Secretary Caralee McLiesh says the Treasury Department of New Zealand is investigating additional measures to lower government spending and raise revenue despite ongoing declines in tax receipts due to the sluggish economy.
“Treasury’s going to continue to conduct reviews of spending and identify options, be they revenue options or spending options, for government to consider,” McLiesh said on Wednesday.
Additionally, in terms of revenue, she said the budget in May increased certain taxes and service fees and “we’ll be looking to see if there are more of those.”
The government's attempts to control expenditure, decrease debt, and achieve a budget surplus are being hindered by recessionary conditions, which have led to repeated downward revisions in tax revenue forecasts.
Scheduled tax cuts set to come into effect at the end of July will also contribute to a fall in overall tax revenue, Bloomberg reports.
McLiesh added that recent data indicate “underlying weakness in the economy” that “continues to pose risks for revenue.”
“We’ve seen it in current spending, we’ve seen it in house prices. We’ve seen it in the performance of manufacturing and services indices. There is a lot of weakness and that poses some risks to our forecasts,” she stated.
In the May budget, the Treasury predicted a return to surplus by 2028. It also expects net debt to increase to 43.5% of GDP next year and then decrease to 41.8% by 2028, which remains above the government's target range of 20-40%.
“We do think that overall the levels of debt remain within the prudent level, but we will be working to support government to meet its target,” McLiesh said. “In order to do that, there will need to be some tough choices around the operating balance. The way to bring debt down is to increase revenue or reduce expenses.”
Furthermore, government departments have already implemented spending cuts ranging from 6.5% to 7.5%, leading to significant layoffs. McLiesh noted that the Treasury is reducing its workforce by 50 positions, primarily through natural attrition and by not filling vacancies, which will bring its total staff numbers down to approximately 600 people.
In addition, Finance Minister Nicola Willis has imposed new spending limits of just NZ$2.4 billion per year for her next three budgets.
However, McLiesh said these limits are expected to be “very challenging to meet” given the pressures for increased government services.
“It’s going to require a lot more reprioritisation, either more spending reductions or higher revenue, and the Minister of Finance has said that that is what government is committed to doing,” she added.