6:00 PM - By VERNON SMALL
The sharp increase in business confidence has given the Government's accounts a shot in the arm, lifting the Budget surplus $834 million ahead of Treasury's December forecast.
In the seven months to January 31 the operating balance - the excess of income over expenditure - was
$1.578 billion in the black, up from an expected $744 million.
Treasury Deputy Secretary Iain Rennie said extra tax of $484 million was the main reason for the improvement. Expenses were $108 million below forecast and surpluses from State Owned Enterprises and Crown entities were $108 million better than expected.
GST was $54 million lower than forecast, but company tax was up $149 million due mainly to improved business confidence which prompted companies to increase tax assessments, Treasury said.
The buoyant returns come at a time when New Zealand's growth outlook is healthier than our major trading partners.
Japan and Australia are facing recessions and there are storm clouds gathering in the US where the Federal Reserve has cut interest rates to fight off a downturn.
In its March forecasts Deutsche Bank said the weakening in global growth prospects had cast a shadow over what was shaping up to be an extremely strong year for the New Zealand economy.
World growth is expected to fall to 3.2 per cent this year from 4.9 per cent in 2000.
Some of the improvement in the Government's accounts is expected to reverse, but the bulk of it should endure, meaning the Government can look forward to a significant lift in the final surplus for the year.
But that is unlikely to prompt any extra Government spending, which has been capped at $5.9 billion for the three year term.
The surplus, by definition, is not spent but reduces the Government's debt.
Net Crown debt at the end of January stood at 20.4 per cent of Gross Domestic Product ($21.4 billion, $833 million lower than forecast) compared to a forecast of 21.2 percent.
A delay in contracting by the Health Funding Authority saw health expenses $44 million lower than forecast, while delays in implementing the conservation component of the Government's biodiversity strategy saw spending on heritage, culture and recreation $28 million below forecast.
