Government deficit remains above $5 billion

The New Zealand government’s books remain in woeful shape with the latest Treasury figures showing an operating deficit of $5.5 billion, $8.8 billion lower than forecast in the pre-election update.

The operating balance, for the seven months to January 31, was 312% below its forecast $2.61 billion.

However, it was slightly above the operating deficit of $6.2 billion for the six months to December.

The government’s coffers were hit by higher-than-expected losses on investments ($3.2 billion), lower than forecast tax revenue ($500 million) and actuarial losses on both the ACC outstanding claims liability ($3.1 billion) and the Government Superannuation Fund pension liability ($900 million).

The operating balance excluding gains and losses (OBEGAL), which strips out unrealised investment gains or losses, was a surplus of $600 million against a forecast surplus of $1.44 billion.

On a brighter note net government debt of $2.29 billion was $1.74 billion lower than forecast.

Treasury attributed this to positive valuation movements in financial assets and financial liabilities held by the New Zealand Debt Management Office and the Reserve Bank, driven by off movements in exchange rates and interest rates.

Treasury deputy secretary Peter Bushnell said it is expecting the government’s books to continue to track more closely with the December Update through the 2008/09 fiscal year, “as the continued deterioration in the world economic situation flows through to the New Zealand economy.”

In December, it forecast an overall operating deficit of $4.33 billion for the fiscal year to June 30, with an OBEGAL deficit of $550 million, and net cash shortfall of $6.63 billion.