Wednesday 7th March 2018
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The New Zealand government's operating surplus continued to track ahead of forecast in the first seven months of the financial year as optimistic consumers and low unemployment spurred higher income and GST taxation.
The operating surplus before gains and losses (obegal) was a surplus of $2.44 billion in the seven months ended Jan. 31, some $677 million more than expected, and more than twice the $1.15 billion a year earlier, the latest Crown accounts show. Core tax revenue rose 5.7 percent to $44.84 billion, some $937 million more than expected, as a robust labour market and strong residential investment swelled the GST and income tax takes, while customs and excise duty was bolstered by a higher seasonal peak in tobacco duties than anticipated.
Treasury officials dropped earlier uncertainty about whether those variances would bed in, saying much of it is "expected to remain until year end".
Consumer confidence has outperformed business sentiment since the Labour-led government took office last year, with government data showing retail spending rose 1.7 percent in the final three months of 2017. A strong labour market and expanding population underpinned the increased PAYE and GST tax takes in recent months, catching up with larger-than-expected corporate taxation in the June 2017 year.
Finance Minister Grant Robertson will deliver his first budget on May 17 and has been seeking to allay business fears about the government's direction. He'll get another chance on Friday when he delivers a speech to the Auckland Chamber of Commerce outlining the government's plans for implementing its programme, while maintaining prudent debt and surplus limits.
Today's accounts show core Crown expenses rose 4.7 percent to $45.99 billion, some $155 million more than expected with some spending being recognised earlier than anticipated.
Net debt was $1.23 billion below forecast at $60.13 billion, or 21.6 percent of gross domestic product, as the bigger tax take made for a smaller residual cash deficit of $889 million. Still, gross debt was $2.07 billion above forecast at $85.96 billion, or 30.9 percent of GDP, due to an increase in short-term borrowings and unsettled trades at the end of the month, which the Treasury expects will reverse out of the accounts.
Robertson has signalled capital investment as a key focus for future budgets with some $41.7 billion of spending expected over the next five years. The Crown accounts show total capital commitments of $13.58 billion as at Jan. 31, up from $11.72 billion a year earlier, of which state highways account for $6.96 billion, land and buildings $3.11 billion, and other property plant and equipment $2.1 billion.
The government's operating balance, which includes unrealised movements in the Crown's investment portfolio, was a surplus of $6.46 billion, some $2.12 billion ahead of forecast, although narrowing from $7.83 billion a year earlier. That included net investment gains on the New Zealand Superannuation Fund and Accident Compensation Corp portfolio of $5.5 billion, some $2.7 billion more than expected. That was offset by $1.5 billion of losses on non-financial instruments as low interest rates pushed up the long-term liability of ACC claims and higher carbon prices led to a loss on the Emissions Trading Scheme.
The Crown's net worth of $117 billion was $2.06 billion more than forecast and up from $97.23 billion a year earlier.
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