Crown accounts show Government is tackling fuel crisis with its books $8.4b in the red ... which isn’t quite as bad as expected

Treasury has released its last set of Crown accounts, ahead of the May 28 Budget. Photo / Mark Mitchell

The Government is absorbing the impacts of conflict in the Middle East from a position that is faintly stronger than forecast in December.

The latest Crown accounts for the nine months to March 31 show that at $8.4 billion, the deficit was $2.1b narrower than forecast.

This is according to the traditional operating balance before gains and losses (Obegal) measure. The new ObegalX measure, which excludes the impact of the Accident Compensation Corporation (ACC), shows a $7.8b deficit.

The improvement can partially be attributed to core Crown expenses being slightly (1.2%) lower than forecast, as the Inland Revenue Department collected more tax debt than expected and there were fewer payments for community and residential-based health support services.

Expenses were also lower because of various delays in money set aside to cover costs or to fund various initiatives being spent.

Core Crown tax revenue was 0.4% weaker than forecast, partially due to weakness in the corporate tax take.

This fell by 3.5% year-on-year. While the economy was weak over this time, Treasury said the drop also reflected the impact of the Government’s Investment Boost policy, which enables businesses to claim 20% of the cost of new assets as an expense, then claim depreciation as usual on the remaining 80%.

Overall, core Crown tax revenue was 1.5% higher than the same period the prior year, as higher wages and more spending saw people pay more income tax and GST.

However, core Crown expenses were 3.6% higher.

The jump was largely due to the cost of healthcare and welfare (including New Zealand Superannuation) rising.

Treasury noted the accounts were also negatively affected by the New Zealand Superannuation Fund and the ACC’s very large investment portfolios not performing as well as expected.

At the end of March, net core Crown debt was worth $187.8b, or 42.2% of GDP. This was 1.8% less than expected.

Net debt to GDP has broadly been on an upward trajectory since the Covid-19 pandemic. Before 2020, it fell to below 20% of GDP.

The accounts to March are the last set to be published ahead of the Budget on May 28.

Speaking to media on April 23, Finance Minister Nicola Willis said the war meant New Zealand’s economic recovery had been “delayed, not derailed”.

She noted that uncertainty was such that Treasury was redoing its forecasts pretty late in the piece, ahead of the Budget.

Jenée Tibshraeny is the Herald’s Wellington business editor, based in the parliamentary press gallery. She specialises in government and Reserve Bank policymaking, economics and banking.

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