Core Crown revenue and expenses below forecast

Tuesday 10th May 2011

Core crown revenue was $466 million lower than expected in the nine months to the end of March, while core crown expenses were $422 million lower.

Figures published by The Treasury today compare the Government's financial statements against forecasts based on the 2010 Half Year Economic and Fiscal Update published in December.

The nine month figures show a deficit of $10.2 billion in the operating balance before gains and losses. That was $1.3 billion, or 14.8%, higher than forecast due mainly to EQC's estimated $1.5 billion share of costs from the February 22 Christchurch earthquake.

At the same time, the operating balance deficit was $3.8 billion stronger than expected at $3.34 billion, mainly due to gains on investments and derivatives held by the NZS Fund and ACC and actuarial gains on the valuation of ACC's long term liabilities.

Net debt was similar to forecast at $39.4 billion, equivalent to 20.2% of gross domestic product, Treasury said.

Core crown tax revenue was just $19 million higher than forecast at $37.91 billion.

The contribution of source deductions to tax revenue was $242 million or 1.6% higher than forecast, as it appeared the impact of tax cuts had not been as large as anticipated, Treasury said.

Offsetting those gains GST revenue was $263 million or 2.6% lower than forecast, with factors including reduced household spending and delays to rebuilding activity in Christchurch.

Core crown expenses for the nine months were $50.35 billion, $422 million or 0.8% below forecast mainly due to underspends in a number of areas, partly offset by a $331 million revision in the estimate of recoveries relating to the deposit guarantee scheme.

Gross debt was $2.5 billion higher than forecast at $66.7 billion, as March set a record with $2.8 billion worth of bonds sold, taking the year-to-date issuance total to $13.9 billion. Proceeds from the bond issuances were largely invested in financial assets.

The core crown residual cash deficit was $102 million higher than forecast at $12.41 billion. Corporate tax was $488 million lower than forecast, thought to be partly due to the Christchurch earthquake as disruptions affected the ability of companies to make tax payments, Treasury said.

Net purchases of physical assets were $435 million less than forecast, including delays in $175 million of defence projects, and delays in $71 million of school property capital programmes.

NZPA

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