The government’s tax take is up $243 million on forecasts, according to the Crown accounts to May released today.
Overall, the operating balance before gains and losses for the year to the end of May was a deficit of $4.7 billion – $1.1 billion smaller than expected with tax
revenue slightly ahead of forecast and expenditure slightly below.
Net government debt is $25.4 billion, or 13.6% of GDP.
The bulk of the above-forecast result was driven by more GST than expected. That might seem to suggest spending has held up higher than was thought, but the Treasury suggests the issue is more that people have brought some spending forward.
More recent data from Statistics New Zealand, on retail sales and electronic cards transactions, suggest the increase may tail off by the end of the financial year.
Corporate tax was also up, by $93 million, but this is primarily due to revenue from portfolio investment entities (PIEs) earning more from investments during the year.
Elsewhere in the revenue data the signs of the recession are more clear. “Source deduction revenue” – mostly PAYE – is down $106 milion on expectations, primarily because of weaker wage growth than anticipated. The increase in unemployment does not appear to have been a factor, simply because unemployment has not increased quite as much as the Treasury forecast.
The employment data in fact suggests a turnaround is due by the end of the financial year, when those figures come out in mid-August.
On the spending side, the government’s outlays are $200 million below what was expected.
There are some one-off factors here. One is $113 million of anticipated debt write offs by Inland Revenue which in fact did not need to happen.
Other factors are several items, mostly in the foreign affairs and trade area, which have been deferred into the next year.
The only other significant drop was $82 million lower-than-forecast spending on welfare – but this, too, has a “one off” element – family tax credits were $94 million below forecast, partly because fewer people needed them but also because of a slight error in the timing of the forecasts – and this, too, is expected to even out in the next month.
Mon, 12 Jul 2010