Country getting poorer every year, Parker says

The economic performance of the National-led Government was "tragic", Labour finance spokesman David Parker said yesterday.

Prime Minister John Key and Finance Minister Bill English could not agree about the potential revenue from asset sales but while they were guessing, the underlying performance of the economy on their watch was getting worse, Mr Parker said.

"If the architects of the National Government can't agree that they know what they're doing, or what the outcome of what they're doing will be, it's hardly reassuring for Kiwis who are facing increasing uncertainty in the jobs market and rising costs of living."

Increasingly, the only measure of reality the Government felt it could use was the level of the government deficit but that was not the real issue, Mr Parker said.

The size of the New Zealand deficit was the major issue and that was what the international credit-rating agencies were interested in.

New Zealand, as a country, was getting poorer every year. Selling assets would not pay the country's way in the world.

"We'll end up owing even more overseas," Mr Parker said.

Mr Parker was commenting on the Government's first-half operating deficit, which was in line with expectations, though the Treasury warned the corporate tax take may taper off through the second half of the year.

The operating balance before gains and losses (Obegal) was a deficit of $4.09 billion in the six months ended Dec. 31, just $3 million wider than the pre-election fiscal and economic update forecast (Prefu). Core crown tax revenue was $400 million short of expectations at $26.4 billion, with source deductions and goods and services tax below forecast.

Total corporate tax accrued of $3.7 billion was in line with forecasts, having beaten expectations in recent months.

"Data on provisional tax assessments received during the month of December, together with slightly weaker-than-expected growth in GDP in the September quarter, indicates that corporate profits may be weaker for the full financial year," Treasury chief financial officer Fergus Welsh said in a statement.

Last week, the Treasury downgraded the forecast tax take to $28.7 billion for the 2012 financial year in the budget policy statement, and flagged an Obegal deficit of $12.08 billion, wider than the $10.81 billion shortfall projected in the Prefu.

The global deterioration originating from Europe raised red flags for the government department, and while that posed a heightened risk to the country's economy, things were not yet a worst-case scenario, he said.

The operating deficit was $2.6 billion wider than expected $9.47 billion in the six-month period, with larger actuarial losses in the Government Superannuation Fund and Accident Compensation Corporation's outstanding claims liability.

Mr English said lower government spending helped offset the fall in revenue, and the Crown must stay disciplined to meet its target $370 million surplus in the 2014-15 year.

"That is why we have made it one of our four main priorities, alongside building a more productive and competitive economy, delivering better public services and rebuilding Canterbury. The economic update in the budget policy statement last week shows growth will be slightly lower in the near term due to a weaker global outlook," he said.

The Government's net debt was $50.13 billion, or 24.7% of GDP, $499 million below forecast.