Budget Policy Statement 2014/15 and Half Year Fiscal Update 2013/14
Minister of Finance-Honourable Mark Brown
The Budget Policy Statement states Government’s policy intent for the 2014/15 fiscal year including the Government’s fiscal policy and its broad strategic priorities to lead the 2014/15 Budget. On 25-26 November 2013, a Head of Ministries (HOM’s) retreat was held to discuss and develop strategic priorities for the BPS. From these discussions, seven broad strategic priorities were developed and endorsed by cabinet.
These strategic priorities build on the achievements of the Government to date by directing public spending to encourage growth and complement private sector investment. Taking the National Sustainable Development Plan (NSDP) as a starting point, the Government is certain that the broad strategic priorities for 2014/15 will provide a framework which protects our fiscal position and supports inclusive sustainable growth.
The broad strategic priorities are to:
1.improve the wellbeing of our people;
2.revitalise growth in the Pa Enua;
3.maximise the social and economic benefits of infrastructure investment to our communities ;
4.facilitate greater income generation opportunities and economic growth in the Cook Islands;
5.take the precautionary approach to economic development;
6.promote safety and justice; and
7.improve public service productivity.
Half Year Economic and Fiscal Update 2013/14 (HYEFU) Summary
The HYEFU provides the first update on economic and fiscal parameters since the 2013/14 Budget published in June 2013.
The budget position for 2013/14 and 2014/15 has deteriorated since the publication of the 2013/14 Budget, due to both parameter changes and decisions which have been taken by Government since the Budget.
The net operating surplus for 2013/14 was estimated to be $0.046 million. After reviewing five months of actual receipts, tax revenue has been revised downwards by $0.7 million for the 2013/14 Budget year. Additional to this, the phased implementation of the Tax Review will cost the Government around $1.5 million in 2013/14. As a result of these recent movements, the net operating balance has been revised to a deficit of $1.9 million for 2013/14.
Going forward the net operating deficits is forecast to be $1.2 million in 2014/15 and $0.8 million in 2015/16, before returning to a surplus of $3.9 million in 2016/17.
Due to the downward revision of economic forecasts in 2013/14, the growth estimates for the forward years were also revised. In particular, growth in New Zealand and Australian arrivals were revised downward, reflecting slower growth in 2013 than anticipated. Offsetting the downward revision to tourism, the implementation of the Tax Review recommendations will add significantly to GDP across the 2013/14 and 2014/15 budget years.
Following the revisions for 2014/15 Budget, the fiscal setting should be carried out under tight fiscal conditions. Therefore Government will need to consider cost saving policies and initiatives. New budget initiatives will be supplemented by identifying initiatives that can be funded through efficiencies gained in other areas of government operations.