New Zealand budget surplus jumps

The New Zealand government said Thursday it ended the year to June with a budget operating surplus of 8.8 billion dollars (6.1 billion US) but Finance Minister Michael Cullen defended his decision not to return money through tax cuts.
The main opposition National Party came within a whisker of upsetting the governing Labour Party in elections held last weekend by promising large personal tax cuts and accusing the government of hoarding taxpayer funds.
National under Don Brash has 49 seats in the parliament compared to Labour's 50 after provisional vote counting but the final result will not be known until October 1. Labour is expected to be in the best position to form a government by building alliances with minor parties.
Cullen has said tax cuts would only have fuelled inflation, which is already projected to exceed the central bank's three percent limit by next year.
"The economy is running close to capacity and oil prices are high. Both these factors are already putting pressure on inflation, as the Reserve Bank warned last week," Cullen said Thursday. "To further fuel consumption under these circumstances would simply risk pushing up interest rates," Cullen said. The budget operating surplus was well up on 6.6 billion dollars last year, reflecting a 7.7 percent rise in income tax to 18.3 billion dollars, an 18 percent rise in company tax to 7.8 billion dollars and a 4.7 percent rise in goods and services tax to 10.2 billion dollars.
The government's narrower cash surplus, which includes capital spending, was 3.1 billion dollars, of which 2.1 billion dollars was to be set aside for the country's superannuation or pension funding.
Gross sovereign debt fell to 23.5 percent of gross domestic product (GDP) from 25.3 percent at end June 2004, which Cullen said was consistent with the target of lowering the ratio to 20 percent by 2015. Net debt, including the superannuation fund assets, was 4.2 billion dollars or 2.8 percent of GDP, compared with 11.2 billion dollars a year ago.