Tax revenue $1.1 billion below forecast

Monday 6th December 2010

The Government's tax revenue was $1.1 billion or 6.3% lower than forecast in the four months to the end of October.

Publishing the Government's financial statements for the September quarter today, the Treasury said the figures were consistent with the general picture outlined in the three-monthly statement published last month.

The biggest factor in the shortfall shown in the data out today for the four months to the end of October was that corporate tax revenue was $784 million or 28% lower than forecast.

That was mostly due to a slower economic recovery than expected, Treasury said.

GST revenue also continued to be below forecast, coming up short by $190 million or 4.2% in the four months of the year so far.

That was a significantly lower shortfall than had been recorded in the three months to the end of September.

"Overall, an underlying weakness remains in private consumption, with households exercising greater than expected spending constraint," Treasury said.

The deficit in the operating balance before gains and losses (Obegal) was $1.9 billion higher than expected at $4.4 billion.

The key factor in that variance was the $1.5 billion net expense recorded by the Earthquake Commission for the expected cost of its obligations arising from damage caused by the Canterbury earthquake.

There was also a net impact of $684 million in below forecast core Crown tax revenue and expenses, with the $1.1 billion lower revenue partly offset by expenses being $440 million less than expected.

The lower expenses were mainly due to later than expected progress in signing Treaty of Waitangi settlements ($165 million), and lower than expected benefit expenses across a range of social benefits ($80 million).

The higher than expected Obegal was partly softened by gains made on investment portfolios, Treasury said.

NZS Fund gains were $1.1 billion higher than expected while net gains made by ACC were $287 million above forecast.

Overall, the Crown's operating balance deficit was $450 million higher than forecast, at $2.2 billion.

Lower-than-forecast tax receipts contributed to the residual cash deficit being $798 million higher than forecast at $7.4 billion.

That variance flowed into debt indicators, with net debt being $1 billion higher than expected at $34.7 billion or 18.4% of GDP.

NZPA

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