Government revenue from GST was higher than forecast in the 11 months to May, raising the prospect that private consumption has climbed faster than expected.
Treasury is also raising the prospect that the Government's full year deficit could be hundreds of millions of dollars lower than expected.
The Government's financial statements for the 11 months to the end of May, published today, show core crown tax revenue 0.5 per cent above forecast for the period at $47.4 billion.
GST was the largest contributor to the better than expected outcome, $512 million or 4.2 per cent above the forecast in the 2011 budget economic and fiscal update published in May.
Indications were that higher than forecast private consumption was a significant contributor to the higher GST, with March quarter retail sales rising more than expected, Treasury said.
Also, GST refunds had come in lower than forecast, which could mean some of the GST gain could be temporary and reverse out.
Corporate tax revenue was $118m or 1.8 per cent below forecast, with continuing Canterbury earthquakes likely to be having a more negative effect on corporate profitability than expected in the budget forecast, particularly for insurers.
Core crown expenses were 1.2 per cent or $770m below forecast at $62.1b for the 11 months, with most departments continuing to report some under spending. Most of the under expenditure was expected to persist for the full year to the end of June, Treasury said.
The higher than expected tax revenue and lower core expenses meant the deficit in the operating balance before gains and losses (obegal) was 10.6 per cent smaller than expected at $10.8b.
Tax revenue for the full year was expected to be in line with, or even stronger than, forecast, while full year expenses were expected to continue to be below forecast.
Assuming the Government's share of the Canterbury earthquake costs for the current fiscal year were close to forecast, the obegal deficit of $16.7b set out in the budget was now expected to come closer to $16b for the year to June 30, Treasury said.
Gross debt at May 31 was $3.3b or 4.7 per cent higher than forecast due to valuation movements as a result of higher than forecast exchange rates and Treasury bills' issuance remaining ahead of forecast. At $73.2b or 37.6 per cent of GDP, gross debt was $20.5b higher than the same time last year.
The movements in gross debt were largely net debt neutral meaning that at May 31 net debt was close to forecast at $39.7b or 20.4 per cent of GDP. That was $14.3b higher than at the same time last year, resulting in net finance costs $516m higher than in the same period last year.
Despite the obegal deficit being $1.3b lower than forecast, the operating balance deficit was $113m higher than forecast at $5b, as net gains were $1.4b lower than forecast. That was mainly driven by ACC actuarial gains being $1.2b less than anticipated mainly due to a lower than forecast discount rate.