The Government's fiscal position for the 11 months to the end of May was better than expected, with tax revenues slightly ahead of forecast and spending slightly below.
The operating balance excluding gains and loses (Obegal), which strips out unrealised investment gains or losses, for the 11 months to May 31 was a deficit of $4.7 billion. That was a $1.1b, or 18.5 per cent, lower deficit than that forecast in the budget in May.
Publishing the data today, Treasury said core crown tax revenue was $243 million or 0.5 per cent higher than forecast, mainly due to GST revenue being $238m or 2.2 per cent higher than forecast.
The GST variance was expected to reverse next month, leaving tax revenue close to the full year forecast, Treasury said.
Core crown expenses continued to be behind forecast, with the variance growing from $416m in the 10 months to April to $558m in the 11 months to May. The core expenses were 1 per cent lower than forecast.
Factors contributing to the lower core expenses included $82m or 0.4 per cent lower than forecast spending on social security and welfare spending.
The largest factor was family tax credits $94m below forecast, driven by lower recipients and an incorrect split of forecast expense between May and June. It was expected some of that difference would be reversed for June, Treasury said.
Despite the variation from budget of the Obegal figure, the operating balance deficit was much closer to forecast, with the deficit for the 11 months coming in $73m or 3.5 per cent worse than expected at $2.2b.
That was due to the recent downturn in global equity markets, triggered by the European sovereign debt crisis, leading to a fall in gains on the crown's investment portfolios, Treasury said.
Year-to-date investment income for the NZS Fund was $203m below forecast, and that for ACC $208m below. Also ACC had reported a year-to-date actuarial loss of $35m, compared to a forecast gain of $204m.
Gross debt was $685m or 1.3 per cent lower than expected due to market conditions limiting the issuance of government stock and treasury bills, which were $465m and $812m below forecast, respectively.
Net debt was close to forecast at $25.4b or 13.6 per cent of GDP.
Treasury said that looking to the full year to June 30, it expected tax revenue to remain close to forecast while there was a risk expenses may come in marginally below expected levels.
Net debt was expected to come in close to forecast, but lower than expected investment returns driven by recent weakening in equity markets were likely to push the operating balance deficit higher than expected.