Grant Robertson urges caution after Government books bounce back from Covid

Finance Minister Grant Robertson urged caution about the better-than-expected numbers. Photo / mark Mitchell.

The Government's books continue to outperform expectations, with New Zealand $4.44 billion closer to surplus than Treasury expected in its most recent forecasts, published in December.

The rosier-than-expected fiscals are for the eight months to February, and were published by Treasury on Tuesday. The Government has urged caution with the numbers, warning they do not capture the impact of Omicron, but National reckons the accounts show the Government could afford tax cuts.

The result was largely thanks to tax revenue for the first eight months of the financial year coming in at $1.8b higher than expected, and expenses $1.4b lower than expected. Treasury put this down to better-than-expected corporate tax take, and a strong jobs market.

Overall, the pandemic continues to lash the Crown's accounts with the Government posting an $8.3b OBEGAL deficit. While the books are still in deficit, the deficit is $4.4b smaller than Treasury forecast just last December.

This has contributed to lower borrowing levels from the Government, which has borrowed $1.8b less than forecast (by one measure). Net core Crown debt stands at $123b, or 35.2 per cent of GDP.

Finance Minister Grant Robertson said the accounts showed the economy's "resilience", although he urged caution saying "the full effects of the Omicron outbreak have yet to show up in the books which reinforces the need for balanced financial management".

"This result shows the strength of the economy despite the volatility and uncertainty surrounding Russia's invasion of Ukraine and the ongoing pandemic."

Robertson hinted the Omicron outbreak would likely mean higher Crown expenses before the financial year ended. This would likely mean slightly more ominous and expensive forecasts will be published by Treasury at the Budget next month.

"But the impacts of the Omicron outbreak have yet to be accounted for and this will affect Crown expenses in the current year," Robertson said.

National's finance spokeswoman Nicola Willis said she did not want to read too much into monthly results, given they tended to vary, but the overall trend was one of "tax revenue running ahead of forecast".

"It underscores a picture of increased revenue flowing from New Zealanders into the Crown accounts.".

Robertson fired off a light barb at National, which has been arguing for tax cuts to deal with the cost-of-living crisis. National reckons the cuts would cost $1.7b if implemented this year - roughly the same amount of above forecast revenue booked by Treasury in the past eight months.

"New Zealand is in a strong fiscal position, with lower-than-expected deficits and debt levels well below that of other countries we compare ourselves with," Robertson said.

"We will continue to take a balanced approach to respond to the ongoing pandemic and invest in long-standing challenges such as climate change, housing and child wellbeing, while carefully managing our resources to ensure the long-term sustainability of the economy."

Willis said Robertson's call for restraint was "very hard to take... seriously" when he was "planning the biggest operating allowance in New Zealand history".