Government operating deficit bigger than expected as tax take lags
The New Zealand government posted a bigger operating deficit than forecasts in the May Budget, as company tax and GST again lagged expectations.
The Crown's operating balance before gains and losses (obegal) was a deficit of $1.1 billion in the 11 months ended May 31, smaller than the $3.27 billion shortfall a year earlier, though more than the $767 million deficit forecast in the Budget economist and fiscal update. Core tax revenue was up 4.6 percent from a year earlier, though $459 million short of expectations at $56.5 billion, with goods and services tax was lower than forecast on more subdued domestic consumption. The company tax take was below forecast due to some large downward adjustments in end of financial year assessments.
"It is too early to determine the likely impact of these results on the current and future financial years as both downside and upside risks exist," acting chief government accountant Fergus Welsh said in a statement. The Treasury will update its forecasts in the pre-election economic and fiscal update on Aug 19.
In May, Finance Minister Bill English confirmed a return to Budget surplus in the 2015 fiscal year at $372 million, wider than the $86 million projected in the half year economic and fiscal update, with bigger surpluses projected after that as an accelerating economy helps bolster the government's books.
The accounts show Crown expenses were $36 million below forecast at $64.17 billion at the end of May, with underspending across a number of departments, the biggest of which was at the Ministry of Business, Innovation and Employment. Core spending was up from $63.74 billion a year earlier.
The residual cash deficit narrowed to $3.83 billion from $5.58 billion for the same 11 month period in 2013, though was $398 million below forecast due to the lagging tax take.
Net debt was $453 million ahead of forecast at $59.47 billion, or 26.2 percent of gross domestic product, while gross debt was below forecast at $82.15 billion, or 36.3 percent of GDP.
The operating balance, which includes movements in the Crown's investment portfolio, was a surplus of $4.33 billion, $165 million below forecast, and smaller than the $6.48 billion surplus at the same stage of the previous fiscal year. Gains in the value of its equity investments were offset by an increase in the Accident Compensation Corp's insurance liability.