Government's operating deficit in line with expectations first three months

Debt was below forecast.

The New Zealand government posted a small operating deficit in line with expectations in the first three months of the 2018 fiscal year while debt was below forecast, giving the new Labour-led administration more headroom for big-ticket spending items.

The operating balance before gains and losses (obegal) was a deficit of $90 million in the three months ended Sept. 30, $3 million below forecast, and compared to a surplus of $222 million a year earlier. Tax revenue rose 3.9 percent to $18 billion, largely matching forecast, with a bigger take on income tax offset by lower than expected customs and excise duties.

"Obegal can fluctuate from month to month as the recognition of tax revenue does not happen uniformly throughout the year (peak months tend to be April/May), while expenditure is fairly static on a monthly basis before peaking in June," the Treasury said in a statement. "As a result it is not unusual for obegal to be a small surplus or deficit in the first part of the financial year."

A bigger inflow of provisional tax receipts than expected led to a smaller residual cash deficit than forecast at $1.2 billion, which contributed to net debt of $61.1 billion, or 22.8 percent of gross domestic product, some $3.07 billion below forecast. Lower gross debt of $87.5 billion, or 32.7 percent of GDP, was the other leg to the lower net debt position.

New Zealand's Debt Management Office yesterday deferred a 10-year bond tender until next year, saying it was flush with cash and wanted the chance to see what the new government had in store when the half-year economic and fiscal update was released.

The Labour-led administration campaigned on reducing government debt at a slower pace and running smaller operating surpluses than its rival National to revive what it claimed was a run-down public service and fast-track big-ticket items such as three free years of tertiary education and the KiwiBuild housing programme.

"The government is committed to the fiscal parameters we outlined before the election, which include reducing government net debt to 20 percent of GDP within five years of taking office, maintaining government expenditure to within the recent historical range of spending to GDP, and delivering a stable obegal surplus throughout the Treasury's Budget forecast period," Finance Minister Grant Robertson said in a statement. "I do note that readings of business confidence during the government formation process reflected the temporary uncertainty at the time, which had been expected by economists no matter what the outcome of the coalition negotiations."

The Crown accounts showed the operating balance, which includes movements in the government's financial assets, was a surplus of $1.57 billion, some $969 million ahead of forecast, due largely to gains in the New Zealand Superannuation Fund's investment portfolio.

The government's net worth was $112 billion, $11.45 billion more than forecast, and up from $91.6 billion a year earlier due to the bigger operating surplus and an upward valuation of Crown land, largely in the housing stock and state highway network at $17.86 billion and $10.89 billion respectively.