New Zealand's operating deficit was wider than forecast in the first five months of the government's fiscal year as personal income tax continued to come up short of the Treasury's expectations.
The operating balance before gains and losses (OBEGAL) was a deficit of $4.48 billion in the five months ended November 30, some $252 million, or 6 per cent, less than expected in the pre-election fiscal and economic update (PREFU).
Accrued individual taxes were $428 million short of forecasts at $9.45 billion, though the corporate tax take beat expectations by $187 million at $2.97 billion. The net accrued goods and service tax take was $5.76 billion, $309 million below forecast.
"While corporate tax revenue was above forecast, which appears to be due to higher than expected profitability, lower third-quarter GDP (gross domestic product) compared to the PREFU forecast suggests that corporate profitability may be lower than forecast by the year end," Treasury chief financial officer Fergus Welsh said in his commentary. "There is a downside risk to tax revenue for the current year."
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The operating deficit was exaggerated by bigger than expected actuarial losses for the Government Superannuation Fund and Accident Compensation Corporation's liabilities by $1.04 billion and $898 million respectively. The Crown also booked bigger investment losses on ACC's investment portfolio, the New Zealand Superannuation Fund and the Earthquake Commission by $588 million.
As at November 30, the Treasury flagged the government's insurance liability on AMI Insurance at $2.1 billion, some $28 million below forecast, but noted the swarm of quakes in December "are expected to result in increased insurance expenses and to weaken the Crown's fiscal position."
Core Crown expenses were $399 million below forecast at $28.84 billion in the five month period, and the government's residual cash deficit was $7.48 billion, $some $280 million bigger than expected.
The government's net debt was $47.63 billion, or 23.4 per cent of GDP, as at Nov.ember 30, close to the $47.42 billion forecast in the PREFU.
Today's financial statements come a day after Prime Minister John Key outlined the government's outlook on the year, and said the projected surplus for 2014/15 would likely be between $300 million and $500 million rather than the $1.4 billion previously forecast.