Impact of recession will still be felt - English

The latest Crown accounts show the impact of the recession will be felt for some time, Finance Minister Bill English says.

The accounts, released today, show the Government is continuing to pull in less tax than it forecast in this year's budget.

"It means there will be little or no new money for Government departments and ministries for the foreseeable future - and certainly not at the unsustainable rate of increase provided by the previous government," Mr English said.

"It's clear that the impact of the recession will be felt by many businesses and, in turn, on the Government's books for some time. This will influence our decisions around both revenue and spending."

The accounts for the four months ending October recorded tax revenue as $15.4 billion which was $1.6 billion (9.4 percent) lower than forecast.

Treasury said lower business profits were hitting the Government's books and this flowed through into a lower tax take in 2010.

"Recent 2008/2009 financial year results for public-listed companies indicate that weakness in corporate profitability has occurred across a broad range of sectors," Treasury said.

"This shortfall against the Budget Update in provisional tax is expected to carry through to year end, but is not expected to increase over this period."

The $1b (39.7 percent) reduction in corporate tax take compared to forecasts was also matched by individuals' tax revenue being down $346 million.

Treasury said there had been greater than expected refunds due to repayment of overpaid provisional tax, more requests for refunds and increased donation and childcare credits.

These hits to revenue resulted in the operating balance before gains and losses rising to $3.27b, which was $1.2b worse than the forecast $2.04b or 59 percent.

This was offset by higher than forecast investment returns from the New Zealand Superannuation Fund ($1.3b) and ACC ($0.6b).

These greater than expected returns meant the headline operating balance was only slightly worse than the forecast $1.3b.

The Government's cash deficit also improved from $4.1b to $3.9b due to some higher than forecast dividends from state owned enterprises and other cash receipts.

Add a Comment

drivesouth-pow-generic-1.png

Our journalists are your neighbours

We are the South's eyes and ears in crucial council meetings, at court hearings, on the sidelines of sporting events and on the frontline of breaking news.

As our region faces uncharted waters in the wake of a global pandemic, Otago Daily Times continues to bring you local stories that matter.

We employ local journalists and photographers to tell your stories, as other outlets cut local coverage in favour of stories told out of Auckland, Wellington and Christchurch.

You can help us continue to bring you local news you can trust by becoming a supporter.

Become a Supporter