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Finance Minister Bill English says he would like the Government's books to be back in surplus sooner than the Budget forecast of 2015/2016.
His comments come after figures for the Government's finances published yesterday show the operating balance excluding gains and losses (Obegal), which strips out unrealised investment gains or losses, for the 11 months to May 31 was a deficit of $4.7 billion.
That was $1.1 billion, or 18.5 per cent, lower than forecast for the period in May's Budget.
"In many ways, restraint in the public sector is only just starting," English said.
"In our first two Budgets, the Government took early steps to bring deficits and Government debt under control. We will build on that over the next few years by living within our $1.1 billion annual allowance for extra operating spending and weeding out lower-priority spending.
"We still have a significant medium-term challenge to get back to surplus as soon as possible."
The Government's financial statements, published by the Treasury, show that for the 11 months to the end of May core Crown tax revenue was $243 million or 0.5 per cent higher than forecast, mainly due to GST revenue being up $238 million or 2.2 per cent.
The GST variance was expected to reverse next month, leaving tax revenue close to the full-year forecast.
Core Crown expenses continued to be behind forecast, with the variance growing from $416 million in the 10 months to April to $558 million in the 11 months to May. The core expenses were 1 per cent lower than forecast.
Factors contributing to the lower core expenses included $82 million or 0.4 per cent lower than forecast spending on social security and welfare spending.
The largest factor was family tax credits $94 million below forecast, driven by fewer recipients and an incorrect split of forecast expense between May and June. It was expected some of that difference would be reversed for June, Treasury said.
The operating balance deficit for the 11 months came in $73 million or 3.5 per cent worse than expected at $2.2 billion. That was due to the downturn in global equity markets, triggered by the European sovereign debt crisis, leading to a fall in gains on the Crown's investment portfolios, Treasury said.
Year-to-date investment income for the NZS Fund was $203 million below forecast, and that for ACC $208 million below. ACC had reported a year-to-date actuarial loss of $35 million, compared with a forecast gain of $204 million.
Gross debt was $685 million (1.3 per cent) lower than expected due to market conditions limiting the issuance of Government stock and treasury bills, which were $465 million and $812 million below forecast, respectively.
Net debt was close to forecast at $25.4 billion, 13.6 per cent of GDP.