-
Bill English - Source: ONE News
One of the big dilemmas facing this National-led Government is just how hard it should push to bring the books back to surplus by 2014/15 as promised.
If it has to, for example, cut spending in a bid to hit the target it could unnecessarily weaken demand in the economy and push up unemployment.
If it is too loose and misses the target by too much it could incur the wrath of credit rating agencies and undermine its political credentials as a competent manager of the economy.
At the moment the latest Treasury data shows the books are about $800 million shy of where they should be if the Government is to get back into the black in two years.
Nothing too drastic in that.
However predicting how the economy will perform over the next few years and how big the tax take will be is very difficult and many economists still feel the Government, while broadly on track for now, will struggle to get to the surplus target.
The question is, does it really matter?
Helping focus Finance Minister Bill English's mind on that question this week was his Australian counterpart Wayne Swann, who's made it abundantly clear that for his government, getting back to surplus next year is a must.
And to get there in the face of a slowing economy and falling tax returns Mr Swann will now make $16 billion in savings over four years, including a cut in the baby bonus for mothers.
The cuts across the ditch will not have been lost on English and John Key.
However they are unlikely in my view to be as slavish as Mr Swann about sticking to the target should they find themselves running short in two years.
In fact, while Mr Key and Mr English have repeatedly said their aim is to get to surplus by 2014/15, they have also been careful to signal that they won't go for the target come hell or high water.
This is a sensible approach.
True, if it misses the target National will take a lot of political flak over its management credentials.
Labour can rightly attack National over a failed promise and would get a boost going into the next election.
So for National there is some genuine political risk in that.
However the damage is unlikely to be severe as English has by and large proved to the electorate over a number of years now that he is, at the very least, a steady hand.
In reality the key test both politically and for the credit rating agencies and lenders who are watching our books is actually that the Government has spending under control and is at least going to get near to surplus by 2014/15.
At the moment it's hard to argue that the Government isn't meeting those tests.
Cutting spending just to meet a pre-determined target might make sense for the Australians right now.
However, for New Zealand, it's a goal that surely isn't worth dying in a ditch over.