Operating loss up $332m on forecast

The Government's much-touted financial surplus remains elusive, with the operating loss for the 11 months ended May coming in higher than expected and tax revenue still proving problematic.

The operating balance before gains and losses (obegal) for the 11 months was $1.1 billion, $332 million more than forecasts released with the Budget on May 15.

However, the obegal was still significantly down on the 11 months ended May 2013, which saw a deficit of $3.26 billion.

Tax revenue of $56.5 billion for the current period was $2.5 billion, or 4.6%, ahead of the previous corresponding period but was still $459 million below Budget forecasts.

GST and corporate tax were less than expected at $238 million and $120 million respectively.

The Treasury said GST revenue variance mostly reflected lower than forecast domestic consumption growth, although some of the variance was expected to have reversed in the month of June.

''It's too early to determine the likely impact of these results on the current and future financial years as both downside and upside risks exist.''

The Treasury's next set of economic and fiscal forecasts - the Pre-election Economic and Fiscal Update - would be published on August 19.

It would include updated assessments of macroeconomic conditions and fiscal forecasts, including updates on the expected tax result for the fiscal year ended June 30 and the following four financial years.

The operating balance, including gains and loses, was in surplus by $4.3 billion.

Continued strength in equity markets saw gains recorded on financial investments of $4.8 billion, which was $1.4 billion ahead of forecast.

At the same time last year, the operating balance was a surplus of $6.5 billion.

The Treasury said that the gains were offset by an increase in ACC's insurance liability because of recent decreases in short-term discount rates.

Finance Minister Bill English remained optimistic yesterday, saying careful spending was in order with the surplus within sight.

Mr English, who will become a list MP after the election, probably will not serve out a full three-year term before retiring from politics and seeking other opportunities.

However, if National is re-elected on September 20, he would want to see the books return to surplus before he left.

Both he and Prime Minister John Key have promised a ''wafer-thin'' surplus in the 2014-15 financial year.

Mr English said the Government's latest monthly financial accounts confirmed achieving a surplus required a determined focus on careful spending and responsible economic management.

''Just as the Government's careful fiscal stewardship has taken New Zealand within sight of fiscal surplus in the coming year, the last thing we need is a return to big government spending programmes that would crowd out private investment and put the surplus in jeopardy.''

New Zealanders should be wary of such approaches from political parties as the country headed towards the election, he said.

Mr English downplayed the tax result from the current period. While tax revenue was lower than forecast, it was $2.5 billion higher than at the same time last year.

''These figures are within the normal variation for forecasts.''

The Treasury figures showed social security and welfare remained the top expenditure for the Government at $21.2 billion for the 11 months, up 3.6% on the previous corresponding period.

Health spending rose 3% to $13.6 billion and education spending was up 2.1% at $11.1 billion. Housing and development spending was up more than 49% at $320 million.

Core government services spending fell 19.2% to $3.7 billion and transport and communications spending was down nearly 8% at $1.8 billion.

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