Chronology of main economic events.
The Minister of Finance announced the reappointment of Dr. Donald Brash as Governor of the Reserve Bank. At the same time, a new Policy Targets Agreement was signed by the Minister of Finance and the Governor. Under the new PTA, the Reserve Bank is required to keep twelve-monthly increases in the consumer price index within 0 to 2 per cent.
December Economic and Fiscal Update presented by the Treasury.
A sharp fall in the exchange rate caused the Reserve Bank to tighten monetary policy. The Bank took three specific actions over one day: increasing the penalty discount margin from 90 basis points to 150 basis points; not offering to sell back to the market previously discounted Reserve Bank bills; and reducing the cash target from NZ$ 20 million to zero.
The Reserve Bank restored monetary policy settings to the levels which prevailed before January.
International credit rating agency Standard and Poor's reaffirmed the AA-credit rating of New Zealand's long-term debt.
The 1993 Budget was presented. The main statements were:
* the estimated adjusted financial deficit for the 1992/93 financial year was NZ$ 2 340 million. For the 1993/94 and 1994/95 fiscal years, deficits of NZ$ 2 278 million and NZ$ 2 013 million were forecast respectively;
* announcement of a new initiative in financial reporting, and a commitment that the government will publish an economic and fiscal update prior to a general election;
* targeted increases in Family Support and new initiatives funded by Social Welfare and Education to provide extra support for families at risk;
* formation of Regional Health Authorities and Crown Health Enterprises;
* formation of Crown Research Units.
The government moved to facilitate overseas investment in domestic government securities. From 1 July the Debt Management Office will pay the 2 per cent Approved Issuer Levy on interest income for all registered non-resident investors. Thus the full amount of interest due will be paid without any deductions.
The government announced the actual financial deficit for the 1992/93 fiscal year was NZ$ 1 823 million.
The New Zealand Government sold its 100 per cent shareholding in New Zealand Rail Limited to Wisconsin Central Transportation Corporation, Berkshire Partners III LP., and Fay, Richwhite and Company Limited on 20 July 1993 for NZ$ 328.2 million.
Completion of the sale of the government's 57 per cent shareholding of the BNZ to National Australia Bank for NZ$ 849 million.
Introduction of the Fiscal Responsibility Bill.
The government presented its Pre-election Economic and Fiscal Update. The financial deficits for the 1993/94 and 1994/95 fiscal years were forecast at NZ$ 1 442 million and NZ$ 1 194 million respectively.
The National Party was returned to power by a slim majority in the general election. The National Party now holds 50 seats in Parliament, the Labour Party 45, Alliance 2 and New Zealand First 2 seats.
In the electoral reform referendum a majority (53.8 per cent) voted for a change from the First-Past-the-Post electoral system to Mixed Member Proportional Representation.
The government was issued with 10.4 million rights to purchase ordinary share in Wrightsons through its ownership of Fletcher Challenge shares. The fights were sold in conjunction with those received by the FCL Employee Unit Trust at a price of 33c each.
Treasury's Briefing to the incoming government was publicly released.
The government sold its entire stake of 104.5 million ordinary division shares and 26.1 million forest division shares in Fletcher Challenge Limited. The sale was to a number of institutional investors in the world markets. The sale price was NZ$ 418 million.
The New York based credit sorting agency Moody's raised the government's long-term debt rating from AA3 to AA2, matching that of Australia's. This compares to consecutive downgradings from AAA prior to 1984 to AA in October 1984 and AA3 in August 1986.
The Minister of Finance announced that he expects a broadly balanced budget for the 1993/94 financial year.
The government announced a small budget surplus for the eight months till the end of April, almost NZ$ 1 billion ahead of the pre-election forecasts released in October 1993.
The Debt Management Office announced that the bond tender scheduled for May would be cancelled.
The government released its Fiscal Update. The financial balance from the 1993/94 fiscal year was projected to be a NZ$ 422 million surplus. The last official forecast, contained in the October Pre-Election Economic and Fiscal Update, was for a deficit of NZ$ 1 442 million.
The Debt Management Office announced that the bond tender scheduled for June would be cancelled because of the improved fiscal position.
The 1994 Budget was presented. The main statements were:
* the estimated adjusted financial balance for the 1993/94 financial year showed a surplus of NZ$ 527 million. This was projected to rise to NZ$ 730 million in 1994/95 and NZ$ 4 531 million in 1996/97;
* the Crown balance (net worth) was forecast to improve from NZ$ -6 254 million on 30 June 1994 to NZ$ +3 571 million on 30 June 1997;
* net public debt was forecast to fall from NZ$ 35 557 million (42.1 per cent of GDP) on 30 June 1994 to NZ$ 28 128 million (28.7 per cent of GDP) in June 1997;
* funding was increased for the health system and the education and training systems;
* the favourable fiscal outlook would create the potential for tax cuts once prudent debt levels were achieved.