The government’s operating deficit before gains and losses is expected to reach around $16.7 billion for the year to June 30, as forecast in the budget last month, according to Finance Minister Bill English.

This is despite core Crown expenses coming in $525 million below forecast for the 10 months to April 30, leaving the OBEGAL (operating balance excluding gains and losses) deficit at $10.9 billion for the 10 months.

 “We will run a record annual deficit this year and it’s essential that we take the steps outlined in the Budget to bring it down and return to surplus by 2014/15,” Mr English said.

 “We have borrowed an average $380 million of net new debt every week this fiscal year. That simply could not continue. Budget measures will reduce that net borrowing to around $100 million a week in the coming year.

 “The OBEGAL deficit is expected to fall below $10 billion next year and be virtually eliminated in 2013/14, before the government then starts running surpluses and repaying debt.

 “This is one of the largest contributions the government can make to lifting national savings and building faster growth built on exports and productive investment.”

 The budget deficit this year will include some significant one-off costs, including the Earthquake Commission’s $3 billion share of the two Canterbury earthquakes and some of the government’s cost of meeting deposit guarantees for collapsed finance companies.

Crown accounts published today show the OBEGAL deficit of $10.9 billion for the 10 months to April 30 – about $400 million lower than the $11.3 billion forecast in the Budget.

Most of the difference stemmed from core Crown expenses coming in $525 million below forecast, due to a number of relatively small differences, which are expected to reverse before the end of the fiscal year.