NZ govt deficit worse than forecast on KiwiRail writedown, actuarial losses mount

Wednesday 10th October 2012

The New Zealand government's annual accounts were worse than forecast in the May budget after a writedown in the value of Kiwirail weighed on the books, even as the Crown reaped more in company taxes.

The operating balance before gains and losses (obegal) was a deficit of $9.24 billion in the year ended June 30, worse than the $8.44 billion shortfall expected by the Treasury, after running ahead of expectations in the 11 month accounts.

The target was missed largely due to a $1.4 billion impairment charge on the rail network after the government revalued the assets and decided to split the underlying land from the rolling stock.

The obegal was a deficit of $18.4 billion in the 2011 financial year as the government wore the cost of the February Canterbury earthquake upfront. The government took in $55.01 billion in core tax revenue, beating the $54.74 billion forecast in the budget.

Corporate tax accrued of $8.61 billion beat the forecast $8.2 billion, while personal tax was in line with expectations at $24.2 billion. Good and Services Tax was just short of forecasts at $14.57 billion. Core spending of $69.08 billion was less than the forecast $69.63 billion.

"The latest financial statements show the government is making good progress with the economy continuing to recover and public finances improving," Finance Minister Bill English said in a statement. "We have less control over our revenue - particularly with other parts of the world still struggling with high levels of debt and sluggish economies."

The operating balance was a bigger deficit than forecast at $14.9 billion, compared to shortfall of $10.64 billion expected at the budget. That came from a blow-out in the long-term liabilities for the Accident Compensation Corp, reporting a $2.94 billion actuarial loss.

The Government Superannuation Fund also took a charge of $3.9 billion in the face of low global interest rates. That means both entities face smaller cash flows when determining how much they may have to pay out in the future.

The Crown's net debt $50.67 billion, or 24.8 percent of gross domestic product, as at June 30, was smaller than the $51.92 billion budgeted for. The yield on government's benchmark 10-year bond fell a third of a basis point to 3.532 percent

BusinessDesk.co.nz

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