A smaller than expected government deficit in the eight months to February 28 was due to controlled spending and freeing up money for frontline services, Finance Minister Bill English says.The operating balance excluding gains and loses (Obegal), which st
A smaller than expected government deficit in the eight months to February 28 was due to controlled spending and freeing up money for frontline services, Finance Minister Bill English says.
The operating balance excluding gains and loses (Obegal), which strips out unrealised investment gains or losses, for the eight months to February 28 was a deficit of $4.49 billion, or 11.2 percent better than the forecast in December's fiscal update for a deficit of $5.05b.
Treasury said the smaller deficit was largely because of reduced government expenses, 2.2 percent below forecast, while total revenue fell only 0.9 percent.
Mr English said the Government was taking a "firm but balanced" approach -- maintaining New Zealand Superannuation and Working For Families while remaining within the $1.1b annual allowance for extra spending they set.
This would continue for the foreseeable future as the Government faced several years of large deficits and worked to get back into surplus, he said.
"Budget 2010 will have a similar focus on weeding out low quality spending."
Underlying core Crown tax revenue (excluding structured finance settlements) was down $681 million, or 2.1 percent, on forecast in the eight month period which Mr English attributed to lower than expected business profitability.
Core Crown expenses were $915m, 2.2 percent, below forecast due to low spend by government departments and the timing of Treaty of Waitangi settlements and deferred transport funding, he said.
Treasury also said corporate taxes were still weaker than expected but the indirect goods and services tax was bringing in more than expected, which it expected to last through the rest of the fiscal year to June 30.
The net operating balance was a deficit of $1.62b, $1.1b or 40.5 percent less than forecast, on higher investment returns. Net government debt stood at $24.17b, which was 0.3 percent less than forecast, equating to 13 percent of gross domestic product.
Treasury said net debt has grown $10b in the past year. The Government's net cash position, the difference between all income and spending -- operational and capital -- was a deficit of $6.34b compared with a forecast deficit of $6.68b.
Treasury forecast in its December fiscal update an Obegal deficit of $7.5b for the fiscal year to June 30, 2010, an overall operating deficit of $4.8b, and net cash shortfall of $10.1b.
The Government is expected to post large budget deficits and need hefty borrowing at least until 2016.
