By Rob Hosking
Friday 21st February 2003
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The annual surplus for the year looks like being about $1 billion higher than Treasury officials projected back in the pre-election economic statement in June, mainly due to higher than expected tax revenues.
That poses a delicate problem for Finance Minister Michael Cullen, as he prepares for what will be his fourth Budget likely in May or June.
The issue is whether the Treasury consistently errs on the side of caution because of some flaw in its models or whether the downturn in the economy, predicted for later this year, will result in lower revenues than currently expected.
The government doesn't appear to be about to act like a punter who has just won Lotto.
"Tax revenue continues to run ahead for forecasts," Dr Cullen told Parliament's finance and expenditure select committee. "But it's important not to spent the surpluses before they arrive."
There is anecdotal evidence of some government ministers and not all of them in the traditionally high-spending social services area putting in some outrageously large bids in the current Budget round.
Ministers and officials have read the economic updates and are betting there will be extra money in the offing this year.
Surpluses have come in consistently ahead of forecasts for some years now and Treasury officials have been asked to take another look at the economic assumptions underlying the forecasts.
If those assumptions have to be revised and it turns out the government has more money to play with than expected, Dr Cullen outlined four areas of tax relief he saw as a priority:
* greater tax relief for low income families, through the family support system;
* tax inequities present in the current regime;
* further tax simplification measures; and
* a more stimulatory depreciation regime for businesses.
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