HERALD WEEKLY ISSUE 608: 21 March 2012

Supplementary Budget 2011/2012

On Monday, Finance Minister Hon Mark Brown tabled a deficit budget in the House

Parliament sat for its first session of 2012 on Monday 20 February and the Minister of Finance Hon. Mark Brown addressed the house on the Supplementary Budget for 2011/2012.
Brown began by touching on recent successful outcomes of the Development Partners Round Table 2012. He commented that “this was an opportunity to reaffirm the investment in our country by our development partners, providing greater certainty about how to fund our national priorities.” The Minister’s attempt to set a positive tone however could not overshadow the overall budget deficit of $2.8 million.
The Appropriation Amendment Bill 2011/2012 amends the original estimates in the budget for total appropriation from $172,097,116 to an increased figure of $178,327, 447. Brown emphasised that items covered under the supplementary budget adhere to the criteria that they are “beyond the control of the government”, are “time sensitive” and “cannot be deferred to the next budget process”, are “one-off in nature” and will not be an ongoing expenditure to the Crown and “have a level of existing Cabinet commitment”.
There is an overall increase of $0.121 million to “ministry outputs”. Included under this are measures to scrutinise and improve on the management of public finances, funding for an environmental officer for Manihiki and also “preparatory work” on several islands for renewable energy initiatives. However, it is POBOC funds (Payments on Behalf of the Crown) that represent the most significant increase in the budget. This is principally due to the Air New Zealand underwrite deal for the Sydney and Los Angeles routes, which will cost Cook Island tax-payers a massive $4.5 million more than the $8 million originally estimated.
Minister Brown and the Prime Minister Hon. Henry Puna met with Air New Zealand Senior Executives on February 2 to discuss several issues and according to Brown it was during this meeting that the increase in costs was confirmed by Air New Zealand. While the minister described the issue as “complex in nature”, he placed most of the blame on the rising cost of aviation fuel. Brown was quick to note that the rising cost of aviation fuel was severely affecting the airline industry globally and not just within the Cook Islands, however he did not address the question of why the government’s original estimates were so far off the $12.5 million mark. Minister Brown added that this “external” cost is beyond control of the government and remarked that “the outlook for aviation fuel is unlikely to get any better and could possibly deteriorate further.”
Despite this forecasted “deterioration”, the Minister said that to cease either of the routes would be “irresponsible” if done in “haste” and without a proper strategy to support the move. The only strategy however that government appears to be placing an emphasis on is ensuring public finances are managed to continue to meet this considerable cost, despite protest from some members of the public at the continuance of the underwrite deal. The government plans to review the growth strategy for the tourism sector but the minister did not go into detail about the review.
Other variances in POBOCs from the July 2011-12 budget include $130,000 to send a dance team to participate in Queen Elizabeth’s Diamond Jubilee Celebrations, $123,000 in financial support for CISNOC, $95,000 towards the hosting of the Pacific Leaders Forum in August, $60,000 in “Operation Eagle” prosecution costs and $50,000 in Civil List operating expenses to cover ministerial and Queen’s Representative travel costs.
Other adjustments outlined include an increase of approximately $58,000 to the Outer Islands Capital Fund for the purchasing of septic tanks for Aitutaki, funds acquired as a result of the sale of recycled materials from Cyclone Pat recovery efforts. Minister Brown also highlighted the success of development partner funds increasing from the original budget by $0.946 million.
The budget balance however is still at an operating deficit of $2.5 million, leaving an overall net balance deficit of $2.8 million. The government will need to ensure it delivers on its promise, as outlined in Brown’s address, to ensure that going forward “investments are targeted and will boost the economy in both short to medium-term spending”. Perhaps the more pertinent question is whether or not the government can achieve this in a sustainable manner that does not place a strain or cause adverse negative impacts on the environment, infrastructure and natural resources of the country. Furthermore, it remains to be seen what engagement and consultation the government plans to have with tax-payers on the Air New Zealand underwrite deal as well as alternative strategies to having this deal in place.

Herald Issue 608 21 March
- Terms of one China Policy document should be reviewed
- Pacific Media Assistance Scheme Seeks Innovation
- Successful NZ visit by PM
- Rerekura Teaurere New Climate Change Coordinator
- News Briefs

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