Government accounts deficit significantly reduced on year ago

The Government accounts ended their short-lived period in surplus in September to record a minuscule deficit of $34 million in October.

Lately, Finance Minister Bill English has been concentrating on the operating balance before gains and losses (obegal) which remains in deficit.

But the obegal deficit of nearly $2.9 billion, while ahead of forecast, was a 14.7% reduction on the same time last year.

The operating deficit of $34 million was a significant reduction on the $7.45 billion recorded at the same time last year.

Again, continued strengthening global and New Zealand equity markets helped keep the deficit at its low level.

Gains on the New Zealand Superannuation Fund and ACC investment portfolios were $724 million and $660 million higher than forecast respectively.

In addition, ACC recorded an actuarial gain on its liability for outstanding claims that was $228 million.

Mr English said the obegal was slightly larger than forecast after core Crown revenue and expenses both came in below expectations.

''The latest figures confirm that the Government is continuing to control its new spending and getting better results from existing programmes.''

The Government continued to have an aim of returning to surplus in 2014-15, he said.

Analysis of the accounts showed core Crown revenue was $536 million lower than forecast.

Tax revenue was down $292 million, or 1.6% on the forecast.

GST was $253 million (5%) lower than forecast due to weakness in private consumption.

Source deductions were $191 million (2.6%) lower than forecast, due to weaker-than-anticipated wage growth, and other indirect taxes were $86 million (14.2%) lower than expected, mainly due to a fall in road user charges.

Offsetting those results was other individuals tax which was $351 million (46.6%) above forecast.

Treasury said tighter collection and enforcement policies by Inland Revenue were considered to be a factor, resulting in a higher effective tax rate being paid by non-incorporated business.

The variance was expected to continue widening during the rest of the financial year, albeit at a slower pace.

Crown interest income was $173 million lower than anticipated due to lower interest rates than forecast.

Crown expenses were 15.1% lower than forecast at $22.95 billion.

This was mainly due to health expenses being $117 million lower than forecast, social assistance benefits being $108 million lower than forecast, due mainly to fewer than expected beneficiaries, and education expenses coming in $72 million lower than forecast.

Lower teacher numbers, departmental expenses and expenditure across school programmes helped reduce the education spending.

In the four months ended October, gross debt rose 8.7% to $81.5 billion and net debt rose 21.5% to $55 billion.

Mr English said that with the world economic position remaining uncertain, it was important the Government remained focused on responsible and prudent fiscal policy well beyond the 2014-15 surplus target.

A new set of forecasts would be issued with the Half-Year Economic and Fiscal Update on December 18.

Labour finance spokesman David Parker said the economy continued to stagnate under National.

''The Government's deficit is over 6% higher than forecast, undermining their credibility as managers of the economy. National is breaking promise after promise.''

 

---

Government accounts
For four months ended October

• Core Crown tax revenue: $17.9 billion
• Crown expenses: $22.9 billion
• Operating balance excluding gains and losses: -$2.865 billion
• Operating balance: -$34 million

---