NZ posts smaller-than-forecast deficit

Monday 12th July 2010

New Zealand’s operating deficit was smaller than forecast in the 11 months through May 31 as the government took in more tax and spent less than expected. The variations were mainly timing issues that the Treasury expects to reverse out in the full year.

The operating balance before gains and losses was a deficit of $4.7 billion in the 11 months ended May 31, which was $1.1 billion, or 18.5% smaller than expected, the Treasury said in a statement posted on its website.

Core tax revenue of $46.6 billion was $243 million, or 0.5% more than expected, while expenses trailed the Treasury’s May Budget forecast by $558 million, or 1%, at $57.8 billion.

Goods and services tax was $238 million, or 2.2% more than expected though the Treasury said the variance would reverse next month, leaving tax revenue for the year in line with forecasts. Core Crown expenses were $558 million below forecast, reflecting lower-than-expected tax impairments, delays in the completion of Ministry of Foreign Affairs and Trade projects and lower-than-forecast family tax credits.

The Crown’s operating balance was $2.16 billion, close to the forecast $2.08 billion. Gross debt was $52.6 billion, or 28.1% of GDP, which was $685 million less than expected, while net debt $25.4 billion, or 13.6%, met estimates.

The Crown accounts show the Treasury has increased provisioning for losses under the retail deposit guarantee scheme to $934 million at May 31 from $880 million in the 10 months through April.

Most of the change reflected the inclusion of $47 million of liabilities for the cost of payments to investors in guaranteed entities which are now in receivership, the Treasury said.

It said the provisions are “a best estimate of likely loss” due to the “significant uncertainty” over how much value can be realized from an entity’s assets following a default.

As at May 31, 73 finance companies had joined the scheme, covering deposits of $133 billion.

Businesswire.co.nz

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