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Tax revenue 0.8% below forecast for seven months to January

Tuesday 8th March 2011

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Core Crown tax revenue was 0.8% lower than forecast at $29.9 billion in the seven months to the end of January, Treasury says.

That was due to underlying weakness in the economy resulting in a $285 million shortfall in GST, a $157 million shortfall in corporate tax, and a $120 million shortfall in individuals' tax.

Partially offsetting the shortfall in tax revenue, source deductions (PAYE) were 2.6%, or $323 million, higher than forecast.

"This was potentially due to wage and employment growth although volatility in recent data provides uncertainty over the cause," Treasury said.

Core Crown expenses were 0.9% lower than expected at $38.5 billion, while profits from State-owned enterprises and Crown entities were slightly higher.

The operating balance before gains and losses deficit remain largely in line with forecast at $6.2 billion.

Both the residual cash deficit, at $10.1 billion, and net debt, at just under $37 billion or 19.4% of GDP, were also close to forecast, as the previous month's residual cash variance reversed as expected, Treasury said.

Gross debt stood at $63 billion, or 33.1% of GDP, which was $14.3 billion higher than the same time last year. It was $1.5 billion above forecast, as government stock issuances were $1.2 billion above forecast due to strong investor demand, and derivative values were $320 million higher.

As a result of the higher debt position, finance costs for the seven months ended January 31 were $1.7 billion, compared to $1.3 billion in the same period last year.

The operating balance deficit of $998 million was much lower than the deficit of $4.8 billion forecast. That was due to NZS Fund gains being $1.8 billion above forecast, and an ACC actuarial gain $1.8 billion above the forecast loss of $889 million.

Treasury noted the results were for the period before the devastating Canterbury Earthquake on February 22, the costs of which would be recorded in future accounts as costs were quantified.

The monthly financial statements are compared against monthly forecast tracks based on the 2010 Half Year Economic and Fiscal Update published in December.



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