NZ budget sinks into deficit as government investments shrink

Tuesday 4th November 2008

New Zealand's budget sunk into deficit in the three months ended September 30, as the global financial rout eroded the value of government investments and an adjustment to ACC liabilities.

The Treasury today reported an operating deficit of $757 million. That's $1.7 billion below the government's forecast, which was for a surplus of $943 million surplus forecast by the government in early October.

The deficit reflects "the period of disruption and weakness in global financial markets," Finance Minister Michael Cullen said in a statement today.

Much of the reversal related to losses on the investments by Crown entities, reflecting turmoil in financial markets. The Dow Jones Industrial Average has tumbled 30% this year. New Zealand's NZX 50 Index has slumped 45%.

"New Zealand is today in a better position to weather the current global economic situation than the great majority of developed countries," Cullen said.

By Jonathan Underhill

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