NZ budget deficit widens on poor investment returns

Friday 3rd April 2009

New Zealand's budget deficit widened in February as the ongoing recession eroded revenue from taxes and dented returns on investments.

The operating deficit in the eight months through February was $8.45 billion, compared with a surplus of $3.18 billion in the Pre-Election Economic and Fiscal Update published in October.

Core Crown revenue was $39.1 billion, or $1.8 billion less than forecast, the Treasury department said in a statement today.

The deficit largely reflected $3.5 billion of losses from investment funds, actuarial losses on the ACC insurance liability of $2.9 billion and GSF net pension fund liability of $2.4 billion.

The difference in tax revenue from forecast was mainly due to timing issues which it expected to reverse in the following month. Then the tax take is expected to track in line with forecasts "as the continued deterioration in the world economic situation flows through to the New Zealand economy," the Treasury said.

Excluding unrealised gains and losses on investments, the operating balance was a surplus of NZ$49 million, a fraction of the forecast NZ$1.83 billion for the OBEGAL measure, as it is known.

Net government debt was a lower-than-forecast $3.3 billion, or 1.8% of gross domestic product.

The government's net cash position was a deficit of $6.61 billion, which was $1.7 billion worse than forecast.

By Jonathan Underhill

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