New Zealand is still on track to reach a record budget deficit of nearly $17 billion by the end of this month (June) but Treasury figures out yesterday showed some encouraging signs for the Government.
The financial statements for the 10 months ended April showed core crown expenses of $56.3 billion were $525 million below forecast, with most government departments continuing to report some under expenditure against their forecasts.
While economists wrote off the amount as minuscule, Finance Minister Bill English has for more than a year been asking his public sector chief executives to look closely at their spending.
Some of the savings may be reversed in future months, but presently less spending has occurred than at the corresponding time last year.
The operating balance deficit before gains and losses at $10.9 billion was 3.6% smaller than expected at the end of April, largely as a result of the lower-than-forecast expenses.
However, the deficit is expected to grow by $5.8 billion in the next two months to $16.7 billion.
The most growth in the deficit is largely a result of share increases in forecasts expenses, most notably earthquake-related costs, the weathertight homes assistance package and costs associated with the emissions trading scheme.
Mr English said New Zealand would run a record annual deficit this year and it was essential the Government took steps outlined in the Budget to bring it down and return to surplus by 2014-15.
"We have borrowed an average $380 million of net new debt every week this fiscal year.
"That simply could not continue.
"Budget measures will reduce that net borrowing to around $100 million a week in the coming year," Mr English said.
The operating deficit was expected to fall below $10 billion next year and be almost eliminated in 2013-14 before the Government started to run surpluses again and repay debt, he said.
That was one of the largest contributions the Government could make to lifting national savings and building faster growth on exports and productive investments.
This year's deficit would include some significant one-off costs, including the Earthquake Commission's $3 billion share of the two Canterbury earthquakes and some of the Government's cost of meeting deposit guarantees for collapsed finance companies, Mr English said.
The accounts showed core government services spending was up $900 million on the previous corresponding period because of the AMI insurance recovery package and a revision in the expected recoveries relating to the deposit guarantee scheme.
Heritage, culture and recreation spending was up $800 million due to allocation of New Zealand units under the ETS.
Social security and welfare spending was up the same because of more beneficiaries and payments for earthquake support.
Finance costs were up $600 million as a result of increased debt levels.
Health expenses were up $500 million through funding provided in last year's Budget.
