The New Zealand government kept a smaller operating deficit than forecast in the first nine months of the financial year, even as the cost of the Canterbury earthquakes grew an expected $192 million.
The operating balance before gains and losses (obegal) was a deficit of $4.95 billion in the nine months ended March 31, smaller than the $5.22 billion shortfall expected in the half-year economic and fiscal update, according to the Crown's latest accounts.
Core tax revenue continued to track ahead of expectations at $41.86 billion with gains in the personal income tax base coming from the higher end of the pay scale. Core crown expenses of $52.17 billion were broadly in line with expectations, as delays to Treaty of Waitangi settlement costs and New Zealand's aid programme were offset by higher than expected costs from rebuilding Canterbury's infrastructure.
"Further asset investigation, scheduling and costing analysis by the SCIRT Alliance and the Christchurch City Council led to a $985m expense (and increase in the provision) being recorded," the Treasury said in its commentary. "As $793m of this expense had been forecast at HYEFU, the unforecast portion was $192m."
Last month Prime Minister John Key said the cost of the Canterbury rebuild rose $10 billion to $40 billion, of which the government will cover an extra $2 billion, taking the net fiscal cost to some $15 billion. Despite the increased cost, Key said the government is still on track to reach its surplus target in 2014/15.
The government's insurance liability for the Earthquake Commission was $7.59 billion as at March 31, almost 11 per cent bigger than forecast, while the liability from failed AMI Insurance, now known as Southern Response, was 45 per cent ahead of expectations at $1.85 billion.
The Crown's provision for Canterbury Red Zone support was 16 per cent below forecast at $477 million.
The government's net debt was $58.48 billion, or almost 28 per cent of gross domestic product, 2.4 per cent below forecast. The yield on New Zealand's 10-year government bond rose 5.5 basis points 3.235 per cent this morning.
The operating balance was a surplus of $2.52 billion, ahead of a forecast deficit of $1.98 billion for the nine month period, due to gains in the value of the New Zealand Superannuation Fund and Accident Compensation Corp investment portfolios, and an actuarial gain on the future cost of ACC's liabilities.