NZ posts wider budget deficit as tax take slides

Wednesday 6th May 2009

New Zealand reported a wider-than-forecast cash budget deficit as the prolonged recession eroded the government’s revenue from taxes.

The cash deficit was $7.88 billion in the nine months ended March 31, which was $1.78 billion wider than the forecast in the pre-election update, according to the Treasury. Tax revenue was $1.42 billion less than expected.

Tax revenue is declining in New Zealand as the economy enters probably its sixth quarter of contraction, spurring companies to cut jobs as demand dwindles. The central bank last week said it will keep interest rates low through until the second half of 2010, after slashing the official cash rate to a record low 2.5%.

The tax take is likely to worsen versus estimates through until the end of the fiscal year “as the continued deterioration in the world economic situation flows through to the New Zealand economy,” the Treasury said.

The operating deficit, including items such as investments, was $11.2 billion worse than forecast because of a slump in the value of government pension funds and increased liabilities from the accident insurance system.

Businesswire.co.nz

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