SCHEDULE B

FISCAL PARAMETERS

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Statement of General Direction:

Maintain a prudent approach to fiscal policy which balances additional spending on priority areas with tax reductions and the repayment of debt.

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Key Initiatives of Policy:

Additional expenses and the abolition of the superannuation surcharge from 1 April 1998	Up to $1.2 billion in 1997/98; up to $1.7 billion in 1998/99; and up to $2.1 billion in 1999/2000
Tax reductions	Delay the next tax cuts by twelve months to 1 July 1998. Though not the increases to the Independent Family Tax Credit and Family Support. Subject to the continued availability of adequate surpluses and a positive Referendum, further tax cuts on 1 July 1999, 2000, 2001 and 2002, of equivalent fiscal cost to 2%, 1%, 1% and 1% of the base for contributions to the proposed compulsory superannuation scheme. In the event of a positive Referendum outcome on the scheme, those tax cuts would be applied as appropriate to fund the increased contributions.
Capital spending	As provided in the December Economic and Fiscal Update.

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Fiscal Implications of this Policy Agreement:

This agreement sets the overall limits on the additional spending envisaged in other policy agreements as well as policy changes to taxation.

The overall implications are set out in the attached table. This assumes that the economic projections in the December Economic and Fiscal Update (in particular, GDP growth of 3.4% on average over the three years to March 2000, and the under lying rate of inflation averaging 1.3% over the same period) remain appropriate.

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Legislative Implications of this Policy Agreement:

Legislation would be required early in 1997 to delay the tax cuts. Legislation would also be required to abolish the superannuation surcharge.

Fiscal Parameters Table

The Coalition Parties agree that the total spending of the Coalition Government during their three year parliamentary term will be contained within the overall parameters below.

				1996/97	1997/98	1998/99	1999/2000
Revenue (incl SOE Surplus)				$ millions
DEFU projections				35,719	35,904	37,404	39,176
Delay tax cut one y ear					1,100
Further tax cut from 1 July 1999 (1)							-1,000
Total revenue				35,719	37,004	37,404	38,176
% of GDP				37.3%	36.7%	35.5%	34.3%
Expense
DEFU projections				33,226	32,779	32,999	33,069
Additional finance costs						100	300
Additional Coalition expense (2)					1,200	1,700	2,100
Total revenue				33,226	33,979	34,799	35,469
% of GDP				34.7%	33.7%	33.0%	31.9%
Operating Balance
DEFU projections				2,493	3,125	4,405	6,107
% of GDP				2.6%	3.1%	4.2%	5.5%
Coalition				2,493	3,025	2,605	2,707
% of GDP				2.6%	3.0%	2.5%	2.4%
Net Debt
DEFU projections				26,086	23,758	20,474	15,470
% of GDP				27.3%	23.6%	19.4%	13.9%
Coalition				26.086	23,858	22,374	20,770
% of GDP				27.3%	23.7%	21.2%	18.7%

(1) Subject to the continued availability of adequate surpluses and a positive Referendum outcome.

(2) Inclusive of cost to revenue of abolishing the surcharge.

The table assumes that the DEFU economic projections remain appropriate.

The number provided for a further tax cut from July 1999 is broadly equivalent to 2% of the contribution base, for the compulsory savings scheme, in that year.

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SUPPLEMENTARY AGREEMENT BETWEEN NEW ZEALAND FIRST AND NATIONAL ON OUT STANDING MATTERS

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Earthquake Commission

The Parties agree in principle that reserves need to be adequate to meet substantial disasters. The issues to be considered further by the Parties.

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Christmas Island Test Claimants

The Coalition Government agrees to fund up to $200,000 in legal expenses for a possible class action by New Zealand veterans against the United Kingdom Government.

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Hepatitis C and HIV

The Parties agree to investigate whether adequate compensation has been received by those who have contracted Hepatitis C and HIV from contaminated blood transfusions.

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Independent Commission against Corruption

The Parties agree to consider the establishment of an Independent Commission against Corruption after investigating whether existing criminal enforcement agencies and the existing law are adequate.

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Winebox Inquiry

The Coalition Government agrees in principle to promote expeditious implementation of the Commissioner's recommendations (see in conjunction with Taxation Policy).

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Funding for the Commissioner for Children

The Parties agree to provide a further $300,000 in funding.

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Programme Content on Radio and Television

The Parties agree to encourage by non-legislative means an increase in New Zealand-made programmes on television and radio.

 

 

 

 

Rt. Hon. J. B. Bolger Leader New Zealand National Party

Hon. Winston Peters Leader New Zealand First

18 December 1996

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