NZ government 9-month tax take $1.57B below forecast, spending also down

Tuesday 8th May 2012

The New Zealand government took in $1.57 billion less tax than expected in the first nine months of the fiscal year, reflecting a tepid economy, though below-forecast spending helped restrain the operating deficit, Treasury figures show.

The Crown took in $39.8 billion in tax in the nine months ended March 31, against a forecast in the Pre-election Economic and Fiscal Update estimate of $41.3 billion, according to the government’s financial statements. Core Crown spending was $1.75 billion below forecast at $50.99 billion, which the Treasury said reflected revenue variances and spending delays.

The operating balance before gains and losses (OBEGAL) was a deficit of $6.13 billion, or $800 million more than forecast. Much of the shortfall reflected an increase in estimated earthquake costs of about $500 million, net of reinsurance, "much of which related to the 23 December 2011 earthquake," it said.

The operating deficit was $8.9 billion including gains and losses versus a Prefu forecast of $7.6 billion. That reflected higher-than-expected actuarial losses on the Government Superannuation Fund and Accident Compensation Corp liabilities.

The Treasury expects a rebound in corporate tax, given “stronger performance by some corporate taxpayers” during the latest reporting period. It is expecting some $400 million of ground will be made up in the final quarter of the year, it said.

The financial statements are the final set to be released before Finance Minister Bill English releases his budget on May 24, which is expected to outline how the government will keep its commitment of returning to surplus by 2015.

“The Government is committed to returning to surplus in 2014/15 and the Budget will confirm that,” English said in a statement. “But we shouldn’t underestimate the challenge – returning to surplus will require tight spending control for the foreseeable future.

The government is “making some challenging decisions to get back to surplus,” he said.

Net debt stood at $50.06 billion, or 24.5 percent of gross domestic product, at March 31. Gross debt was $75.93 billion, or 37 percent of GDP.

BusinessDesk.co.nz

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