Govt trebles earthquake levy as fiscal headaches continue

New Zealand’s fiscal migraine is slightly less intense than expected – but it is still causing significant financial pain.

The government’s financial accounts for the year to June – released by the Treasury this morning – show higher revenue than expected, and some lower costs, but the loud pounding fiscal headache is still a deficit of $18.4 billion for the year.

Better than expected economic growth – not to mention stepped-up auditing from the Inland Revenue – saw a rise of $800 million in tax revenue for the year to June.

This is the first increase in tax revenue since the recession hit in the 2007-08 financial year.

The rise is mostly in GST and personal taxation: the company tax take is actually down by $220 million. However tax form source deductions - PAYE, withholding tax, and the like – is up $587 million, while GST is up $502 million on forecasts, even though those forecasts took the rise form 12.5% to 15% into account.

But expenses are also up. A big chunk of this is the Christchurch earthquake, of course, which pushed up expenses by $1.9 billion, and the Treasury’s financial statements warn of higher costs to come.

Finance Minister Bill English, not coincidentally, chose this morning to announce a rise in Earthquake Commission levies. Household levies are currently capped at $69 a year: this will rise to $207 a year.

The government’s largest outlays, however, managed to spend less than forecast. Welfare costs are down $263 million on expectations (but still, at $25.3 billion, very high). Health costs, which ritually outran forecasts for most of the last 20 years regardless of who was in government, came in slightly below expectations, at $13.06 billion instead of $13.11 billion.

Education, another sector traditionally not renowned for its sense of fiscal reasonability, managed to spending $377 million less than budgeted, at $12.4 billion.

Today’s financial statement is simply focused on the government accounts for the last financial year. The pre-election economic and fiscal update (PREFU) is to be released on 25 October and will include an updated set of economic forecasts.