Crown accounts unexpectedly in surplus in 10 months to April as PIE tax fills coffers
The New Zealand government reported an unexpected operating surplus in the 10 months through April as the Crown's tax coffers were bolstered by a bigger inflow from portfolio investment entity tax and strong consumer spending.
The operating balance before gains and losses (obegal) was a surplus of $448 million in the 10 months ended April 30, compared to the forecast deficit of $555 million in the budget last month, and a turnaround from the year-earlier deficit of $1.37 billion. Tax revenue rose 8.9% to $55.05 billion from the same period in 2014, and was $437 million ahead of forecast, with unexpected gains in PIE tax and the goods and services tax.
"With April being the last significant month for PIE tax in this financial year, there is potential for this to be a permanent favourable variance from forecast at June 30," chief government accountant Paul Helm said in a statement. "Above-forecast GST suggests higher-than-forecast domestic spending as indicated by strong March quarter retail sales. However, it is still too early to be confident whether or not this strength will continue through to June 30."
Finance Minister Bill English has previously warned that achieving a budget surplus this year was looking less likely because of slow inflation and low interest rates crimping returns on consumption and savings taxes and said he wouldn't slash spending to artificially get the books back in the black. A deteriorating outlook prompted the Treasury to lower its forecasts further in the May 21 budget, projecting an obegal deficit of $684 million in the 2015 financial year, with the 2016 surplus whittled back to $176 million.
"We won't know whether we will make surplus for the full year until we see the final accounts in October," English said in a statement today. "But it's clear it will be a close run thing."
Crown expenses for the 10-month period were $420 million below forecast at $59.75 billion, with education spending tracking $171 million below expectations, core government services $200 million below forecast, and transport and communications $226 million lower than expected. Spending was 3.2% higher than the same period a year earlier, driven largely by an increase in welfare and superannuation payments.
The Crown's spend on superannuation was in line with expectations at $9.59 billion, accounting for more than half of the government's transfers, while spending on income-related rents, a key plank of its social housing plan, was $47 million above forecast at $584 million.
The operating balance, which includes unrealised movements in the Crown's investment portfolios, was a surplus of $795 million, compared to a forecast deficit of $863 million, due largely to lower-than-expected actuarial losses on the Accident Compensation Corp's claims liability, due to higher interest rates.
ACC's insurance liability was $34.76 billion as at April 30, $788 million smaller than expected, while the Earthquake Commission property damage liability was $570 million ahead of forecast at $3.31 billion.
Net debt was $64.17 billion, or 27% of gross domestic product, $278 million smaller than forecast, while gross debt at $85.52 billion, or 35.9% of GDP, was $624 million above expectations.
The Crown's residual cash deficit was smaller than expected at $4.84 billion due to the increased tax take and smaller spending expense, and was down from a shortfall of $6.51 billion a year earlier.