The New Zealand government's operating deficit was bigger than expected in the first five months of the financial year after it reported a smaller take in corporate taxes and goods and services tax than it anticipated a month ago in its updated forecasts.
The Crown's operating balance before gains and losses (obegal) was a deficit of $2.34 billion in the five months ended November 30, more than the $1.93 billion forecast in its December 17 half-year economic and fiscal update, and down from $3.03 billion a year earlier.
"At this stage, our assessment is that the majority of this variance is timing in nature and will reverse out in coming months," Treasury chief financial officer Fergus Welsh said in a statement.
Core Crown tax revenue was 2.1 per cent lower than forecast at $23.88 billion, with corporate taxes $259 million below expectation with "a few large taxpayers revising down their current year provisional tax assessment" and GST $174 million short of the forecast due to earthquake related refunds, the Treasury said in commentary accompanying the accounts.
The government is forecast to post an obegal deficit of $2.3 billion in the current financial year ending June 30 before returning a surplus of $86 million the following year. Treasury officials are picking accelerating tax revenue growth as an expanding labour market provides more income tax, and as rising wages get caught in the fiscal drag of people entering a higher tax bracket.
Expenditure was in line with forecast at $29.16 billion, with higher than expected defence of $72 million offset by reduced costs across a range of departments.
The Crown's core residual cash deficit was $4.01 billion in the five-month period, a bigger shortfall than the $3.79 billion forecast, and is forecast to return to surplus in 2017, after which the government plans to start reducing debt.
The period includes the government's $365 million sell down of its Air New Zealand holding, on which it recognised a gain of $52 million.
The government's net debt at $59.59 billion, or 27.6 per cent of gross domestic product, was slightly lower than forecast, and gross debt of $83.21 billion, or 38.5 per cent of GDP, was in line with expectations.
The operating balance, which includes movements in its investment portfolios and actuarial adjustments, was a surplus of $2.26 billion, $1.6 billion ahead of the December forecast due to net gains from the New Zealand Superannuation Fund. That compares to a surplus of $706 million a year earlier.