BUSINESSDESK: The government took in $772 million more tax than expected in the first 10 months of the fiscal year as Portfolio Investment Entities grew faster than anticipated and there were fewer GST refunds.
The Crown took $45.09 billion in tax in the 10 months ended April 30, against a forecast of $44.32 billion based on the May 24 Budget assumptions.
Core spending was 0.6% below forecast at $56.13 billion. That led to a smaller operating deficit before gains and losses of $5.94 billion, against an expected shortfall of $7.36 billion.
"While this month’s tax take has been boosted by better than expected GST and corporate results, revenue is still about $900 million below forecasts in Treasury’s pre-election update last October," Finance Minister Bill English said.
"These fluctuations in revenue reinforce the need for the government to keep a firm control on its costs, so it can stay on track to surplus in 2014-15."
Last month, Treasury said it expected corporate tax to grow by some $400 million in the final quarter of the year after stronger corporate earnings.
The Crown is forecast to run an annual operating deficit of $8.44 billion, with a further two years in the red before returning to a wafer-thin surplus of $197 million in the 2015 financial year.
That assumes New Zealand's net migration turns positive in the 2014 year as the country's economy outperforms Australia and the Christchurch rebuild attracts workers from overseas.
It also predicts productivity growth of about 1.4% a year over the next four years, rising interest rates from next year and a falling exchange rate.
Yesterday, Treasury stuck by its budget forecasts in its monthly economic indicator, saying its base-case scenario "remains valid" despite the deterioration in Europe's financial stability.
The Canterbury Earthquake Recovery Authority spent $52 million less than expected after delays in demolition work and smaller costs incurred from the acquisition of red-zone properties in Christchurch.
The government's provision for its Canterbury Red Zone support package was 0.4% more than forecast at $473 million.
Net debt was $595 million less than expected at $52.03 billion, or 25.9%of gross domestic product, due to a smaller cash deficit as at April 30.