Deficit $1.5b in five months to November

  • Bill English
Finance

Lower than expected operating expenses and higher than forecast customs and excise duties contributed to an operating balance before gains and losses (OBEGAL) deficit $121 million better than forecast for the five months to November, Finance Minister Bill English says.

The OBEGAL deficit was $1.54 billion - down from the $1.66 billion forecast by the Treasury in the Half-Year Update in December, although tax revenue continued to be weaker than forecast.

Even though Core Crown tax revenue was $1.6 billion (or 6.7 per cent) higher than at the same time last year, it was $94 million lower than forecast in the HYEFU.

“Continued weakness in tax revenue against forecast again highlights the challenge of returning to surplus this year,” Mr English says. “However, the smaller than expected OBEGAL deficit reinforces the Government’s belief that the strong underlying economy and responsible fiscal management can deliver a surplus when the final government accounts are published next October.

“Current economic conditions - stable growth, low inflation, growing employment, and low interest rates - are helping New Zealanders to get ahead. But these conditions are also making it more challenging for the Government to achieve its fiscal objectives in a timely manner.”

The Government accounts for the five months to November show GST revenue was $56 million (0.8 per cent) below the HYEFU forecast and corporate tax was $45 million (1.4 per cent) below forecast. These shortfalls were partially off-set by customs and excise duties being $65 million (3.6 per cent) above forecast.

Core Crown expenses for the first five months of this financial year were $67 million lower than forecast at HYEFU – with the variance being spread over a number of departments.

“This shows the Government is continuing to responsibly manage its finances. The challenge is coming from revenue, which the Government has much less control over,” Mr English says.