Crown accounts surprise with surplus in first three months
The New Zealand government's accounts were unexpectedly in surplus in the first three months of the 2017 financial year, with the provisional tax take from companies tracking ahead of forecast.
The operating balance before gains and losses was a surplus of $222 million in the three months ended September 30, turning around a deficit of $545 million a year earlier, and ahead of the projected $503 million shortfall in the May budget projections. That was largely due to the 6.7% increase in taxation to $17.34 billion, which was $523 million ahead of expectations due to a higher than expected provisional taxes bolstering the corporate tax take while GST was supported by residential investment and tourist spending.
"Most of the variance was caused by provisional tax being higher than forecast for both revenue and receipts, indicating that taxable profits for the current tax year may be higher than expected," Treasury said in notes to the financial statements. "Based on GDP outturns to June and Treasury estimates for the September quarter, GST arising from residential investment and inbound tourism was above forecast."
Last month Finance Minister Bill English unveiled a bigger surplus than expected for the 2016 financial year as record inbound migration bolstered the government's coffers and reinvigorated speculation the Crown may put tax cuts on the table in next year's budget ahead of the 2017 general election.
Today's accounts show the Crown's expenses were in line with expectations, rising 2% to $18.92 billion, while net debt was below forecast at $63.12 billion, or 25.1% of gross domestic product.
The residential cash deficit of $810 million was $1.4 billion smaller than expected due to the increased tax take\, while the operating balance, which includes unrealised movements in the Crown's investment portfolio and actuarial valuations of long-term liabilities, was a surplus of $2.31 billion, some $2.2 billion above forecast on investment gains in the New Zealand Superannuation Fund and Accident Compensation Corp investment portfolios.
The Crown's net worth of $91.6 billion was $8 billion more than expectations, due to a stronger starting position after year-end adjustments and revaluations. The 2016 annual accounts released last month showed a $2.7 billion gain in the housing stock due to Auckland's booming property market, and today's figures show the housing portfolio valued at $15.64 billion, almost $2.6 billion more than forecast.
The government's provisioning for Emissions Trading Scheme credits soared to $2.33 billion from $832 million a year earlier, and was tracking $1.06 billion ahead of expectations. The Crown is reviewing the scheme as it tries to work out how to meet a commitment to cut greenhouse gas emissions 30% below 2005 levels by 2030, using a combination of local emissions reductions, storing carbon in forests, and buying international carbon credits.
Separately, Climate Change Minister Paula Bennett acknowledged the Paris agreement comes into force today.