Yesterday Bill English, Minister of Finance released the PREFU. NZ Young Nats Policy Chair Nick Cross explains what it is, and what it means:
In order to create open and accountable government in New Zealand, the Minister of Finance is required by the Public Finance Act to release the Pre-Election Economic and and Fiscal Update (PREFU) which sets out updated forecasts about key economic indicators. Yesterday Bill English released PREFU 2014
What does it tell us?
PREFU 2014 tells us that National is still very much the party of credible economic management. The economic growth forecast from March 2014- March 2015 has been revised down very slightly from 4% to 3.8%, still some of the highest growth in the OECD. The surplus as projected by Treasury is set to hit $300 million. Tax revenue is expected to rise from $61 billion this year to $77 billion by 2018.
Why did these changes happen?
Largely because of slightly lower than expected commodity prices in dairy and timber. However this fall is expected to be a short term fall in overseas demand as several countries look to reduce inventories and does not reflect any structural weakness according to Treasury Secretary Gabriel Makhlouf.
What does it mean?
It means that, on the latest figures, the economic recovery is still very much on track to take the New Zealand into strong growth. What I found most fascinating is how much new tax revenue this promises for the government, making Labour and the Greens new ‘tax the rich’ promises of $1billion more tax revenue seem insignificant. It suggests that business driven economic performance, and not new taxes which harm business, is the path to providing better social services.