By Duncan Garner
The Government's managed to halve its deficit from around $18 billion to just over $9 billion in the year to June.
That’s why John Key was finally drinking to signs of life in the New Zealand economy today, even if it was only a sip at 11am.
The Government's accounts to June this year show the days of moaning and groaning may be over. And growth – no matter how small – is something Mr Key’s clinging to.
“We're heading in the right direction,” he says.
The deficit has been halved to $9.2 billion – that's still above forecast, but down from the record $18.4 billion last year.
KiwiRail's $1.4 billion write off in value hasn't helped. In fact the deficit would actually be lower than forecast if the KiwiRail train wreck hadn’t slightly derailed the Government's books.
“We're not in bad shape relative to other countries but it's still tough on people who don't have a job,” says Mr Key.
Labour leader David Shearer says most New Zealanders are not in a position to celebrate.
“It's going to be cold comfort for most New Zealanders – they're working harder than ever before, we've got job losses and manufacturing in crisis,” he says.
Despite all that, there are some small signs of life in the economy.
Tax revenue is up $3.5 billion overall, including a $2 billion increase in the corporate tax take as business profits rise. PAYE is up a bit and GST is up almost $1 billion, meanwhile Government spending has dropped $1.4 billion.
“Our economy is growing, people are starting to pay more tax,” says Mr Key.
But economists say the coming years don't look that rosy.
“Unfortunately the outlook for further years doesn't look bright given our economic growth,” says BERL economist Ganesh Nana. “Forecasts have been revised down.”
That leaves one crucial question: what are the chances of the Government posting a surplus in 2014/15?
“Pretty slim, bluntly,” says Mr Nana, “unless the Government starts cutting expenditure yet again.”
Mr Key says outside forces may stop his Government reaching surplus.
“We've never been able to commit 100 percent, it's always been a target,” he says. “We are always subject to international conditions.”
The Government still hopes to achieve a surplus in 2014/15 – it's become a political goal – although Mr Key is far less bullish about getting there than he used to be.
Certainly today's numbers leave it on track, but only just. And National will have to deliver two tight budgets in 2013 and 2014 if it's to get there.
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