NZ govt operating surplus pips pre-election forecast as corporate profits swell tax take, spending delays

Thursday 5th October 2017

The New Zealand government's annual operating surplus was a little bigger than projected in the pre-election forecast as fatter corporate profits helped swell the Crown's tax take and as some spending was put off.

The operating balance before gains and losses (obegal) was a surplus of $4.07 billion in the 12 months ended June 30, ahead of the $3.71 billion forecast in the pre-election fiscal and economic update, and widening from $1.83 billion a year earlier. Core Crown tax revenue was largely in line with the prefu projection, rising 7.4 percent to $75.64 billion.

That was bolstered by a 12 percent gain in corporate taxation driven by higher company profits across most sectors, although the finance and insurance industries were singled out as making substantial contributions. Core Crown expenses rose a more modest 3.3 percent to $76.34 billion, some $502 million below the prefu forecast due to some spending being put off for later years.

"The 2016/17 crown accounts are a direct demonstration of the benefits of a steadily growing New Zealand economy," Finance Minister Steven Joyce said in his ministerial statement to the accounts. "This performance is more impressive in the context of a still volatile global outlook."

The Crown's surpluses have largely been on the back of an expanding population and robust labour market underpinning growth in income and consumption tax, and both major political parties committed to delivering sound fiscal management when hustling for votes during the recent election campaign. No coalition has been entered into since last week's vote, with New Zealand First leader Winston Peters, who can swing the government either way, saying he wants to wait until the special votes are counted this weekend.

Joyce didn't appear at today's briefing on the accounts while a caretaker government operates, and Treasury secretary Gabriel Makhlouf confirmed his department had provided factual information about costings to parties.

The delayed spending helped deliver a bigger-than-expected residual cash surplus of $2.57 billion, and compared to a deficit of $1.32 billion a year earlier. That helped push down net debt to $59.48 billion, or 22.2 percent of gross domestic product, from $61.88 billion, or 24.4 percent of GDP, a year earlier.

The Crown's operating balance, which includes movements in the government's financial assets, was a surplus of $12.32 billion, turning around a deficit of $5.37 billion a year earlier. That was bolstered by a $5.5 billion gain in the value of the New Zealand Superannuation Fund.

The net worth of the Crown rose to $110.53 billion from $89.37 billion a year earlier.

(BusinessDesk)

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