New Zealanders appear to be buying into the Government's message of saving rather than spending, judging by the changes included in the Crown accounts for the three months ended September.
The bad news was that the Government's operating balances were higher than expected.
Lower-than-forecast tax revenue, alongside the fiscal impact of the Canterbury earthquake, contributed to a larger-than-expected operating deficit before gains and losses of $3.7 billion for the period compared to a forecast deficit of $1.5 billion.
The Earthquake Commission recorded an estimated net loss of $1.5 billion for settling claims for damage arising from the earthquake.
While the total cost incurred by the commission is likely to exceed this figure, the commission had reinsurance cover for costs above $1.5 billion.
The operating balance was $2.35 billion compared with a forecast deficit of $922 million.
Treasury deputy chief executive Andrew Kibblewhite said when releasing the accounts that tax revenue was $1.1 billion (8.2%) lower than forecast, with the underlying drivers of the result indicating the economy was recovering more slowly from the recession than previously expected.
There were two main variances in the forecasts.
GST revenue was $600,000 (15.8%) lower than forecast, mainly due to a smaller-than-expected boost in consumer spending before October's GST rate rise.
"Evidence suggests that spending in the September quarter continued to be subdued generally," Mr Kibblewhite said.
Corporate tax revenue was $500,000 (22.4%) lower than forecast mostly due to lower-than-expected provisional tax assessments.
That suggested that while corporate profits were higher than they were at the same time last year, they were still lower than anticipated, he said.
Finance Minister Bill English continued with his message of restraint and the need for the Government to provide "sound management" of its finances and ongoing spending as the economy continued to recover from the recession.
But even he had to admit that New Zealanders were beginning to understand the need to rebalance the economy away from debt and spending towards savings and investment.
The trend away from consumer spending to increased saving contributed to the lower-than-forecast tax revenue.
"While in the short term this increased saving means slightly lower growth and tax revenue, it is what the economy needs over the long term as we build our future on savings and productive investment and exports."
On Government spending, Mr English said good progress had been made on getting the spending under control but the work must continue.
In the past two years, the Government had turned about $4 billion of lower quality spending into more worthwhile initiatives and had promised to cap new Budget spending at $1.1 billion.
"In many ways, restraint in the public sector is only just starting.
"We still have a significant medium-term challenge to get back into surplus as soon as possible.
"That is why the Government is committed to spending restraint for the foreseeable future."
The accounts showed that the New Zealand Superannuation fund made gains on its investment portfolio $820 million higher than expected in the quarter.
ACC made gains on its investments $617 million higher than expected.
However, ACC made an unforecast lost of $805 million on the valuation of its outstanding claims liability.
Spending on social security and pensions, health and education continue to dominate the government accounts.
Social security and welfare spending increased 3.9% in the quarter to $5.4 billion from $5.2 billion in the previous corresponding period.
Health spending increased 6.2% to $3.4 billion and education spending increased 6% to $3.1 billion.
Labour Party finance spokesman David Cunliffe said all New Zealanders should be concerned that the latest accounts showed a stalled economy and a Government with no answers.
"Bill English wants us to believe that Kiwis are saving more.
"What's more likely to be actually happening is that Kiwis are focused on the basic essentials like paying the bills at the supermarket each week."
Budget 2010 failed to provide any lift.
Imposing GST on struggling families and giving big tax breaks to the wealthy had made matters worse, he said
