Government surplus already ahead of budget forecast

Finance Minister Steven Joyce at Petone printing plant with Budget speech. Photo / Gia Garrick

The government's operating surplus came in ahead of the Treasury's forecasts in the May budget for the first 10 months of the current financial year as the corporate provisional tax take peaked a month earlier than anticipated.

The operating balance before gains and losses (obegal) was a surplus of $2.53 billion in the 10 months ended April 30, $1.55b more than the surplus forecast in last month's budget documents, and up from $297 million a year earlier. The boost came as corporate taxes were $1.08b more than predicted, largely due to annual provisional tax estimates peaking early in April, and the Treasury expects that variance will reverse in the May accounts.

The Crown's tax take rose 8.8 per cent to $61.72b in the 10 months ended April 30, $1.19b more than the budget forecast, while core expenses increased 3.2 per cent to $62.74b, some $1.19b below expectations due in part to smaller debt impairment charges and write-offs.

"While the accounts for the year-to-date are $1.6b stronger than was forecast at the budget economic and fiscal update, the bulk of this change is due to a timing difference of company taxes," Finance Minister Steven Joyce said in a statement. "Treasury and Inland Revenue expect most of that to reverse in May, and at this stage Treasury expects the 2016/17 accounts to be broadly as forecast."

In the May 25 budget, Joyce unveiled a new programme to boost family incomes, expanded infrastructure spending, and a more aggressive debt reduction target which were seen chewing up increasing surpluses in coming years.

The Crown's net debt of $62.75b, or 24 per cent of gross domestic product, was 1.9 per cent below the May forecast as the government's cash balance was boosted by the swelling tax take. Net debt was $64.64b as at April 30, 2015.

The residual cash deficit of $850m was $670m below forecast, and down from a deficit of $4.06b a year earlier. Capital spending was $3.04b in the 10-month period, down from $3.82b a year earlier, and tracking 4.9 per cent below the budget forecast.

The operating balance, which includes non-cash balance sheet items, was a surplus of $11.86b, $2.14b more than forecast due to bigger than expected gains from the Crown's investment portfolios, and turning around from a deficit of $3.41b a year earlier. The government's Accident Compensation Corp investment portfolio, which has been built up to fully-fund the state-owned workplace insurer, was worth $40.32b as at April 30, up from $38.19b a year earlier, while the New Zealand Superannuation Fund held $34.91b of assets compared to $30.46b a year earlier.

ACC's long-term liabilities were $39.25b as at April 30, up from $37.31b a year earlier.

The Crown's net worth was $102.55b as at April 30, some $2.23b ahead of forecast due to the bigger than expected operating surplus.