The New Zealand government's operating deficit was in line with pre-election forecasts as company and income tax came in ahead of expectations, offsetting the lower domestic consumption which has been weighing on GST.
The Crown's operating balance before gains and losses (Obegal) was a deficit of $725 million in the three months ended September 30, slightly smaller than what Treasury predicted in its truncated September pre-election economic and fiscal update, it said in a statement.
That's smaller than the $1.29 billion deficit in the same period a year earlier, with the tax take up 8.3 per cent at $15.55 billion from a year earlier.
The Treasury said full monthly forecast for the Prefu weren't prepared due to the close proximity to the May budget, but core crown tax revenue was $287 million ahead of expectations due to stronger corporate and individual taxes, and analysts already factoring in subdued consumption weighing on the goods and services tax take.
Last month, Finance Minister Bill English warned the tax take could come in below forecast in the current financial year, with declining agricultural export receipts threatening to weigh on the government's revenue with a faster than anticipated slump in dairy prices.
The August 19 pre-election forecasts retained the government's ambition to get the books back in black in the current financial year, projecting an operating balance before gains and losses showing a surplus of $297 million in the year ending June 30, 2015, down slightly from the surplus of $372 million at the May budget. The projected surpluses in subsequent financial years are $500 million lower than the previous forecast due to a lower tax take than previously forecast.
Core Crown expenses were higher than anticipated at $18.06 billion in the three month period, due to the government signing a $103 million indemnity for financially stricken state-owned coal miner, Solid Energy.
The core residual cash deficit was $2.56 billion, with higher personnel and operating payments offsetting the bigger tax take. That flowed through to the government's borrowing programme, with net debt at $62.63 billion, or 27.3 per cent of gross domestic product, and gross debt at $85.21 billion, or 37.2 per cent of GDP.
The operating balance, which includes movements in the Crown's investment portfolio, was a deficit of $831 million in the three months ended September 30, as gains in its investment portfolio weren't enough to cover a $1.2 billion actuarial loss on its ACC liability, as low interest rates increase the cost of future liabilities. That compares to a surplus of $539 million a year earlier.