The deficit

It turns out the $400 000 000 deficit is actually a $600 000 000 surplus. So there is (some) money for tax cuts after all. Actually, I didn’t look that much into the deficit anyway, regarding it, like the low surplus now, as a temporary thing due to the recent US economic problems. None the less, the fact the surplus is now only $200 000 000 instead of the billions means any tax cuts will be very small.

It also raises the question of where the surplus has gone. No doubt much of it has gone into Labours irresponsible working for families and interest free student loan bribes, along with runaway spending elsewhere. One interesting thing to note from the 2007 budget was its inclusion of $10.3 billion in contingencies for new expenditure. No doubt we will find out more detail of where this unallocated sending will go now that it is election year (hint: election bribes).

For those interested in tax cuts, don’t get despondant about the surplus at only $200 000 000. The real surplus (OBEGAL), not the cash surplus (OBEGAL doesn’t count investment in assets as expenditure, which would be counted as expenditure in the cash surplus) was 3.1 billion, but with this error corrected is now 3.8 billion. Actually slightly ahead of forcast. So there is still money avaliable. And that $10.3 billion in contingencies can be forgotten about. If your brave enough to cut spending you might be able to afford something decent.

However, not everything is good. The economy is projected to grow at only 2% per year over the next three years, and with our population growing at 1.5% average per year between the 2001 census and the 2006 one, our per capita growth will probably be around 0.5%. This is bad, as when the economy grows, the government gets more tax revenue (e.g. more people spending more money, more GST, as well as more jobs (more income tax) and less people on benefits) creating room for tax cuts (which can lead to more growth causing an upward spiral) and better public services. And 2% growth could be good news. There is talk of a possible recession.

Translation: There may be money for tax cuts now, but may not be in future.

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