NZ budget deficit smaller than forecast in first 5 months as GST, corporate tax beat estimates

Prime Minister Bill English. The New Zealand government's accounts recorded a smaller-than-forecast deficit in the first five months of the fiscal year. Photo / Mark Mitchell

The New Zealand government's accounts recorded a smaller-than-forecast deficit in the first five months of the fiscal year on a higher-than-expected inflow of corporate and goods and services tax.

The operating balance before gains and losses was a deficit of $768 million in the five months ended November 30, compared with a forecast deficit of $1.7 billion in the Treasury's Half Year Fiscal and Economic Update (HYEFU). That was largely due to core Crown revenue being 1.3 per cent more than expected at $31.5b while core Crown expenses were 0.8 per cent lower than forecast at $31.7b.

The tax take was also higher in the first four months of the year but the Treasury said today that it is too early to know whether that trend "is timing related or whether it will be permanent". Goods and services tax was 3.3 per cent above forecast and corporate tax was 2.5 per cent more than expected.

The HYEFU included $1b of the estimated fiscal cost of the Kaik ura earthquakes of $2b to $3b that couldn't be met by insurance proceeds, reprioritisation or existing budget allowances. The Treasury said while an initial estimate of EQC claims costs was included in the November results, a number of other costs are currently too uncertain to recognise in the actual results.

The HYEFU reduced the Obegal surplus by $200m to $473m for the 2017 fiscal year compared to the May budget before growing again by a combined $1.3b through to 2020, producing a forecast surplus of $8.5b in the year to June 2021. The Treasury lifted its economic growth forecasts for the next three years, with real gross domestic product now expected to grow 3.6 per cent on an annual average basis in the June 2017 year, up from the 2.9 per cent pace it projected in the May budget. On average, the Treasury expected growth to average 3 per cent a year over the next five years.

Today's figures showed the actual operating balance was a surplus of $4.69b, compared to the HYEFU forecast of $1.2b. Net gains were $5.4b, or about $2.6b more than expected, mostly reflecting a drop in ACC claims liability.

Gross debt of $87.1b, or 34 per cent of GDP, was about $1.1b below forecast, reflecting the impact of repurchases of government stock, the Treasury said. Net debt was in line with forecast at $63.5b, or 24.8 per cent of GDP.