Zealand general election, claiming Labour's handling of the economy pre-Covid-19 might trigger a swing to his party.

Seymour told TVNZ Q+A host Jack Tame on 11 October that voters are questioning whether Labour can rebuild the country given that before the Covid-19 pandemic hit earlier this year the government oversaw the reversal of a big surplus in just two years.

In response to a question about ACT's path to power, Seymour characterised voters as saying, "'These are the guys that gave us KiwiBuild, can they really rebuild our country out of this? Can they really get on top of the debt when they took, I think it was a $6bn surplus to a billion dollar deficit in only two years before Covid happened?'"

AAP FactCheck analysed Seymour's claim that a $6bn surplus had been reduced to a $1bn deficit in the space of two years pre-Covid-19.

The total Crown operating balance before gains and losses (OBEGAL) can be found in the Half Year Economic and Fiscal Update reports from Treasury.

According to the 2018 report, the government recorded a surplus of $5.5bn in the financial year ending 30 June, $500 million less than Seymour's figure of $6bn (page 22, table 2.1 - fiscal indicators). The following year's surplus was $7.3bn, according to the 2019 report (page 24, table 2.1 - fiscal indicators).

In the same report, Treasury provides the projected deficit for 2020 as $0.9bn, close to the $1bn deficit highlighted by Seymour.

The forecast doesn't take into account the unforeseen impact of the Covid-19 pandemic, which pushed the actual 2020 deficit out to $23.4bn, according to unaudited Treasury figures from September.

In explaining the pre-pandemic budget turnaround, Treasury said: "In the past two years the government has run surpluses of $5.5bn and $7.3bn. The Treasury forecasts a small OBEGAL (operating balance before gains and losses) deficit in 2019/20.

"This is owing to increased investment at recent Budgets and the temporary effects of the global headwinds... flowing through the New Zealand economy."

The verdict

While there are minor inaccuracies in the numbers he quoted, Seymour's comments were broadly in line with budget figures reported by New Zealand Treasury.

The New Zealand government recorded an operating surplus, before gains and losses, of $5.5bn in 2018. It was expected to record a deficit of $0.9bn two years later, before the impact of Covid-19.

Mostly True - The claim is mostly accurate but there is a minor error or problem.

* AAP FactCheck is accredited by the Poynter Institute's International Fact-Checking Network, which promotes best practice through a stringent and transparent Code of Principles.